Budget surplus above $6 billion

The Government budget surplus in the year to June was $6.2 billion, or 4.2 per cent of Gross Domestic Product, Treasury figures show today.

The result compared with the $5.78 billion forecast in pre-election budget and fiscal update (PREFU).

The 2005 Oberac surplus (operating balance excluding revaluations and accounting changes) was $8.8 billion against the PREFU forecast of $8.3 billion.

The OBERAC surplus compares with $6.6 billion last year.

The cash surplus, which includes capital spending on schools, roads hospitals etc, and excludes student loans and contibutions to the New Zealand Superannuation Fund, was $3.1 billion, down $52 million on the PREFU forecast.

Finance Minister Michael Cullen said the OBERAC surplus was sufficient to fund capital needs and set aside $2.1 billion for the New Zealand Superannuation Fund.

Gross sovereign debt fell to 23.5 per cent of GDP from 25.3 per cent in June 2004, which Dr Cullen said was consistent with lowering the ratio to 20 per cent by 2015.

Net Crown debt including NZ Superfund assets, at June 30, 2005, was $4.2 billion, just 2.8 per cent of GDP, against $11.2 billion a year ago.

Core net Crown debt was $10.8 billion, 7.2 per cent of GPD, in line with the PREFU forecast, but well down on the $15.2 billion a year earlier.


Dr Cullen noted the improvement in the OBERAC surplus reflected improved returns from State-Owned Enterprises and Crown entities, several of which came in ahead of expectations.


"Those funds will be left with the organisation for re-investment rather than skimmed off by the Government," he said.


However, analysts believe improved SOE balance sheets could allow the Government to extract significant one-off capital returns.


The improvement of the Government's net worth to $50 billion from $35.5 billion a year earlier reflected revaluation of physical assets -- mainly electricity infrastructure, state highways, conservation assets, housing stock, educational facilities and buildings.


"The important factor to be borne in mind were the economic considerations weighting against any big spending increases," Dr Cullen said.


"The economy is running close to capacity and oil prices are high. Both these factors are already putting pressure on inflation as the Reserve Bank warned last week.


"To further fuel consumption under these circumstances would simply risk pushing up interest rates," he said.


- NZPA