The Government is tackling this Delta outbreak from a much stronger financial position than Treasury expected earlier in the year.
The Crown accounts were only $4.6 billion in deficit as at June 30, according to the audited accounts for the 2020/21 financial year, released on Tuesday.
This is a smaller deficit than the $15.1 billion deficit forecast by Treasury at the May 20 Budget, and the $23.1 billion deficit reported last year.
The better-than-expected financial position reflects the Government’s tax take being higher than expected, and expenses being lower than expected - thanks to the economy rebounding strongly after lockdown with the help of seismic levels of fiscal and monetary support.
Core Crown tax revenue was 15% higher than the previous year and 7% higher than forecast at the Budget, coming in at $98 billion.
There was also a fall in social security and welfare expenses in 2020/21 after the large increase in 2019/20. Although there was an increase in health and transport spending.
“When this is combined with the improved results from Crown entities and SOEs [state-owned enterprises], there is an improvement in the OBEGAL deficit,” Treasury said.
Indeed, Super Fund and ACC investment portfolios spiked in value as equity markets surged.
The Crown’s net worth increased by 37% to $157.2 billion from the prior year, largely thanks to the value of its land and buildings inflating. The value of land owned by the Government increased by a whopping $12.2 billion over the year.
The graph below shows the magnitude of revaluations in property, plant and equipment (PPE).
Net core Crown debt was worth 30% of gross domestic product (GDP) at June 30, below the 34% forecast at the May Budget.
Finance Minister Grant Robertson said the strength of the books “has given us the fiscal headroom to support businesses and households when the Delta outbreak struck”.
A lot has changed since June 30. The Government on September 16 announced it would need to top up its Covid-19 Response and Recovery Fund by $7 billion, having already put aside $62 billion for the response since the start of the pandemic.
As at Friday, the Government had paid businesses around $3 billion in Wage Subsidies and $974 million in Resurgence Support Payments since the start of the Delta outbreak.
In the 2019/20 year, it spent much more - $12.1 billion - on Wage Subsidies. The benefits of this expenditure were felt in 2020/21, when interest rates were also at record lows.
Robertson said the Government would continue to take a “balanced approach, investing heavily to support wellbeing, our transition to being a low carbon economy and to improve productivity, while carefully managing our resources with an eye to the long-term sustainability of the economy”.
We will find out more about the impact of this Delta outbreak when Treasury releases its Half-Year Economic and Fiscal Update on December 15, and its Debt Management Office updates its forecast debt issuance programme.
Robertson will on December 15 also release his Budget Policy Statement for 2022. He said the Budget will focus on climate change, and the Government’s "various reform programmes". There are health, resource management and three waters reforms underway.
Here are the headline figures from the Crown accounts: