Cash budget deficit worsens as tax take shrinks

Friday 6th March 2009

New Zealand's cash budget deficit was worse than forecast in the seven months through January, reflecting a slide in tax revenue as the economy contracted, according to Treasury figures.

The cash deficit was $5.78 billion in the seven months to January 31, $1.07 billion wider than forecast, the Treasury said in a report posted on its website. Tax revenue $30.5 billion, which was $769 million less than the department had estimated.

The Treasury last month said New Zealand's economy probably entered its fifth quarter of contraction in January, prolonging the first recession since 1998, driving up the jobless rate and eroding corporate earnings. Company tax receipts were $398 million below the Treasury's forecast in the latest seven months.

"We expect the deteriorating global economic and fiscal situation to be reflected in the crown's finances through 2009," Finance Minister Bill English said. "We face the most difficult economic conditions in two generations - the new government is focused on both getting through this recession and preparing New Zealand for recovery," he said.

By Jonathan Underhill

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