Spendup drives $1b Crown account boost

NEW Zealanders who went on a spending spree after the August lockdown have helped boost the Government’s tax take, putting Crown Accounts more than $1 billion ahead of where they were forecast to be.

Yesterday morning, Treasury confirmed the Government’s financial position continued to track ahead of forecasts for the year to December 31.

The accounts still show the severe scars of the pandemic.

For the full 2020 year to December 31 the Crown had an operating balance before gains and losses (obegal) deficit of $4 billion and net core Crown debt of $104.5 billion (32.6% of GDP).

By comparison, net core Crown debt was $40 billion higher than at the same time last year and as a percentage of GDP has increased to 32.6% from 21%.

But the statements showed the position and performance of the Crown continued to be stronger than was forecast in the Half Year Economic and Fiscal Update, Treasury said.

The deficit was $1.1 billion better than forecast in the update and the level of net core debt was $1.5 billion less than forecast. This was partly due to tax revenue coming in $0.8 billion above forecast, with GST revenue $0.6 billion [5.5%] above forecast as domestic spending continued to be better than expected at the update, Finance Minister Grant Robertson said.

PAYE revenue was also $500 million above forecast, reflecting the strong labour market, he said.

The rest of the gains came from lower expenditure as stronger employment meant less need for welfare payments.

Core Crown expenses at $52.3 billion were $0.4 billion below the forecast.

The variance was mainly owing to social security and welfare, which was $0.3 billion lower than forecast, Treasury said.

‘‘The Government’s support for New Zealand’s businesses and workers through the Covid19 pandemic has helped the economy get back on its feet quickly,’’ Mr Robertson said.

The latest update showed New Zealand was still in a strong position to respond to any Covid19 resurgence, he said.