Rising Government spending and falling world sharemarkets combined to slash the Crown's operating surplus in the first half of the current fiscal year to one-fifth of what it was a year earlier.
The surplus was $815 million for the six months ended December 31, down from $4.2 billion
in the same period of 2006.
While tax revenue at $27.1 billion was 6.7 per cent higher, Government spending grew half as fast again (up 10.1 per cent to $27.7 billion).
About half of the $2.5 billion increase in spending was in the core areas of superannuation, health and education.
A further $500 million was linked to setting up the KiwiSaver scheme and there was an extra $171 million or 14 per cent spent on law and order.
The operating balance also took a $700 million hit from the impact on the New Zealand Superannuation Fund of the carnage in world equity markets. That represents just over 5 per cent of the fund's assets of $13.8 billion.
Investment losses by other Crown financial institutions, which include the Government Superannuation Fund (which pays public servants' pensions) and the Earthquake Commission, combined with an increase in ACC's unfunded liability to reduce the operating surplus by $1.8 billion, when an $800 million gain had been forecast.
Excluding those revaluation gains and losses, the surplus at $2.53 billion was only $20 million less than forecast.
The net impact has been to increase Government debt by $600 million on a year earlier.
