Budget deficit better than expected

Treasury reports OBEGAL deficit of $545 mln in first quarter of financial year; better than $798 mln forecast in May; Income taxes bit better than forecast; GST lower than forecast

6th Nov 15, 10:08am by Bernard Hickey

By Bernard Hickey

Treasury has reported the Government made an Operating Balance Excluding Gains and Losses (OBEGAL) deficit of NZ$545 million in the three months to the end of September, which was better than the NZ$798 million deficit forecast in the May Budget.

Treasury said the result included a NZ$253 million boost from ACC's own OBEGAL because of lower insurance costs and and higher dividends, but that income taxes were NZ$101 million higher than expected and spending of NZ$18.5 billion was NZ$34 million higher than forecast.

It said the higher than forecast trend in PAYE earnings in the June quarter had continued through into the September quarter and corporate tax receipts were NZ$72 million above forecasts because of a number of permanent one-off tax payments.

However, GST receipts were NZ$76 million below forecasts, "mainly owing to lower-than-forecast consumption."

"Current indicators are pointing to consumption growth being close to forecast in the September quarter, but lower‐than‐forecast consumption growth through the first half of 2015 has lowered the GST‐taxable base overall relative to the Budget forecast," Treasury said.

Treasury forecast a NZ$176 million surplus for the full year in the May budget, but that also included a forecast for a deficit for the 2014/15 year. The Government's final result was a surplus, indicating an improvement since May.

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7 Comments

by bigblue | 6th Nov 15, 12:07pm 1446764829

How confusing! So correct me if I am wrong - the govt is losing/accumulating debt at a rate of $500m to $750m per quarter ie $2 to $3 billion per year?
How and when are we ever likely to start paying this debt down?

by HeavyG | 6th Nov 15, 2:17pm 1446772660

It only forecast a deficit for the first quarter (which came in below forecast i.e. -$500m instead of -$750). The year forecast is for a small surplus. The question is what was the reason for a forecast large deficit in the Q1 and what is supposed to change in Q2, Q3 and Q4 to give us the forecast annual surplus.

You are wrong to assume the Q1 forecast is merely an average of the forecast yearly deficit so that Q2, Q3 and Q4 are also forecast to be -$500m to -$750m.

by dtcarter | 6th Nov 15, 2:05pm 1446771936

I thought just last week we were celebrating the first surplus of the Key government?

by HeavyG | 6th Nov 15, 2:23pm 1446773014

There was a surplus for the 2015 year (see http://www.interest.co.nz/bonds/78132/treasury-reports-obegal-surplus-n…).

This was despite a deficit forecast for 2015.

We are now in the first quarter of the 2016 year. The forecast is for a surplus and the Q1 result, albeit a deficit of -$500m is better than the expected deficit of -$750. This would indicate the forecast surplus for 2016 looks on track as presumably Q2, Q3 and Q4 are forecast to bring the annual budget back to surplus (and now only have to turn around a -$500m Q1 deficit and not a -$750m one).

by Alter Ego | 6th Nov 15, 2:21pm 1446772867

Key process for fixing all ills. Celebrating the surplus.

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by sharetrader | 6th Nov 15, 8:34pm 1446795249

this is pointing to a downturn, along with unemployment rising (increased costs)
GST receipts were NZ$76 million below forecasts, "mainly owing to lower-than-forecast consumption."

by Roger Witherspoon | 7th Nov 15, 6:11pm 1446873096

Who would have thought that paying silly prices for houses would mean that people had less to spend after paying the mortgage? I mean, no one saw that coming..