Larger than expected budget deficit of $9.4 billion to year ended June

Navigation for News Categories

Finance Minister Grant Robertson said New Zealand was in a position of strength despite the challenging global environment.
Photo: RNZ / Angus Dreaver

Pressure on the tax take and higher spending have confirmed a bigger than expected budget deficit.

Final accounts for the year ended June show a deficit of $9.4 billion compared with forecasts in May of a deficit of $6.96b, and the previous year’s $9.7b shortfall.

The accounts are $600 million below the unaudited figures presented in the Pre-election Economic and Fiscal Update (PREFU) in mid-September.

Finance Minister Grant Robertson said the government had taken a balanced approach and managed its finances carefully to counter economic headwinds.

“New Zealand is in a position of strength despite the challenging global environment,” he said in a statement attached to the books.

The tax take was $2.9b below forecasts in the May Budget, as the fall in company and other persons tax offset gains from income tax from the strong labour market, inflation driven gains for GST, and higher investment tax returns as rising interest rates delivered better returns.

Government expenses were in line with the Budget forecasts at $162b, which was nearly $11b ahead of a year ago, driven in part by health sector pay settlements, and $1.7b in Cyclone Gabrielle recovery and reconstruction costs.

The net debt level was in line with forecasts at 18 percent of the value of the economy, although the $71.4b total was close to $10b above the year before.

Robertson said the books showed the government had worked to meet its “responsible and balance fiscal goals” of a budget surplus within the forecast range and net debt below the targeted ceiling of 30 percent of gross domestic product.

The PREFU forecast bigger deficits and a one year delay in the return to budget surplus until 2026/27, as well as higher borrowing.

The budget operating balance, which includes investment movements from the NZ Super Fund and ACC, was a surplus of $5.3b compared to the previous year’s deficit of $16.9b, and above the budget forecast by $1b.

The government’s net worth, the difference between assets and liabilities, increased on higher valuations to $191.4b.

A half year economic and fiscal update and budget policy statement will be released by the new government in mid-December.