KEY POINTS:
Rising Government spending and falling world sharemarkets combined to slash the Crown's operating surplus in the first half of the current fiscal year to one-fifth of what it was a year earlier.
The operating surplus was $815 million for the six months ended December 31, down from $4.2 billion in the same period of 2006.
While tax revenue at $27.1 billion was 6.7 per cent higher, Government spending grew half as fast again.
About half of the $2.5 billion increase in spending was in the core areas of superannuation, health and education.
Another $500 million was associated with setting up the KiwiSaver scheme and there was an extra $171 million or 14 per cent spent on law and order.
The implications for the tax cuts being promised by both major parties is unclear.
Some claim the operating surplus is available as cash to spend or return as tax cuts, but others argue the figures released today make little difference to the amount available.
The operating balance also took a $700 million hit from the impact on the New Zealand Superannuation Fund of the carnage in world equity markets.
That represents just over 5 per cent of the fund's assets of $13.8 billion.
Downwards revaluations also applied to the Crown financial institutions, including the Government Superannuation Fund, which funds public servants' pensions, and the Accident Compensation Corporation.
The net impact has been to increase Government debt by $600 million on a year earlier, but at 18.8 per cent of gross domestic product it is well within the Government's self-imposed long-term target range of 20 per cent of GDP.
Finance Minister Michael Cullen last week predicted the hit, which he said was the result of turmoil on the world equity and financial markets.
However, today's accounts only tell part of the story as they do not show the returns for January when share markets around the world took a real tumble.
- with NZPA
