The New Zealand government had a smaller operating deficit than expected in the first seven months of the financial year as the tax take on investments gained on the rally in stock markets, and higher income workers made up for falling job numbers for the lower paid.
The operating balance before gains and losses (obegal) was a deficit of $2.51 billion in the seven months ended January 31, 19 per cent smaller than forecast in the December half-year economic and fiscal update, according to the Crown's latest accounts.
Core Crown tax revenue was 1.5 per cent ahead of schedule at $33.11 billion with income tax ahead by $225 million and tax from other individuals - which includes on investments - $277 million more than forecast. Government expenses were $282 million behind forecast due to ongoing delays in complex Treaty of Waitangi negotiations.
"Total labour force earnings were in line with forecast, however there was a fall in employment concentrated at the lower end of the income scale," Treasury's chief financial officer Fergus Welsh said in his commentary. "The same amount of income was earned by fewer workers, increasing the average tax rate due to the progressive nature of the personal income tax scale."
Persistently high unemployment has been a bugbear for New Zealand's economy, which is relying on the rebuild in Christchurch to re-ignite economic growth. Economists, government officials and politicians have been sceptical of the official household labour force survey, which puts the jobless rate at 6.9 per cent, saying it is often volatile and hasn't married up with falling benefit numbers and the tax take.
