7 Nov 2014

Govt deficit $79m higher than forecast

12:19 pm on 7 November 2014

The Government's operating deficit for the three months to the end of September is slightly higher than forecast.

Finance Minister Bill English releasing the Government financial statements.

Finance Minister Bill English described the economy's growth as solid but with low dairy prices affecting revenue growth. Photo: RNZ / Diego Opatowski

The latest financial statements out today showed the deficit, excluding investment gains and losses, was $725 million - $79 million higher than the Treasury predicted in May.

Crown expenses of $18.1 billion were 0.7 percent more than forecast and core Crown tax revenue of $15.5 billion was 0.5 percent more than forecast.

Tax revenue was $1.2 billion higher in the three-month period, compared with the same period the year before. However, GST revenue was $175 million less than forecast, following lower than expected growth in domestic consumption.

Dairy prices hit nominal growth

Russel Norman

Russel Norman Photo: RNZ / Diego Opatowski

Finance Minister Bill English said the Government's latest financial statements highlighted the challenge of returning to surplus

Mr English said the accounts showed the economy was growing solidly but that revenue was increasing more slowly, partly because of the fall in dairy prices.

He said New Zealand had an unusual situation with the nominal economy - which is what drives revenue to the Government - increasing more slowly.

"This is partly because falling dairy prices are impacting on nominal growth. While it's good for New Zealand families to have low interest rates, low inflation and less debt-driven consumption, it makes the Government's fiscal position more challenging."

David Parker.

David Parker Photo: RNZ / Diego Opatowski

The Green Party said the financial results released by the Treasury showed the Government's goal of achieving a budget surplus was looking doubtful.

"National has staked its credibility on achieving a budget surplus this year, but even that limited goal is looking increasingly dubious," Green Party co-leader Dr Russel Norman said.

"National will likely blame the fall in dairy prices if their surplus never materialises, even though it was clear dairy prices would never hold at historic highs."

Labour Party finance spokesperson David Parker said National's economic credibility was under serious scrutiny with its search for surplus becoming harder due to an economy far too reliant on the dairy industry.

"National promised New Zealanders would get into surplus by improving the economy. It has been six years in government and more than three years since the financial crisis ended and they still haven't run a surplus."

He said National was running out of excuses.

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