Finance Minister Bill English says next month's budget forecasts will reflect the weaker track of inflation, which erodes tax revenue and is making it less likely the government will achieve a surplus this year.
The Crown accounts turned to a deficit of $269 million, on an operating balance before gains and losses (Obegal) basis, in the eight months ended Feb. 28, compared to a surplus of $77 million in the seven months through January, the Treasury said today.
The February accounts show goods and services tax came in $261 million below estimate, and while some $150 million of that related to earthquake-related refunds to insurers, "the rest of the GST shortfall is related to very low inflation leading to lower-than-expected spending on consumption."
The Treasury flagged in December that the government's target of a return to surplus in 2015 would be delayed by a year, projecting a Obegal deficit of $572 million for the June 2015 year, turning to a surplus of $565 million in 2016. But English had held out the hope that 2015 could yet deliver a surplus once the final accounts were tallied in October. Today he said that's less likely.
"We're continuing to manage the books carefully but lower inflation, while good for consumers, is making it less likely that the final accounts in October will show a surplus for the whole year," English said. "Next month's Budget will produce new forecasts that I expect will take in to account further reductions in the inflation outlook."
