Government debt now $5b above Budget forecast as accounts continue to disappoint

The Government’s accounts have deteriorated further from the track marked out by Finance Minister Grant Robertson in the Budget.

The Treasury reported that the Government’s operating (Obegal) deficit for the 11 months to the end of May stood at $6.5 billion, which was $2.1b higher than the forecast it released in the Budget.

The deficit had been $1.3b behind forecast at the end of April.

Net core Crown debt has now risen $5b above forecast to $73b, or to 18.9% of GDP.

That is significantly above the Budget forecast which had charted that it would stand at 17.6% of GDP at the end of May.

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The higher-than-forecast operating deficit can be entirely accounted for by tax revenues for the 11 month-period being $2.2b behind forecast, as government spending has been essentially in line with expectations.

The even larger deviation in government debt from forecast was caused by higher Crown entity borrowings compounding the tax shortfall.

The tax shortfall was almost entirely due to a lower-than-expected company tax take.

The accounts are the last the Treasury will release before early October, when it is due to report the Crown accounts for the full year to the end of June.

Based on the timing past releases, the year-end accounts would be most likely to be posted only a week or so before the election on October 14.

Finance Minister Grant Robertson said this year was a difficult one for the global economy, marked by slowing growth and prolonged high inflation.

“New Zealand is not immune to those forces while the North Island weather events have also taken their toll on affected communities, which will flow through to the Government’s books,” he said.

The cooling economy had resulted in lower-than-forecast tax revenue but the Government had taken steps to respond to the uncertain economic environment by “carefully and responsibly managing its spending”, he said.

“The deficit is smaller than it was at the same time a year ago. Budget 2023 is forecasting real government consumption to fall 5% by the beginning of 2025. Our debt levels are among the lowest in the world.”

Robertson also took comfort from the fact unemployment was at historic lows and that there were some signs business confidence was starting to improve.