Shrinking deficit 'on track' for 2014-15 surplus

RICHARD MEADOWS
Last updated 05:00 06/07/2013

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The part-sale of Mighty River Power and higher-than-expected tax revenue have boosted the strength of the Government's balance sheet.

Financial statements for the 11 months to May 31 issued by the Treasury showed the operating balance before gains and losses (obegal) was a $3.3 billion deficit.

That was $763 million lower than the forecasts made in May, before the Budget.

Core Crown tax revenue continued the upward trend of recent months, with just over half a billion dollars more than expected flowing into government coffers.

Finance Minister Bill English said the improving economy suggested the lift in revenue was likely to be sustained until the end of the financial year.

"This is a positive sign and confirms that the Government remains on track to return to surplus in 2014-15, so we are in a position to have choices about repaying debt and investing more in public services," he said.

Most of the extra tax revenue came from corporates ($496m) and other persons ($164m), more than offsetting a $222m decline in GST.

"If this improvement continues until the end of the financial year, the obegal deficit will be $2.3b smaller than Budget 2012 forecasts," English said.

The part-sale of Mighty River Power in May also fed into the financial statements for the first time.

The $1.7b worth of proceeds from the first power company to be put on the block significantly outperformed the expected $1.5b return.

Mighty River shares have languished since the float, currently sitting at $2.27, well below the $2.50 sale price.

The Government's total operating balance, which includes gains and losses, was a $6.5b surplus, or $2.7b higher than forecast.

That was driven in large part by gains on the Crown's investment portfolio, which were $1.7b higher than expected with sustained strength in equity markets.

The New Zealand Superannuation Fund, often dubbed the "Cullen Fund", contributed $1.2b of the difference.

As a result of the Government's lower-than-expected deficit, net debt was $800m lower than forecasts at $55.7b, or 26.4 per cent of GDP.

Gross debt was close to forecast at $78.4b, or 37 per cent of GDP.

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