Govt unexpectedly posts 8-month surplus on increased tax take

Income tax, which makes up the bulk of tax revenue, was 1.1 percent ahead of forecast at $13.21 billion. Photo / Mark Mitchell

The New Zealand government recorded a surplus in the first eight months of the year, compared to the Treasury's forecast for a deficit, mainly driven by higher-than-expected tax revenue.

The operating balance before gains and losses (Obegal) was a surplus of $398 million for the eight months ended Feb. 29, compared to a forecast deficit of $332 million, the government's financial statements show.

Core Crown revenue of $48.1 billion was $606 million more than expected, and included core tax revenue of $44.68 billion, or $828 million more than forecast, offset by lower-than-forecast interest income. Core Crown expenses of $48.4 billion were $113 million more than expected.

The operating balance including gains and losses was a deficit of $5.1 billion, or $4.6 billion greater than expected, mainly reflecting higher-than-expected actuarial losses on ACC claims liability and losses on financial instruments because of unfavourable market movements, the Treasury said.

Finance Minister Bill English is scheduled to release his eighth budget since the election of the National Party-led government in 2008 on May 26.

In the December Budget Policy Statement, the Treasury projected an obegal-deficit of $400 million in the year ending June 30, having previously forecast a surplus of $200 million, with a return to surplus in 2017, mainly because of a slower than expected growth in the tax take. In his speech to open the 2016 parliament, Prime Minister John Key said lower economic growth forecasts would reduce anticipated tax revenues by $17 billion over five years.

In the first eight months, net debt was lower than forecast at $62.4 billion, or 25.3 percent of gross domestic product. The Crown's total assets were valued at $275.3 billion as at Feb. 29, while liabilities stood at $188.3 billion.