Government's June budget comes in $92m below forecast

2.00pm

The official Government financial operating balance for the year to June came in at a surplus of $2.327 billion, $92 million below the latest forecast made in June, the Treasury said today.

However, the Oberac balance (operating balance excluding revaluations and accounting policy changes), which the Government prefers to focus on, came in at $$2.751 billion, about $539 million better than forecast.

The Crown's net worth was $4.24 billion better than forecast at $18.256 billion and Crown net debt was $973 million lower than forecast at $19.25 billion.

Finance Minister Dr Michael Cullen said the Government's fiscal discipline had been rewarded.

Originally, the Government in May last year had budgeted for a $1.4 billion surplus. But in the wake of September 11 and the global downturn, that was revised down to $985 million in December and then, when the effects were not as dire as feared, it was revised up again to $2.419 billion.

Dr Cullen said the Oberac balance was the best measure of financial stewardship because it stripped out revaluations and accounting changes over which the Government had no control. These could be large and were often driven by interest rate changes.

The Oberac result compared with a $2.1 billion surplus in the 2000/01 year.

"The figures show the Government is successfully achieving its fiscal policy objective of running budget surpluses to fund contributions to the New Zealand Superannuation Fund, financing the Government's investments and managing debt to prudent levels," Dr Cullen said.

He noted that gross debt was around 30 per cent of GDP at June 30 and net debt was 16 per cent while net worth was up to 15 per cent.

The variation in the straight operating balance from the pre-election economic and fiscal update estimates was mainly because expenses were $526 million above forecast, due to a higher than forecast unfunded Government Super Fund liability revaluation ($804 million).

This was partially offset by lower than forecast "functional" expenses ($278 million) spread across various areas.

Operating revenue was $442 million above forecast thanks mainly to a one-off gain associated with the Maui gas contract ($260 million) and to United Nations East Timor deployment reimbursements ($67 million).

The $4.242 billion increase in the Crown's net worth was due to revaluation of the Government's assets.

- NZPA