KEY POINTS:
The Government's books have plunged $3.5 billion into the red - $5 billion worse than forecast - on the back of the global financial meltdown, according to the crown accounts out today.
The government's financial statements shows the crown operating balance was $3.5b in deficit at October 30, against a forecast surplus of $1.5b.
Treasury deputy secretary Peter Bushnell said the main reason for the worse than expected result in the monthly update was unrealised losses on government investments as a result of severe turbulence on global sharemarkets.
The losses were $4.3b greater than expected.
Finance Minister Bill English said the deficits showed the need for action to make the economy more productive and competitive.
"They also show Labour's legacy of deepening operating balance deficits, rising debt and a deteriorating economic and fiscal situation," Mr English said.
He said 2009 would be a challenging year for everyone and the books would get worse before there was any improvement.
National would press ahead with its three year plan of tax cuts, boost infrastructure spending, reform the Resource Management Act and get the New Zealand Superannuation Fund to invest 40 per cent of its assets locally.
The worst hit was the New Zealand Superannuation Fund which took a $3.5b hit, while ACC suffered $600 million in losses and the Earthquake Commission (EQC) $200 million.
The separate Government Superannuation Fund and ACC also recorded losses of $1b and $400m respectively as a result of revaluations of liabilities.
However once unrealised investment losses are stripped out the operating balance it comes in at $898m in surplus - $117m better than forecast.
The cash deficit was $900m better than expected, coming in at $3.7b due to delays in transferring $700m to the previous government's Fast Forward research fund and higher than expected petroleum mining royalties.
The accounts show gross crown debt climbing $3.1b higher than expected to $33.6b - 18.8 per cent of GDP.
Net core crown debt was $1.9b lower than forecast at $2.2b mainly due to the lower than expected cash deficit and higher than forecast circulating currency.
Tax revenues overall were about $400m more than forecast, but that was probably due to timing issues, Treasury said.
- NZPA
