Government surplus news just keeps getting better

12.00pm

Stronger economic growth than expected has continued to swell the Government's surplus for the current year beyond expectations.

Treasury said the Government's accounts for seven months ending January showed the surplus had reached $2.45 billion -- $700 million more than it predicted last December.

Higher than expected returns from GST ($219m) and income tax ($217m) has led to tax revenue being $511m ahead of forecast. Excise tax also brought in $49m more than predicted with smokers coughing up $41m more in tobacco taxes than expected.

The Government also spent $462m less than it budgeted for.

Treasury, like Finance Minister Michael Cullen, continues to be cautious about the crown's healthy balance sheet.

The GST take was expected to even out later in the year and the slow spending of welfare and health money was expected to speed up or be deferred until next year, Treasury warned.

Dr Cullen has indicated the current year's surplus was likely to exceed the predicted $2.5 billion.

The current figures shows the tax take has recently been growing $100m a month faster than hoped for. This indicates the surplus could easily exceed $3b if the trend continues.

Despite the healthy state of the books, Dr Cullen is resisting all calls to spend up in the May budget.

He wants to see if the black ink can weather an economic slowdown as well as relatively prosperous times.

The accounts also highlighted the knocks the Government's investments have taken from the turmoil on international stock markets.

Total investment income was lower than forecast by $396m or 49.3 per cent. This reflected a $376m devaluation in the crown's various investment arms.

The Earthquake Commission devalued $213m, Government Superannuation Fund $137m and Accident Compensation Corporation $26m.

"Financial asset portfolios that include equity investments are expected to be volatile in the short-term," Treasury said.

Despite those hits to the accounts, the crown's overall net worth was $794m ahead of forecast ($21.2 billion) due to the operating surplus and revaluations.

Overall net debt was also $297m lower than forecast due to improved cash flows and delays in spending on assets. Net crown debt was estimated to be 14.7 per cent compared to a forecast of 15 per cent.

At a recent select committee hearing, Dr Cullen said he was maintaining a cautious attitude to the surplus growing faster than Treasury believed.

Dr Cullen said since then there had been continuing "uncertainty around the revenue track".

As a result, he was still being cautious and "not spending surpluses before they arrive".

Dr Cullen is under pressure from spending ministers in portfolios such as education, health and welfare to open his purse strings. So far he has resisted all pressure.

He has promised minor increases in spending this year. But indicated Cabinet would look at larger increases to family support payments in the 2004 budget.

- NZPA