6 May 2013

Govt accounts show steady improvement

10:34 pm on 6 May 2013

The Government is confident its books will be back to surplus in 2014-15 after the latest set of accounts showed a steady improvement in its financial position.

But Opposition parties say while the books are improving, the Government has failed to fix fundamental problems within the economy.

The latest figures have been published a week before Finance Minister Bill English delivers his fifth Budget on 16 May.

The Government is continuing to gather more tax than expected and that is helping push its operating deficit lower.

In the nine months to the end of March, the tax take was $535 million higher than the Government forecast in December last year.

That meant the Government spent $5 billion more than it earned in the nine-month period - a deficit $273 million lower than expected.

Mr English said on Monday that the deficit for the year should now end up $1 billion lower than predicted and it will get even better.

"We should end up in this financial year with a deficit a bit more than $1 billion smaller than we thought.

"So instead of it being $7.5 billion, it'll be somewhere around $6.3, $6.4 billion - and that's reassuring, because it demonstrates that we can stick to a plan, that we can meet public expectations around public services at the same time as get back to surplus."

Green Party co-leader Russel Norman said the books are getting better, but Mr English has done nothing to stop New Zealand's indebtedness to the rest of the world getting worse and the economy remains in trouble.

"The Government accounts and the Government books are one part of the national economic picture. But the much bigger part of the picture is what's going on with the tradeable sector - the part of our economy that pays for all our imports.

"The tradeable sector's in real trouble under this Government. Bill English started his term as Finance Minister saying he was going to rebalance the New Zealand economy - it's getting worse."

However, Dr Norman said it is good that the Government is now borrowing less than it has in the past.

Labour Party's finance spokesperson David Parker also criticises Mr English for failing to boost exports.

$2.5b net profit

The Treasury said solid investment incomes, driven by the recent strength in equity markets, contributed to the higher tax take.

Recent data also suggests there has been a reduction in the proportion of low-income workers in the labour force.

The Government made a net profit of $2.5 billion for the period compared with the forecast loss of nearly $2 billion.

The Treasury said this was due to the investment gains by the New Zealand Superannuation Fund and the Accident Compensation Corporation.

The Super Fund's investment gains were $1.7 billion above forecast and ACC's were $700 million higher.

As well, favourable valuations on the Super Fund's retirement liability boosted its contribution by $700 million and a lower estimate of ACC's claims liability added $600 million.

The Treasury says the Government underspent its budget for Treaty settlements and for New Zealand's aid programmes, but these savings were largely offset by higher than expected earthquake-related provisions for the costs of water infrastructure in Christchurch.

The Government's cash deficit and its debt were also lower than forecast, the figures showed.

Treasury expects growth

The Treasury's chief economist expects the economy to have grown at a rate of 2.5% for the year to March.

In its latest set of monthly economic indicators, the Government's economic forecaster says gains in gross domestic product in the December quarter are likely to be extended into the March quarter as business becomes more positive and amid signs of improvements in employment conditions.

Girol Karacaoglu says in the year to March 2012, GDP grew by 1.9% and expects this to have improved in the past year.