The Treasury has released the Government's accounts for the 7 months to January 31 showing an operating balance before gains and losses (OBEGAL) of a deficit of NZ$4.3 billion, which was NZ$473 million worse than forecast in the Pre-Election Fiscal update (PREFU).
This was due to tax revenues, in particular income taxes, GST and corporate taxes, being NZ$31.36 billion or NZ$946 million less than forecast in the PREFU.
Spending was NZ$1.2 billion less than forecast at NZ$33.935 billion.
The operating balance, which includes gains and losses from investments, was a deficit of NZ$8.9 billion, which was NZ$2.5 billion worse than forecast.
Treasury said there was now a risk that revenues for the full year would be lower than the February 2012 Budget Policy forecast.
Here's Treasury's commentary on the figures:
In the seven month period, Core Crown tax revenue of $31.4 billion was 2.9% below the PREFU forecast.
The key drivers of this variance were:
* Source deductions (income tax) were $383 million (3.0%) below PREFU forecast, reflecting weaker than forecast labour market conditions.
* GST revenue was $345 million (4.0%) below PREFU forecast with earthquake‐related GST refunds to insurance companies continuing to account for most of this variance.
* Corporate tax was $245 million (5.1%) below PREFU forecast. Corporate tax assessments in the month of January were below forecast which is a pattern that is now expected to persist to the end of the financial year.
In the 2012 Budget Policy Statement (BPS) published last month, the Treasury forecast the operating balance before gains and losses (OBEGAL) for the current year to be $1.3 billion lower than in PREFU, primarily reflecting a weakening in economic activity. January tax data was in line with the BPS assessment, although weaker labour market conditions now apparent suggest some downside risk to the full year source deductions forecast.
In the seven months to 31 January, Core Crown expenses of $39.4 billion were 3.1% lower than expected. Most of this variance was either offset by similar revenue impacts, or reflect timing of expenditure and is expected to reverse by the end of the financial year. The Treasury continues to expect that expenditure at year‐end will be similar to that forecast at PREFU.
The OBEGAL was in deficit by $4.3 billion, $473 million higher than forecast driven in part by EQC expenses related to the 23 December 2011 earthquake ($290 million). Including gains and losses, the operating balance deficit, at $8.9 billion, was $2.5 billion higher than forecast.
The main contributors continued to be higher‐than‐forecast actuarial losses on the Government Superannuation Fund liability ($1.0 billion) and ACC’s outstanding claims liability ($721 million), as well as higher‐than‐assumed losses on investment portfolios across the Crown ($205 million).
(Updated with more detail, video of Finance Minister English)
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