Crown accounts show surplus within reach

Higher tax revenue and lower than forecast core Crown expenses helped to more than halve the Government’s operating deficit before gains and losses to $4.4 billion in the year to 30 June 2013, compared with a $9.2 billion deficit the previous year.



The result was considerably better than the $7.9 billion deficit forecast by Treasury at the start of the financial year in Budget 2012, and confirms the Government’s prudent approach to fiscal management is paying dividends, Finance Minister Bill English says.



“The National-led Government has consistently examined how public services are delivered,” he says. “This has allowed us to reduce costs while improving the services New Zealanders receive, as well as helping the people of Canterbury following the earthquakes.



“We are well on track to return to Budget surplus in 2014/15. It’s important we get there because, until we do, we will continue to increase our debt. Despite the considerable progress we are making, there is no room for complacency.



“In the past financial year, we were still borrowing a net $110 million a week, compared to almost $260 million a week in 2010/11. Once we reach surplus, we will then have choices about reducing our debt and investing more in priority public services and important infrastructure.



“The consequences of too much government debt are all too clear in Europe and the United States, where we have seen cuts to public services and pensions, and higher taxes.”



Treasury’s Budget 2013 forecasts show net core Crown debt is expected to increase from $10.3 billion in June 2008 to over $70 billion by June 2017.



“An active approach to managing the Government’s finances needs to continue for a number of years to get debt down to below 20 per cent of GDP by 2020,” Mr English says.



“That’s why we’re running a balanced programme to reduce the previously unsustainable growth in government spending and to grow the economy.”



In the year to 30 June, core Crown tax revenue increased by $3.6 billion to $58.7 billion, driven largely by higher incomes and consumption which flowed through to increased revenue.



Core Crown expenses increased by $1.2 billion to $70.3 billion, in large part due to costs around student loans.



However, expenses were about $3.4 billion below Budget 2012 forecasts, partly as a result of lower than forecast Canterbury earthquake costs.



The Government remains on track to reduce expenses to 30 per cent of GDP by 2016/17, down from around 35 per cent of GDP in 2010/11, Mr English says.



Overall, the operating deficit before gains and losses of $4.4 billion for the latest year compared with a $9.2 billion deficit the previous year and an $18.4 billion deficit in 2010/11.



The operating balance (after gains and losses) was in surplus by $6.9 billion - $12.6 billion better than Treasury forecast at the start of the year, and $21.8 billion better than in the previous year.



This turnaround reflects significant returns achieved by Crown Financial Institutions and particularly the New Zealand Superannuation Fund and confirms the volatile nature of sharemarkets.



Net Crown debt increased to $55.8 billion (26.3 per cent of GDP), from $50.7 billion (24.3 per cent of GDP) the previous year.



“The annual accounts confirm that we are making good progress in putting the Government’s finances on a stronger footing and in getting back to surplus,” Mr English says.



“We’re doing that by improving public services because we know that what’s good for communities through better services is also good for the Government’s books.”



The Crown’s annual financial statements are available at:



http://www.treasury.govt.nz/government/financialstatements/yearend