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Government accounts propped up by higher GST, investment earnings

Friday 29th January 2010

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The government deficit came in $1.08 billion below forecast in the five months through November reflecting an increase in the GST and corporate tax take, and gains from investments.  

The Crown operating balance, including net gains and losses from government entities, was a deficit of $1.41 billion for the five months ended Nov. 30, according to the Treasury’s financial statements. The department’s forecast was for a $2.49 billion deficit. GST revenue was $300 million above the estimate because of an extra day of payments, while corporate tax revenue was $100 million ahead of expectations.  

Deputy secretary Colin Lynch said the improvements will likely be reversed in coming months, and warned lower-than-expected provisional tax assessments for companies listed on the stock exchange “suggests current year profitability was weaker than expected in the HYEFU forecast and it is possible this will persist until the end of the year.” 

The New Zealand Superannuation Fund and ACC investment portfolios continued their strong run or returns, recognising gains of $533 million and $124 million respectively. The so-called Cullen Fund was worth $14.96 billion at Nov. 30, and ACC was valued at $14.43 billion.  

Tax revenue came in $232 million ahead of forecasts at $19.3 billion, while total expenses, excluding losses came in $618 million below expectations at $33 billion.  The operating balance before gains and losses was a $3.71 billion deficit compared to a $4.38 billion deficit forecast.  

Finance Minister Bill English said the recession will loom over the government’s finances for some time, and “anything we can do to shorten that process and get the economy growing faster will make a significant difference.”  

“We face another six years of Budget deficits and we’re borrowing an average $240 million a week, every week, for the next four years,” he said in a statement.

Last month, the government shifted the bulk of its debt programme to the next two years as it seeks to take advantage of the extraordinary low interest rates, and pare back future interest repayments, though overall debt issuances have been pared back over the four-year period. 

 Net debt was in line with expectations at $22.73 billion, or 12.3% of gross domestic product.  

The Treasury its provisions for the retail deposit guarantee scheme at $899 million in the five month period. About $873 million has been provided for future costs to the government.

Some 73 institutions are covered by the scheme, with deposits totalling $133.1 billion, of which about $5.5 billion is in the non-bank sector.

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