Crown accounts slide into surplus

‘‘We saw stronger than predicted growth in the September quarter and if that trend continues then we can look forward to exceeding the forecasts.’’

Grant Robertson

Finance Minister

The chances of the Government squeaking into surplus in election year have increased after Treasury released better than expected core Crown accounts for the five months to the end of November.

Labour’s Budget Responsibility Rules set out an expectation of a surplus each year unless there is ‘‘a significant natural event or a major economic shock or crisis’’ but in December the Treasury forecast a deficit of $943 million for the year to June. Hopes a deficit might be avoided have increased after the Treasury announced that instead of being $554m in the red at the end of November, the core Crown operating balance was $129m in surplus – a result $683m better than forecast.

The main reason for the rosier position was that the tax take was $340m ahead of forecast but core government spending was also tracking at $234m less than expected. Finance Minister Grant Robertson said the results were encouraging but he was not yet ruling out an annual deficit, saying the monthly accounts could be volatile.

‘‘We saw stronger than predicted growth in the September quarter and if that trend continues, then we can look forward to exceeding the forecasts. Obviously the international environment and business investment continue to be issues we need to keep an eye on over coming months.’’ The Government would soon be announcing more details of its planned $12 billion boost to infrastructure spending that it sketched out in December, he said.

That spending will be spread over five years and the bulk will be accounted for by transport projects.

Economic data released so far this year that could be reflected in the tax take has so far been undramatic but somewhat soft.

BNZ senior economist Craig Ebert said yesterday it was disappointing the manufacturing sector fell back into contraction in December after ‘‘a couple of months flirting with positivity’’.

ANZ reported last week its ‘‘world commodity price’’ index fell 2.8 per cent in December due to weaker prices for lamb, beef and kiwifruit.

Retail spending fell 0.8 per cent in December after a very strong November and BNZ reported on Thursday that job adverts fell 1.9 per cent in December, on a seasonallyadjusted basis, taking that measure into ‘‘moderately negative territory’’. NZIER’s Quarterly Survey of Business Opinion, released on Tuesday, reported that business confidence was slightly improved but still negative.