Crown accounts stronger than forecast with higher consumer spending

The Government’s books were better than forecast with a higher GST take as the economy got moving again after lockdown, Finance Minister Grant Robertson says.

The Crown Accounts for the 11 months to the end of May indicate the year end results for tax revenue will be stronger than forecast.

“Tax revenue was $1.5 billion above forecast, Core Crown expenses were $100 million below forecast, and the operating balance before gains and losses (OBEGAL) was $1.6 billion less than forecast.

“The higher tax revenue was mainly due to a higher than forecast GST take, indicating consumers are out spending again – a positive sign for the economy post lockdown.

“Despite these better than forecast results, there are still tough times ahead for many people. The rapid growth in COVID-19 cases around the world poses an ongoing threat to the New Zealand economy, but our careful management of the economy going into the COVID-19 pandemic meant we were in a good position to cushion the blow with low debt compared with the rest of the world,” Grant Robertson said.

“Net core crown debt was 25.1% of GDP, compared to the average for advanced economies before COVID of about 80%. Debt servicing costs are also forecast to remain low.

“I have always said that the Government would use its balance sheet to help New Zealanders through this crisis and the accounts released today reflect our commitment to that.

“Even though the OBEGAL was better than expected, it showed a deficit of $16 billion. This is because we moved early to put in place support for our workers and businesses during lockdown with the wage subsidy scheme of cash grants and other cashflow measures, including tax refunds.

“The Treasury’s next set of forecasts will be part of the Pre-election Economic and Fiscal Update (PREFU) which will be released on Thursday August 20,” Grant Robertson said.