NZ Budget deficit bigger than expected
Worsening budget deficits raise serious questions about National's management of the economy and its books, Labour finance spokesman David Parker says.
He was speaking after Treasury today reported that the Budget deficit had continued to worsen. A lower tax take had pushed the books into the red by $1.4 billion, $884 million more than expected.
Parker said for four months in a row the books were worse than predicted, with tax revenues falling short of expectations.
"For the November and December figures Treasury said there were timing issues. They were given a bit of leeway. But now even Treasury admits it doesn't know why the books are even more in the red.
"Somehow (Finance Minister) Bill English is presiding over a growing economy but not getting the tax revenue that should be coming with it. He needs to explain himself."
English said the figures reinforced the need for restraint in government spending.
"We remain committed to reaching a surplus next year and Budget forecasts next month will confirm we are on track," he said.
"It is a challenging task that will be achieved only if we remain disciplined."
Consistent with a growing economy, tax revenue was $1.9b higher than at the same time last year, he said.
The Treasury said that in the eight months to the end of February, core revenue was $1.14b less than expected and showed up across most tax types, continuing the pattern of recent months.
In the seven months to the end of January, the operating deficit before gains and losses was $637m worse than forecast, at $1.1b.
Officials said some weakness was expected to persist as a result of assumptions made at the time of the half year economic and fiscal update (HYEFU) in December not eventuating. That included assumptions about GST, the other individuals' tax group, and customs and excise duties.
However, the $372m shortfall on expected corporate tax and the $136m less than expected from source deductions were probably mostly due to timing.
"Overall, it is expected that slightly over half of the $1.1b weaker year to date outturn will remain at year end once the elements that appear timing-related reverse."
Much of that "narrowing" of the gap may not be apparent until June data comes in.
It was expected the stronger economy would lift tax revenues, largely offsetting the current weakness, leading to an outlook for tax revenue for 2014/15 broadly similar to that in the HYEFU.
"As a result tax revenue developments are not likely to impact on the forecast surplus for 2014/15."
The poorer tax outcome for the eight months to February was partially offset by higher returns from Crown entities, largely due to an updated EQC valuation.
Continued strength in world sharemarkets saw gains recorded on financial instruments of $3.5b, which was $1.9b ahead of forecast.
As a result, the operating balance including gains and losses showed a surplus $891m higher than forecasts at $3.7b.
Net debt was $435m higher than forecast at $60b or 27.1 per cent of GDP.
Total Crown assets were $246.8b and liabilities were $171.4b. The Crown's share of net worth rose to $70.9b.