Crown hauls in cash bonus

In the past year the Government's net worth has soared by 41 per cent - or $14.5 billion - to $50 billion.

Net worth is the combined value of Government assets and surplus.

The Treasury yesterday published Crown financial statements that showed the Government's purse is bulging even bigger than was forecast before the election.

The June year operating surplus was $6.2 billion, or 4.2 per cent of gross domestic product. That's $471 million more than forecast at last month's pre-election fiscal and economic update when previous estimates were in turn bowled by a higher than expected tax take. Last year's original budget forecast was $5.7 billion.

The operating balance excluding revaluations and accounting changes, which Finance Minister Michael Cullen has said gives a truer picture of the Government's accounts, was $8.8 billion against the pre-election forecast of $8.3 billion and the original forecast of $5.7 billion.

Meanwhile the cash surplus was $3.1 billion, down $52 million on the pre-election forecast but well up on the $800 million deficit in the 2004 budget forecast.

"We have a blowout in the surplus," said Bank of New Zealand chief economist Tony Alexander.

The pre-election forecast revealed an extra $541 million in June year revenue, fuelling calls for tax cuts in the run up to last weekend's election. But Alexander believed the "best measure" of the affordability of tax cuts or extra spending was the change in the Government's net worth. That came in yesterday at $50 billion, an increase of about $14.5 billion on last year.

The increase was due to a combination of the $6.2 billion operating surplus and an $8.2 billion upward revaluation of assets.

The "very, very strong" Crown accounts gave the Government three options, Alexander said.

"You can keep running the high surplus and bank the money, which is largely what's happening here with the net worth going through the roof. That's probably a pretty good idea given the vulnerability of New Zealand's economy to shocks down the track.

"Secondly you can spend it all, chucking money at whatever takes your fancy, infrastructure, health, education and welfare, or you can give the likes of tax cuts."

But Cullen yesterday said the "economic considerations weighed against any big spending increases".

"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."

Yesterday's figures show core Crown revenue was up 11 per cent to $52.1 billion from a year earlier with tax revenue of $47.12 billion - up $4.11 billion on last year.

Income tax rose 7.7 per cent to $18.3 billion, company tax rose 18 per cent to $7.8 billion - $1.3 billion up on the original forecast thanks to the buoyant economy.

GST was up 4.7 per cent to $10.2 billion.

In the money

Government's June year operating surplus is $6.2 billion.

That's $471 million more than forecast before the election.

The Government's net worth is now $50 billion.

additional reporting by NZPA