ACC, Super Fund recoveries help NZ govt finances

Recoveries in the investment performance of the ACC and New Zealand Superannuation Fund portfolios helped offset a dramatic fall in corporate and personal tax in the three months to September 30, according to Treasury financial statements released today.

The Crown operating balance, including net gains and losses by government entities came in at a deficit of $175 million for the first quarter of the fiscal year, compared with a forecast $598 million.

"Higher than forecast investment returns reported by the NZS Fund and ACC ($1.4 billion and $0.7 billion respectively) offset the tax result meaning the operating balance deficit was slightly better than forecast."

Both investment funds improved in line with recoveries in world financial markets, although elsewhere in the government's books were net losses on foreign exchange movements on financial instruments of $273 million.

Tax revenue for the quarter at $11.9 billion was $1.1 billion lower than forecast, mainly because the corporate tax take was $900 million under forecast, reflecting lower provisional tax payments following weaker economic conditions last year and for the year ahead.

"A clearer picture of the implications for 2010 is likely to emerge after the end of October, by which time any seasonal volatility is expected to have settled down," Treasury Deputy Secretary Peter Bushnell said in a statement.

"Lower tax revenue was the main contributor to an operating balance before gains and losses (OBEGAL) deficit of $2 billion, against a forecast deficit for the period of $1.1 billion."

Net government debt at 11.8 per cent was in line with forecast.

Other bright spots for the revenue statement were petroleum royalties coming in $146 million higher than forecast, reflecting the upsurge in oil and gas production over the last two years, and $162 million more than expected in fees from participants in the Retail Deposit Guarantee Scheme which financial institutions flocked to in the wake of the global credit crunch.

Strong SOE dividends also helped, although offsetting additional government expenses included social assistance benefit payments $280m higher than forecast due to higher family support payments, more Domestic Purposes Benefit and student allowance recipients than anticipated, and higher than forecast KiwiSaver payments as membership grew faster than expected.

Personnel and operating costs were $356m higher than forecast due mainly to $230 million higher payments than forecast to third party health service providers.