The government’s operating deficit for the September quarter was wider than forecast, but Treasury said it expects this to reverse in coming months as the tax take ticks up.
The operating balance before gains and losses was a $343 million deficit in the three months through September, versus Treasury’s forecast for a $279 million deficit.
The government’s tax take was $19 billion, slightly below the $19.1 billion forecast. Corporate tax revenue was below forecast by $300 million, mainly due to 2018 income tax assessments lodged since June, indicating taxable profits in the 2018 tax year were lower than forecast, Treasury said.
“Tax revenue in the first quarter of the year tends to be less than what is recognised over the rest of the year, while expenses are generally more evenly spread across the year. As a result we expect the deficit reported in the September financial statements to reverse in the coming months,” Treasury said.
Finance Minister Grant Robertson was also sanguine about the wider-than-expected deficit.
“A small deficit is normal at the start of the financial year. This is because monthly tax revenue ramps up as the year progresses, while expenses are more evenly spread out,” he said in a statement.
Core operating expenses were $21.2 billion, 1 percent or $223 million below forecast, partly due to the Working for Family Tax Credit being lower than expected.
Net core Crown debt was $60.4 billion, or 20.9 percent of GDP at the end of September – $2.2 billion less than forecast. The lower-than-expected net debt is largely due to a stronger opening position, Treasury said.
“The Government is focused on keeping net debt under control, with the Budget responsibility rules committing us to reducing net debt to 20 percent of GDP within five years of taking office. As pointed out at the release of the 2017/18 financial statements, net debt is set to fluctuate around the 20 percent mark,” Robertson said.
The Crown’s net worth was $129.3 billion as of Sept 30, $10.6 billion higher than forecast due to property, plant and equipment revaluations.
The government’s operating balance, including investment gains from NZ Super and Accident Compensation Corp, was a $1.1 billion deficit, when a $483 million surplus had been forecast.
Net investment gains were $1.5 billion as of Sept 30, $800 million above forecast. This result was largely due to favourable changes in market prices not forecast, Treasury said.
Offsetting these investment gains were net losses on non-financial instruments of $2.3 billion, $2.2 billion higher than forecast losses. That was primarily driven by changes to discount rates used to calculate the ACC claim liability. The Emission Trading Scheme also recognised a loss of $500 million due to an increase in carbon prices.