Govt accounts continue to track slightly above forecast

Stronger employment growth and residential investment continued to support the Government’s financial accounts in the seven months to the end of January, Finance Minister Grant Robertson says.

The operating balance before gains and losses (OBEGAL) was $677 million above forecast at a surplus of $2.4 billion. This was driven by core Crown tax revenue coming in $937 million (2.1%) above forecast at $44.8 billion. Core Crown expenses were $155 million (0.3%) above forecast as some expenditure was recognised earlier than expected. Net debt at 21.6% of GDP was below the 22.0% forecast.

“Treasury says stronger employment growth in the economy than it had expected in last year’s forecasts has led to PAYE coming in higher than forecast due to more people working. Stronger residential investment meant GST receipts were up, while customs and excise duties also contributed,” Grant Robertson says.

“While some of the revenue variance might still reverse out over coming months, primarily related to customs and excise duties, much of it is expected to persist and will be built into the 2018 Budget Economic and Fiscal Update.”

The better-than-expected financial position of the Government reflects broader economic conditions.

“Business confidence has improved this year, with headline perceptions turning around and the more important ‘own activity’ measures continuing to rise in positive territory. Employment and investment intentions are positive, residential construction intentions are up and export intentions have also improved. On top of this, the latest consumer confidence and employee confidence readings are also positive.

“These surveys can often fluctuate month-to-month, but the trends indicate a clear direction as Ministers get out there to explain the Coalition Government’s policy programme. While Treasury’s projection of near-term growth near 3% is slightly softer than recent years, this comes as we transition the economy to more sustainable and productive activity and away from property speculation and population growth,” Grant Robertson says.