8 Jul 2015

Higher surplus than forecast

5:47 pm on 8 July 2015

The Government has recorded a surplus of $1.176 billion in the 11 months to the end of May.

Its surplus, before investment gains and losses are included, is much higher than the Budget forecast of $193 million.

Treasury said the Government's tax income was $401 million higher than expected.

Spending, particularly on education, was lower than forecast.

Treasury said some of it was due to the fact spending had been delayed until the final month of the financial year.

But in another reflection of the financial strength of the books, Government net worth at the end of May was $4.446 billion higher than the Budget forecast.

Net debt stood at $60.4 billion, or 25.3 percent of gross domestic product.

May's budget forecast a deficit of $684 million for the June financial year, due to low inflation dampening expected tax revenue growth.

Finance Minister Bill English said the Government would not know for some time if there will be a surplus for the full year.

But he said today's announcement of a surplus for the 11 months indicated the Government was on track to reduce its debt. Mr English said the Government had worked hard to improve the quality and effectiveness of its spending.

The Green Party meanwhile said the financial surplus would be short-lived because the economy was flat-lining.

Greens co-leader Metiria Turei said declining business confidence, collapsing dairy prices, stagnant wages, and a possible slow-down of the Chinese economy meant the Government may soon need to start spending again to avoid a recession.

Infometrics senior economist Benje Patterson said the Government was again on track to return to surplus, but it may only be temporary.

He said while the books were unlikely to change much with only one month of the financial year left to report, the slowing economy meant a return to deficit was likely.

"At the moment it does look odds-on that the Government will in fact run a fiscal surplus in the current fiscal year," he said.

"However we see a risk that they slip back into the red in the 2016 fiscal year," he added.