Govt books stronger than forecast ahead of economy opening up

The Government’s accounts ran stronger than forecast during the Level 4 lockdown, ahead of the economy opening up off the back of New Zealanders’ amazing public health efforts, Finance Minister Grant Robertson says.

The Crown accounts for the ten months to April reflect the Government’s decision to go hard and early with its economic response to COVID-19 by getting cash to businesses and households to cushion the blow and protect jobs and incomes.

The accounts also show the strong position of the New Zealand economy heading into the global coronavirus pandemic, with pre-lockdown GST revenue 5.9% above forecast indicating solid underlying activity up to the end of the tax year on 31 March.

“Our strong economy heading into this global pandemic, and low debt compared to the rest of the world means we have the ability to use the Government’s balance sheet to support businesses and households through this 1-in-100 year global shock,” Grant Robertson said.

“The Crown accounts show core Crown tax revenue was running nearly $200 million stronger than expected, while core Crown expenses were $426 million lower. This contributed to the OBEGAL position coming in $629 million better than expected by the Treasury in the Budget.

“The impact of global COVID-19 pandemic is clear in the accounts. Even though the OBEGAL was better than expected, it showed a deficit of $12.78 billion. This reflects the significant investments to support businesses and workers during lockdown through the wage subsidy scheme of cash grants and other cashflow measures, including tax refunds.

“Net debt was 25.3% of GDP, compared to the average for advanced economies before COVID of about 80%. Ratings agencies Moody’s (Aaa) and Standard and Poor’s (AA+) have maintained New Zealand’s strong credit ratings, saying the peak in net debt of 53.6% of GDP in 2024 is low compared to other advanced countries. Debt servicing costs are also forecast to remain low.

“Our economic plan means we are supporting businesses and workers through COVID-19, while investing to create jobs as we open up the economy and rebuild. New Zealand is in a strong position to get a head start on our economic recovery relative to the rest of the world because we went hard and early against this virus as a team of five million.”