NZ govt surplus widens in 11 months on company, PIE tax inflows; delayed education spend

Wednesday 8th July 2015 1 Comment

The New Zealand government reported a surprise operating surplus for a second month in the 11 months through May as the Crown's coffers were swelled by bigger than expected inflows of company and Portfolio Investment Entity tax, and as education spending was delayed.

The operating balance before gains and losses (Obegal) was a surplus of $1.18 billion in the 11 months ended May 31, compared to a forecast surplus of $193 million, and a turnaround from last year's deficit of $1.1 billion. Tax revenue rose 8.4 percent to $61.24 billion in the 11 month period, and was $401 million ahead of forecast, with unexpected gains in company and PIE tax offsetting softer goods and services tax receipts. Core Crown spending rose 2.9 percent to $66 billion, which was $433 million below forecast of which about half was related to delayed education spending.

"Higher than forecast tax revenue largely related to corporate tax ($395 million) and other individuals tax ($112 million) mainly owing to higher than expected provisional tax and above forecast Portfolio Investment Entities," chief government accountant Paul Helm said. "The bulk of these positive variances is expected to persist through to the end of June."

Today's accounts are the second month in a row to surprise on the upside after Finance Minister Bill English warned at the May budget that achieving a surplus was looking less likely as slow inflation and low interest rates crimped returns on consumption and savings taxes. A deteriorating outlook prompted the Treasury to lower its forecasts further in the May 21 budget, projecting an Obegal deficit of $684 million in the 2015 financial year, with the 2016 surplus whittled back to $176 million.

Prime Minister John Key said on Monday that the financial statements would show "quite a strong set of accounts."

The operating balance, which includes unrealised movements in the Crown's investment portfolios, was a surplus of $4.6 billion, well ahead of the forecast surplus of $89 million, and up from a surplus of $4.33 billion a year earlier. The operating balance was bolstered by smaller actuarial losses on the Accident Compensation Corp's claims liability, due to higher interest rates.

ACC's insurance liability was $32.68 billion as at May 31, $2.74 billion smaller than forecast, while the Earthquake Commission's property damage liability was valued at $3.24 billion, $724 million more than expected.

Net debt was $60.37 billion, or 25.3 percent of gross domestic product, $164 million below forecast, while gross debt at $85.72 billion, or 35.9 percent, was $1.64 billion above expectations.

The Crown's residual cash deficit was smaller than expected at $1.29 billion with capital payments coming in under expectations, and was an improvement on the $3.83 billion shortfall a year earlier.

BusinessDesk.co.nz

Comments from our readers

On 9 July 2015 at 10:04 am Anne said:

Great, delay education spending, sell off NZ assets and lie about how well ACC is doing (why doesn't ACC cover all the costs of an Xray if it's doing so well). What spending shall we delay next to artificially make the books look good?