Crown accounts turn back to deficit in February

The Crown accounts have slipped back to a deficit of $269 million in the eight months to February, making the previous month’s flirtation with surplus short-lived but nevertheless encouraging, Finance Minister Bill English says.

The operating balance before gains and losses (OBEGAL) for the seven months to January showed a surplus of $77 million - the first time since 2009 that the Government’s books had shown a part-year surplus.

Revenue from some tax sources have remained higher than forecast in February, but not as far ahead as they were in January. “Other individuals” tax is $217 million ahead of forecast, and corporate tax $91 million higher, indicating a pleasing lift in profitability for some businesses. However, the February accounts show GST being $261 million lower than forecast. About  $150 million of that is attributed to earthquake-related refunds to insurers. The rest of the GST shortfall is related to very low inflation leading to lower-than-expected spending on consumption.

The Government continues to do a good job of controlling its own expenditure with core Crown expenses in the latest eight-month period  $312 million lower than forecast, though some of that relates to the timing of Treaty settlements so will reverse out in time. Taken over the year, core Crown expenditure for 2014/15 is forecast to be $4.1 billion lower than forecast in Budget 2011  when the Government  first set the target of returning to surplus in 2014/15.

“We’re continuing to manage the books carefully but lower inflation, while good for consumers, is making it less likely that the final accounts in October will show a surplus for the whole year,” Mr English says.

“Nevertheless, the fact that we’re a bit over one month, and a bit under the next, shows just how far we have come since 2010/11 when we had an $18.4 billion deficit. Next month’s Budget will produce new forecasts that I expect will take in to account further reductions in the inflation outlook.”