Govt deficit in line with forecasts

The New Zealand government posted a small operating deficit in line with expectations in the first three months of the 2018 fiscal year while debt was below forecast, giving the new Labour-led administration more headroom for big-ticket spending items.

The operating balance before gains and losses (obegal) was a deficit of $90 million in the three months ended September 30, $3m below forecast, and compared to a surplus of $222m a year earlier. Tax revenue rose 3.9 per cent to $18 billion, largely matching forecast, with a bigger take on income tax offset by lower than expected customs and excise duties.

“Obegal can fluctuate from month to month as the recognition of tax revenue does not happen uniformly throughout the year (peak months tend to be April/May), while expenditure is fairly static on a monthly basis before peaking in June,” the Treasury said.

“As a result it is not unusual for obegal to be a small surplus or deficit in the first part of the financial year.”

A bigger inflow of provisional tax receipts than expected led to a smaller residual cash deficit than forecast at $1.2b, which contributed to net debt of $61.1b, or 22.8 per cent of gross domestic product, some $3.07b below forecast.

Lower gross debt of $87.5b, or 32.7 per cent of GDP, was the other leg to the lower net debt position.

New Zealand’s Debt Management Office on Monday deferred a 10-year bond tender until next year, saying it was flush with cash and wanted the chance to see what the new government had in store when the half-year economic and fiscal update was released.

The Labour-led administration campaigned on reducing government debt at a slower pace and running smaller operating surpluses than its rival National to revive what it claimed was a run-down public service and fast-track big-ticket items such as three free years of tertiary education and the KiwiBuild housing programme.