Treasury reports NZ$448 mln OBEGAL Budget surplus in 10 mths to April; English says outlook a bit better; surplus in 2014/15 possible again; 'will be a close run thing'

By Bernard Hickey

Treasury has reported a surprisingly strong budget surplus for the 10 months to April and Finance Minister Bill English said an improved outlook meant there was a chance again that the Government could reach a surplus in 2014/15.

The Government had appeared to give up on its four-year-old target in the Budget last month, but Treasury reported an Operating Balance Excluding Gains and Losses (OBEGAL) in the 10 months to April of NZ$448 million, which was NZ$1.003 billion better than Treasury's forecast in the Budget published just last month.

Tax revenues were NZ$437 million larger than expected, due largely to corporate tax being NZ$190 million higher than forecast and GST being NZ$141 million higher than forecast.

Treasury said Portfolio Investment Entity taxes were stronger than expected after rallies on financial markets and it said this positive surprise could last through to the end of the year.

GST was higher than expected after strong March quarter retail sales, although Treasury said it was too early to be confident this improvement would include through to the end of the fiscal year. Spending was NZ$420 million lower than forecast with the biggest improvement being NZ$164 million in Education.

'It will be a close run thing'

Treasury said State Owned Enterprise and Core Crown entity results were NZ$200 million higher than expected, with Housing NZ's profit being NZ$80 million above forecast. Interest costs were below forecasts because of lower than expected interest rates.

English said the NZ$1 billion variance highlighted the volatility in monthly fiscal results.

"We've always said small differences between large revenue and expenditure numbers can lead to swings of several hundred million dollars in the OBEGAL balance," he said.

"We won't know whether we will make surplus for the full year until we see the final accounts in October. But it's clear it will be a close run thing," he said.

"The Treasury advises that, based on the April results, there is now some upside risk in both tax revenue and Crown expenses. However, it's not yet clear how much of this latest overall improvement will carry through to the full year's result."