Timing issues and higher taxtake boost surplus
Government watches global issues closely
THE Coalition Government has delivered a higher than expected surplus for its year to June, posting a headline $5.5 billion surplus — $2.4 billion above Treasury forecasts.
The boost comes from timing issues with infrastructure expenses but also a higher than expected GST and taxtake. This includes from the corporate sectors’ increase in profits for both small and large companies, and also a larger working population.
However, global trade protectionism, particularly the escalating trade tensions between the US and China, are being watched closely by the Government.
Finance Minister Grant Robertson said the strong surplus and falling net debt reflected a growing economy.
‘‘It’s important we run surpluses and pay down debt to make sure we’re in a good position to deal with any rainy day,’’ he said in a statement.
Economists have been warning about growing risks in the international economy, particularly due to rising trade protectionism, he said.
‘‘We need to be wellplaced to face [this] in case this flows through to the New Zealand economy.’’ Westpac’s senior economist Michael Gordon said the much larger surplus and lower net debt was in part due to to higher tax revenue, but the majority was unplanned delays in operational and capital spending.
‘‘The stronger than expected starting point provides some leeway if economic growth fails to live up to the Treasury’s upbeat forecasts,’’ he said.
It also implied that in upcoming fiscal updates the Government could announce even more stimulus for the economy than was already planned, Mr Gordon said.
‘‘Overall, the accounts for the June 2018 year suggest a substantial amount of wiggle room for the Government in coming years,’’ he said.
Yesterday’s financial statements for the year to June were the first official check in theCoalition Government’s commitment to run surpluses, pay off debt and keep expenses under control, Mr Robertson said.
The result also showed the Government had met its own debt targets earlier than forecast, to be less than 20% of GDP (gross domestic product), coming in at 19.9% or $57.5 billion.
By keeping net debt at 20% of GDP or less, Mr Robertson said that would allow space to make the critical infrastructure investments the country needed, while still building a buffer.
The operating balance before gains and losses (Obegal) reached a $5.5 billion surplus, up by $1.5 billion a year ago and which was $2.4 billion ahead of the Obegal position forecast in May in Budget 2018.
It was the largest surplus since 2008, which was when the full extent of the 200708 global financial crisis was unravelling.
Net capital investment during the year of $5.9 billion was the highest since 2009, up $2.2 billion from a year ago, including spending on hospitals, schools and state highways, and the resumption of contributions to the New Zealand Super Fund.
Crown assets increased over the year by $26.3 billion to $339.9 billion, while its liabilities increased by $7.2 billion to $204.3 billion
Mr Robertson said headline results were ahead of the Treasury’s Budget forecasts, but noted that was largely due to timing issues with Crown expenses.
Those expenses would ‘‘reverse out’’ as planned spending happened early in the 201819 year.
‘‘This means Budget 2018 spending and investment plans are on track,’’ Mr Robertson said.
The Crown’s coffers were bolstered by a 3% increase in annual wages and a 3.7% expansion in the labour force supporting a 7.3% increase in income tax to $36 billion, and a 6.7% gain in goods and services tax to $20.81 billion, BusinessDesk reported.
Company taxes rose 6.2%, or $800 million, to $13.5 billion, of which an extra $200 million came from portfolio investment entities, primarily from ACC and NZ Super Fund investments.