Govt books still resilient as revenue growth slows
Moderation in economic activity is being reflected in the Government’s books, although New Zealand is still well positioned to deal with the challenges ahead, including the cost of living, the impact of recent extreme weather and the uncertain global economy.
For the nine months to the end of March, core Crown tax revenue was $2.3 billion below forecast, partly offset by core Crown expenses being $0.7 billion below forecast. Overall the Operating Balance before Gains and Losses (OBEGAL) recorded a deficit of $3.4 billion. That was $2.5 billion higher than forecast at December’s Half Year Economic and Fiscal Update and $4.7 billion lower than for the same period a year ago.
Net debt was 19.1 percent of GDP, below the forecast of 20.4 percent of GDP.
“2023 is a difficult and challenging year for the global economy and here at home. We are not immune to what happens overseas and it will have an impact on our prospects. However, we are well positioned to deal with the challenges now and in the future,” Grant Robertson said.
“Unemployment is near record lows, inflation while it’s still too high is now heading in the right direction, tourists are returning, overseas workers are arriving in greater numbers and the deficit is significantly smaller than it was at the same time a year ago and our debt levels are among the lowest in the world.
“It’s inevitable that the government’s books will be affected as the economy cools. We are doing our bit to restrain spending and responsibly manage our finances. The upcoming Budget has required tough choices as we respond to the deteriorating economic conditions.
“We will take a balanced approach that is responsible and looks after those who are the most effected by changing economic conditions and recent weather events.
We have already taken action to lower costs for Kiwis and ease some of the pressures they are under. Over 1.4 million people are benefiting from significant income increases, including seniors, families, workers and students. The Winter Energy Payment is providing over a million people with cost of living relief on their electricity bills. We have extended fuel tax cuts and half priced public transport fares and made childcare affordable to more families. The cost of living will be a major focus in the Budget in a couple of weeks’ time.
“The Treasury has estimated the cost of asset damage from the floods and Cyclone at between $9 billion and $14.5 billion, with half of that related to infrastructure owned by central or local government such as roads. This will require significant planning and sequencing of resources over the months and years’ ahead, but we are committed to supporting those affected through the recovery and rebuild.
“Our careful and prudent financial management means we have the fiscal headroom to meet the impacts of Cyclone Gabrielle and the challenges ahead. Our debt levels at 19.1 percent of GDP are among the lowest in the OECD and well below the Government’s debt ceiling of 30 percent.
“We are continuing to strike a balance between supporting Kiwis in the here and now and investing in essential public services and a resilient infrastructure network while carefully managing our resources to ensure the long term sustainability of the economy,“ Grant Robertson said.