The Government’s books are in better shape than Treasury forecast in its September Pre-Election Economic and Fiscal Update (PREFU).
According to accounts for the three months to September 30, the Crown’s deficit was 50% smaller than expected. The operating balance before gains and losses (OBEGAL) came in at -$3.2 billion, as opposed to -$6.5 billion, as forecast in PREFU.
This was owing to the Crown’s core tax revenue being $2.1 billion higher than forecast at $22.0 billion.
Stronger domestic spending saw GST revenue come in at $6.2 billion - $1.2 billion above forecast. Revenue from source deductions (income tax) was $9.3 billion - $0.6 billion above forecast - as salary and wage income for the period held up better-than-expected, helped by the extended wage subsidy.
On the other side of the ledger, core Crown expenses were $27.0 billion - $1.1 billion below forecast, mainly due to wage subsidy payments being $1.0 billion lower than forecast.
This meant net core Crown debt was $94.0 billion (30.5% of GDP), $3.6 billion less than forecast.
Finance Minister Grant Robertson said: “This compares to the average for advanced economies before COVID of about 80%. Debt servicing costs remain low and are forecast to stay that way.”
Meanwhile total borrowings were $27.8 billion below forecast at $154.5 billion, largely due to decreased bank settlement deposits held with the Reserve Bank.
Robertson said: “The Government’s decision that the best economic response to the COVID-19 pandemic was a strong health response has proved time and again to be the right one.
“There was no playbook for this health crisis, and we acted swiftly as the situation unfolded to support our businesses and workers. Those decisions helped us keep kiwis in jobs and mean we are now in a strong position to drive the economic recovery.”