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Budget deficit worse than forecast; debt blows out by NZ$15.4 bln
March 6th, 2009
The New Zealand government’s operating balance before gains and losses (OBEGAL) for the seven months ended January 31 was NZ$600 million, which was NZ$800 million below the pre-election update and NZ$300 million below December forecasts, Treasury said. Tax revenue and receipts during the period were NZ$500 million lower than the pre-election forecast.
Meanwhile, Treasury also disclosed a NZ$15.4 billion rise in Gross Sovereign Issued Debt to NZ$45.4 billion (25.3% of GDP) from the pre-election forecast. This included fresh Reserve Bank bill issuance to mop up the liquidity from lending to the banks against securitised mortgages.
Extra government borrowing and ‘derivative liabilities’ were also blamed, although Treasury said increased financial assets, including the securitised bank mortgages, meant net debt had improved by NZ$1.4 billion from the pre-election update.
The latest figures put extra pressure on the National government to abandon its planned tax cuts and drop its contribution to the New Zealand Superannuation fund. Labour has recently said it would support the government if it deferred the April tax cuts because of the rapid deterioration of the global economy. Prime Minister John Key has said the cuts will go ahead.
Government’s operating deficit, including gains and losses, was NZ$5.5 billion. This was well below the pre-election forecast of a NZ$2.6 billion surplus (a difference of NZ$8.1 billion), and below the December forecast of a NZ$3.6 billion deficit.
“The main contributors to this result were lower than forecast tax revenue (NZ$0.5 billion), higher than forecast investment losses (NZ$3.2 billion), and actuarial losses on both the ACC outstanding claims liability (NZ$3.1 billion) and GSF net pension liability (NZ$0.9 billion),” Treasury said.
Tags: Deficit, John Key, Labour, National Government, new zealand, NZ Super Fund, OBEGAL, Operating balance, Tax Cuts, Treasury
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March 6th, 2009 at 12:55 pm
Ei CARAMBA ! ! So now we see the picture after the smoke gets blown off !! !
We are in deeper caramba than we ever thought. So will we be “Iceland of the Pacific” ??
“keep our chin up:, “grit” whatever will not work. We have spend too much and it’s now payback. So just go as it should….work harder for less (balance to pay what we owe) spend less, smaller houses, smaller cars, eat less ….there is no othe choice. The faster we do this the better we will be when this is over. More goverment borrowing, lower interest rates by RBNZ etc will only delay the inevitable.
March 6th, 2009 at 1:54 pm
Tax cuts are looking more and more like a dumb idea.
March 6th, 2009 at 2:10 pm
Was the powerful election slogan “Tax cut” by National a lie ?
Anyway when I heard about it again and again before election I said to my wife: In the upcoming economic climate it is never happening” – and I’m only Walter and not John the PM of New Zealand.
March 6th, 2009 at 2:19 pm
Evidently Bill English has stated the worst case scenario is a deficit of 4.5% gdp / govt gross debt of 29% gdp:
http://www.stuff.co.nz/business/industries/economy/2016117/Will-New-Zealand-become-Iceland
Looks like they’re going to have to find a lot of dead wood to cut.
March 6th, 2009 at 3:14 pm
is there any point paying Treasury wallahs huge salaries when their forecasts are so far out- if I consisitently got my businesses cash flow forecast that wrong Id be sacked !
March 6th, 2009 at 3:56 pm
Not looking good. I do think this government needs to quickly announce a plan to reduce government spending as a means to stave off a credit downgrade.
I don’t think it needs to cancel tax cuts, instead I’d rather see significant downsizing in non-operational (i.e. policy) expenditure and a massive wind up of many quangos.
Immediately they could offer all non-operational staff voluntary redundancy – and see what sort of savings that turns up for them.
March 7th, 2009 at 1:55 pm
So why exactly is the government assuming the liabilities of the trading banks for the debt that they have issued to the parasitic rentier class? Why should the Gen X and Y generation be saddled with the debt run up by the profligate and greedy Baby Boomers AS WELL AS looking after them in their dotage when its highly unlikely that the cupboard will be empty when it is our time?