Government surplus running at more than $4b

The Government ran up an operating surplus of $4.4 billion in the first half of the 2005/2006 financial year, Treasury reported today.

The surplus was $1.6 billion ahead of forecasts, but this was mainly driven by Meridian Energy's sale of its Australian subsidiary Southern Hydro ($0.6 billion) and better than expected investment returns ($0.7 billion).

The net cash surplus taking into account capital spending and other non-operating expenditure was $234 million, almost 50 per cent less than forecast due to the early purchase of school property.

The Crown accounts for the six month to December are also the first to record the impact to the changes to student loans policy and the increase in the Kyoto Protocol liability.

Treasury said the Kyoto liability was $122 million more than it estimated in December and was now recorded as $562 million in the books.

This is due to the estimated cost of buying carbon credits and higher than previously forecast rates of deforestation.

The changes to student loan policy mean the Government is writing down the value of students' loans.

In the six month accounts this means a $1.5 billion writedown in the fair value of outstanding loans, as well as an estimated $296 million drop in repayments.

Despite the various hits, the Crown's net worth was still estimated to be $54.4 billion -- $1.6 billion more than forecast.

In June 2005 Treasury said the Crown's net worth after taking into account all assets, debts, liabilities and costs was $49.9 billion.

Tax revenue for this half financial year was $24.9 billion -- up 7.7 per cent -- driven by a strong labour markets, consumer spending and company profits.

Total core crown expenses were up $25.5 billion, 16.3 per cent ahead of the previous year due to more spending on welfare and health, as well as the hit from student loan policy and the Kyoto liabilities.

- NZPA