Accounts show need for ongoing discipline

The Government remains committed to sound management of its finances and ongoing spending restraint as the economy continues to recover from recession, Finance Minister Bill English says.

Lower than forecast tax revenue alongside the fiscal impact of the Canterbury earthquake contributed to a larger than expected operating deficit before gains and losses of $3.7 billion in the three months to September 30.

"The $1.1 billion lower than forecast tax take is largely the result of lower than expected consumer spending as New Zealanders pay down debt and save more," Mr English says.

"Although the Treasury expects some of the lower tax take to reverse in coming months, it reinforces the need for ongoing fiscal discipline. We've made good progress on getting Government spending growth under control, but this must continue.

"In the past two years we've reprioritised about $4 billion of lower quality spending into more worthwhile inititatives and we've promised to cap future new Budget spending at $1.1 billion.

"However in many ways restraint in the public sector is only just starting. We still have a significant medium term challenge to get back into surplus as soon as possible. That is why the Government is committed to spending restraint for the foreseeable future.

Mr English says the trend away from consumer spending to increased saving contributed to the lower than forecast tax revenue.

"New Zealanders understand our need to rebalance the economy away from debt and spending towards savings and investment.

"While in the short term this increased saving means slightly lower growth and tax revenue, it is what the economy needs over the long term as we build our future on savings, productive investment and exports," Mr English says.