The Crown reaped a bigger tax take than expected from GST and tobacco excise in the six months through December, while KiwiBuild and welfare payments were smaller than projected.
The operating balance before gains and losses (obegal) was a surplus of $1.11 billion in the six months ended Dec. 31, compared to $1.1 billion a year earlier, and tracking ahead of the $859 million forecast in the December half-year economic and fiscal update. Core tax revenue rose 7.6 percent to $40 billion, some $164 million more than forecast, with bigger than expected GST, customs and excise duties offsetting smaller-than-expected personal income and company taxes.
Crown spending rose 7.5 percent to $43.48 billion, some $399 million below expectations. About half of that variance came from social welfare payments, bad debt write-offs, and KiwiBuild spending that the Treasury still expects to happen.
The Treasury forecasts the Crown’s obegal will be a surplus of $1.7 billion for the year ending June 30 after the government reported a bigger-than-expected surplus of $5.5 billion in the 2018 fiscal year.
“The volatile global situation shows why it’s important that we are managing the Government’s finances carefully by running surpluses and keeping expenses and debt under control,” Finance Minister Grant Robertson said in a statement. “Our domestic economic situation is reflected in the Crown accounts. Corporate tax receipts in the six months to December were 9.8 percent higher than a year ago, highlighting strong underlying business fundamentals.”
Robertson is working towards his first ‘well-being’ budget in May, which hasn’t perturbed global ratings agencies which see the new measures as shifting spending priorities rather than undermining fiscal prudence. That discipline prompted Standard & Poor’s to raise its outlook on the sovereign rating to ‘positive’, meaning there’s a chance of an upgrade in coming years.
While the operating balance was in surplus, the Crown’s cash deficit of $7.26 billion was $501 million more than anticipated, as capital spending occurred earlier than Treasury officials predicted.
Net debt was $64.15 billion, or 22.1 percent of GDP, marginally more than the $64.06 billion, or 22 percent of GDP, predicted.
The government’s operating balance, including $3.1 billion of investment losses made by entities including the New Zealand Superannuation Fund and Accident Compensation Corp, was a deficit of $5.61 billion. Changes in the discount rates to calculate ACC’s long-term claims and the Government Superannuation Fund’s long-term liabilities drove $3.7 billion of losses on non-financial instruments which also weighed on the balance.
The Crown’s net worth was $124.5 billion, some $6.29 billion below forecast, although up from $114.09 billion a year earlier.