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NZ govt posts small surplus in 7 mths to January as tax take swells

11 Mar 15

The New Zealand government posted a small operating surplus in the seven months through January as tax revenue beat expectations, while costs were smaller than anticipated.

The operating balance before gains and losses was a surplus of $77 million in the seven months ended Jan. 31, compared to a forecast deficit of $635 million and better than the shortfall of $1.06 billion a year earlier, the Treasury said in a statement. That was due to a bigger than expected tax-take of $37.78 billion in the period, some $456 million ahead of forecast, while core crown expenses were $249 million below forecast at $41.43 billion.

The Treasury said the Obegal fluctuates on a monthly basis because of the seasonal nature of some tax revenue and expenses. The government's financial adviser pushed out a forecast return to surplus until the 2016 financial year as persistently low interest rates erode the revenue from withholding taxes, household spending lagging estimates saps GST, and soft inflation keeps a lid on wages, crimping income taxes. The Treasury forecast an Obegal deficit of $572 million in the year ending June 30, 2015, turning to a surplus of $565 million the following year.

The bigger than expected tax-take came from other individual taxes coming in 6.1 percent ahead of forecast, with January the second provisional tax payment date for the March balance date, which also helped the company tax take being 3.2 percent above expectations. The growing momentum in New Zealand's labour market helped lift income tax, which was 1 percent ahead of forecast, though GST remained below expectations.

Crown expenses were $249 million below forecast with smaller costs spread across a number of departments, with the biggest variances coming from fewer applications for grants and subsidies than expected, and delays finalising Treaty of Waitangi settlements.

The Crown's operating balance, which includes fair value adjustments in its investment portfolio and actuarial movements, was a deficit of $2.28 billion, smaller than the $3 billion forecast in the December half-year economic and fiscal update. The government posted a surplus of $3.37 billion a year earlier, when its investment portfolios were riding gains in global financial markets.

The deficit has been running wider than expected in prior months due to widening actuarial losses due to the prospect of low interest rates running longer than anticipated. The liability for Accident Compensation Corp was $34.92 billion, some $4.5 billion more than expected, while Earthquake Commission property damage liability was $370 million than forecast at $3.66 billion.

The government's net debt was $61.78 billion, or 26.1 percent of gross domestic product, as at Jan. 31, $1.17 billion below forecast, while gross debt of $87.23 billion, or 36.8 percent of GDP, was $3.59 billion more than expectations.

The Crown's residual cash deficit was $763 million less than expected at $2.4 billion, and almost half the $4.11 billion in the same period a year earlier, due to the tax take coming in ahead of expectations.

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