Tax revenue up but Govt spending higher

Photo / Mark Mitchell

Three-quarters of the way through the Government's financial year, tax revenue was up 3.8 per cent on the same period a year earlier, but its operating spend was 7.2 per cent higher.

And that does not include the impact of the Canterbury earthquakes on the Earthquake Commission.

The Government financial statements for March show that over the nine months tax revenue was $1.4 billion higher than in the same period of the previous year and running in line with last December's forecasts, as higher PAYE offset weaker than expected GST. Core Crown expenses, however, were $3.4 billion up on a year earlier.

The big-ticket items in the increase were $800 million booked from the allocation of free units to foresters and trade-exposed emitters under the emissions trading scheme and a $600 million increase in welfare (including superannuation) spending arising from the indexation of transfer payments and higher recipient numbers.

The Crown's rapidly rising debt was reflected in a $500 million increase in its interest bill, and health spending rose $400 million.

The operating balance excluding gains and losses, which also takes in the state-owned enterprises and Crown entities, was $10.2 billion in deficit. That is $1.3 billion worse than forecast in December but the difference is the $1.5 billion cost to the Earthquake Commission of the February earthquake.

The broadest measure, the operating balance, which includes unrealised valuation gains and losses from ACC, the New Zealand Superannuation Fund and the Government Superannuation Fund, was a deficit of $3.3 billion.

That is $3.8 billion better than expected because of gains on world sharemarkets and higher interest rates which reduce the net present value of ACC and public servants' pension liabilities.

The cash deficit for the nine months was $12.4 billion, $100 million larger than forecast.

The Budget next week would set a credible path back to surplus, Finance Minister Bill English said.

"It's essential that the Government gets its own finances in order as quickly as possible, so it can join households and businesses in lifting national savings and reducing New Zealand's vulnerability to foreign lenders."