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Six-month core Crown tax revenue 0.7% above forecast

Friday 18th February 2011

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Core Crown tax revenue was 0.7% above forecast at $25 billion in the six months to December, Treasury says.

The Financial Statements of the Government of New Zealand for the half year, published today, showed source deductions (PAYE) $271 million or 2.6% higher than forecast, and GST revenue $125 million or 1.9% lower than forecast.

The figures are compared to the 2010 Half Year Economic and Fiscal Update published in December.

It was too early to predict whether the PAYE and GST variances were the result of difficulty in forecasting the October tax changes or whether there were underlying economic drivers, Treasury said.

Retail sales and electronic cards data suggested consumer spending was weaker than expected in the last quarter of 2010. With no GST return due in December, there would be a better indication of GST results once January data was available.

In addition, volatility seen in labour market data, particularly unemployment, in the past two quarters made it unclear whether labour market strength was a factor in the higher than expected source deductions revenue.

Core Crown expenses for the six months were 0.5% below forecast at $32.9 billion, due to individually small variances across several departments, Treasury said.

The operating balance before gains and losses deficit stood at just over $5.9b at the end of the six month period, a 2.8% smaller deficit than forecast.

The operating balance deficit, inclusive of gains and losses, was $1.3 billion, significantly less than the $4.9 billion deficit forecast.

That was driven in part by the NZS Fund which recorded gains in its investment portfolio that were $1.7 billion  higher than forecast, while ACC recorded an actuarial gain on its outstanding claims liability of $911 million, $1.8 billion above its forecast actuarial loss.

The residual cash deficit at $13.2 billion was $555 million higher than forecast, mainly due to payments made in late December which had not been anticipated to happen until January. The residual cash variance was expected to reverse in January.

Net debt was 0.4% higher than expected, as the increased cash deficit was partially offset by changes in the market value of the underlying financial assets and liabilities.

At December 31, gross debt was $62.1 billion - 32.5% of GDP - $1.8 billion higher than forecast across a number of debt instruments.

That variance did not translate into a corresponding rise in net debt because there were similar increases in financial assets during the period, Treasury said.

Net debt at the end of December of $39.5 billion - 20.7% of GDP - was close to forecast.



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