Govt surplus riding high thanks to more tax income, lower expenses
More tax revenue and lower costs lifted the Government’s operating surplus above its forecasts in the first nine months of the financial year.
The operating balance before gains and losses (obegal) was a surplus of $1.5 billion in the nine months ended March 31, well above the $147 million surplus it forecast in December and up from $167m in the year before, the latest crown accounts show.
Tax revenue rose 7.3 per cent to $53.9b, $527m ahead of the December half-year fiscal and economic update forecast, of which corporate taxes continued to be the largest driver of increased tax revenue against forecast, with revenue $673m higher than forecast.
“This increase was across both provisional and terminal tax, indicating that profits in [the] 2016 tax year were higher than forecast and that this has continued into the 2017 tax year,” Treasury said.
While the crown accounts showed the overall tax take beat expectations, GST was $145m below forecast, mainly because of lower than expected residential investment.
The Government’s expenses were $56.6b — $722m, or 1.3 per cent, lower than forecasts. Most of this variance relates to forecast expected costs in relation to the Kaikoura earthquakes, which have yet to eventuate. In addition, impairment of debt and bad debt write-offs for tax receivables were less than forecast, it said.
The Treasury expects the Crown will post an operating surplus of $473m in the year ending June 30 and will update that forecast in the May 25 Budget, which will be Finance Minister Steven Joyce’s first in charge of the purse strings.
In a pre-Budget speech last month Joyce announced a $2b boost to extra infrastructure spending over the next four years, bringing it to $11b.
He wants to almost halve net debt as a proportion of the economy by 2025 and still has plans for potential tax relief and improving public services up his sleeve.
The accounts show net debt at $62b, or 23.8 per cent of GDP, below the projected $63.7b, or 24.4 per cent of GDP. That was helped by a higherthan-expected residual cash result and both circulating currency and net valuation gains being greater than forecasts.
The Government’s aim is to reduce net debt to 10-15 per cent of gross domestic product by 2025 from the current target of 20 per cent by 2020.
The operating balance, which includes unrealised movements in the Crown’s investment portfolio and actuarial valuations of long-term liabilities, was a surplus of $10.9b, some $7.0b ahead of forecast, partly due to actuarial gains on the Accident Compensation Corp and Government Superannuation Fund liabilities tracking ahead of expectations, mostly reflecting an increase in the discount rate used to convert future cash payments into present-day dollars, Treasury said.
The Crown’s net worth of $100.4b was $7.1b ahead of forecast because of the surpluses.