Finance Minister Bill English says there will need to be restraint "for some years to come" to meet the Government's aims, after Treasury released figures today showing the Budget deficit is running $449m worse than forecast.
The updated financial statements showed the deficit before gains and losses (Obegal) was $2.1 billion for the three months ended September 30, mainly because most sources of tax revenues fell behind forecast - but that was partially offset by lower expenses.
"The Government is committed to getting back to surplus so we can start repaying debt, resume contributions to the New Zealand Superannuation Fund and target more investment at priority public services," English said.
"We are making progress, but we will need to restrain our spending for some years to come, so we have those options when we return to surplus."
He said the accounts reinforced the need for careful financial management.
"The accounts confirm that the Government is keeping its spending under control, but that revenue can be affected by the uncertain global economic situation and its impact on New Zealand," he said. "This effect will continue."
"As we work to reduce our deficits and meet our target of returning to surplus by 2014/15, we will need to remain prudent with new spending and ensure existing spending delivers better public services and good value for taxpayers.
"That's important in a world where economic and financial market conditions remain difficult and unpredictable. We need to remain on top of the factors we can control, so we can minimise our debt and have a strong balance sheet."
Labour’s finance spokesman David Parker said the deficit dents the Government’s economic credibility as it is $450 million, or 27 per cent, worse than expected.
“National’s economy is stagnating. Yesterday’s news was that full-time employment is down. Manufacturing is struggling. Exports are down. That is why the tax take is down. Less tax that is a sure sign that businesses aren’t growing and working Kiwis aren’t earning.’’
Parker said National is ‘‘seriously mismanaging’’ the economy’’ and that the only thing growing in New Zealand is the Christchurch rebuild which the Government can’t claim credit for.
ADDING UP THE NUMBERS
Core Crown tax revenue of $13.5 billion was $295m or 2.1 per cent lower than expected.
Wage growth and private consumption were below forecast, causing forecast source deductions and GST each to be $166m lower than expected.
The only tax group to beat expectations was the ''other individuals'' category, which was ahead of forecast by $329m, reflecting an increase in the effective tax rate paid by non-incorporated businesses.
Dividend revenue from SOEs was $248m higher than forecast, mainly because they had been paid earlier than expected.
Offsetting increased dividends, interest revenue was $147m lower than forecast.
Expenditure of $17.3b was $201m or 1.1 per cent lower than forecast.
The most significant under-spending was in welfare, education and finance ($86m, $63m and $45m respectively).
But earthquake expenses were $114m higher than forecast.
Gains on New Zealand Superannuation Fund and ACC's investment portfolios were greater than expected by $1.1b and $600m respectively, leaving an operating surplus of almost $100m - $1.2b higher than the forecast operating deficit.
Gross debt stood at $79.3b, or 38.8 per cent of GDP while net debt was $54.9b or 26.9 per cent of GDP.