NZ govt accounts swelled by bank tax settlement

NZ govt accounts swelled by bank tax settlement; English warns of lean budget

By Paul McBeth

March 5 (BusinessWire) – New Zealand’s government accounts were boosted by the windfall from the major trading banks’ settlement of their case with Inland Revenue over structured finance transactions and Finance Minister Bill English warned there’s little new spending due in this year’s budget.

Core Crown tax revenue was $72 million higher than forecast at $29.06 billion in the seven months ended Jan. 31, according to Treasury financial statements. Corporate tax was $115 million ahead of expectations at $2.97 billion. Excluding the IRD settlement in December, revenue from businesses was 4.3% below projections.

“The government will operate within the $1.1 billion allowance for new spending it set out in the Budget last year,” English said in a statement. “This is not a one-off exercise – and will need to continue for years to come if we are to get the government’s books back into good shape and bring borrowing under control.”

The Crown operating balance, including net gains and losses from government entities, showed a deficit of $630 million, that’s $1.43 billion smaller than expected. The operating deficit before gains and losses was $883 million smaller than forecast at $3.36 billion.

English talked down the gains, calling them “incremental improvements” and warned “they may well be reversed in coming months.”

Gross debt was $2.9 billion lower than forecast at $48.79 billion, or 26.4% of GDP, amid reduced demand for low-yielding securities. Still, net debt was close to forecast at $22.82 billion, or 12.3% of GDP.

The New Zealand Superannuation Fund and ACC investment portfolios remained in the black, with gains exceeding forecasts by $122 million and $222 million respectively. Their total assets were valued at $15.42 billion and $14.38 billion. The State-owned insurer also reported a year-to-date actuarial gain of $255 million, compared to an expected loss of $87 million, due to fewer claims and reduced rehabilitation and medical costs.

The government’s forecast expenses came in $678 million below expectations at $36.17 billion after Treaty of Waitangi settlements worthy about $146 million were deferred.

The Treasury further downgraded its provision for the retail deposit guarantee scheme to $771 million from $776 million in the six months through December. That’s $128 million below the half-year forecast.

(BusinessWire)