The Government collected $1.2 billion less core Crown tax in the nine months ended March than was forecast in Treasury’s half year update.
Core Crown tax revenue across those three quarters was $88.5 billion, or 1.3% below forecast.
Treasury said this was largely due to a $1.7 billion drop in corporate taxes as economic conditions have reduced taxable profits.
This trend has been ongoing for some time but has been partly offset by higher individual taxes, driven by faster than normal nominal wage growth.
Income taxes were up $3.9 billion, or 11.2%, from the previous year due to the strong labour market and associated wage growth.
Goods and services tax revenue was $300 million below forecast, indicating some weakness in consumption for the March quarter. GST numbers were up year-on-year but below inflation.
“It is possible that this weakness relative to forecast could continue through to the end of the fiscal year,” Treasury said in the notes.
Lower-than-expected revenue from the Emissions Trading Scheme added to the Crown’s financial underperformance and dragged total core Crown revenue to $1.6 billion below forecast.
While you might expect this to translate into a deeper deficit, it hasn’t had a big impact yet, as core Crown expenses were also tracking $1.4 billion below forecast.
The operating balance before gains and losses (OBEGAL) deficit was at $5 billion, which is about $600 million worse than forecast.
Favourable movements in financial instruments, the ‘gains and losses’ part of OBEGAL, meant the overall operating balance was in surplus of $1.7 billion.
Treasury said this was primarily due to higher returns on listed equities and derivatives held by the NZ Super Fund and interest rate swaps held by ACC.
This was mostly due to a $9 billion increase in the valuation of financial instruments, minus a $3.1 billion decrease in non-financial instruments.
Net core Crown debt—a measure which the new Government has reverted to using—was at $173.7 billion, or 42.9% of GDP, and was $600 million lower than had been forecast.
The Government’s net worth was $185.5 billion, 45.8% of GDP, and almost $5 billion above forecast, due to the better operating balance result.
Finance Minister Nicola Willis will deliver her first budget on May 30.
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