1 Apr 2021

Government deficit of $4.5b for eight months to February, $3.7b less than forecast

12:32 pm on 1 April 2021

The government's finances continue to withstand the pandemic as the strength of the economy fills its tax coffers and reduces the demands on its spending.

Grant Robertson

Grant Robertson said the global economic environment is still volatile. Photo: RNZ

Official figures show a deficit of $4.5 billion for the eight months ended February, $3.7b less than forecast.

"We do need to remain aware that we are still in a volatile and uncertain global economic environment," Finance Minister Grant Robertson said.

"There will still be challenges ahead this year, and some sectors and regions will be particularly tested."

Treasury said the strength of consumer spending, company profits, and the labour market delivered an unexpected $2.2b extra tax revenue.

One small dent in revenue was a fall in the amount of duties from tobacco products, which fell 5 percent, with a fall in consumer demand.

Repayment of government wage subsidies and delays to some programmes resulted in lower than expected expenses.

The level of net debt at $103.3b was also below forecast, equating to 32.6 percent of the value of the economy.

Strong financial markets, increases in the value of investments, and reduced forecasts of future liabilities for government agencies such as the Super Fund and ACC, meant the government's overall finances were in surplus of $9.8b against a forecast deficit of $12.2b.

"We will consider these economic conditions alongside improved revenue in Budget 2021... (which) will include a strong focus on making sure spending continues to be carefully prioritised and targeted at the areas and people that require it the most," Robertson said.