Govt cash deficit hits $12.4 bln in March on quake costs

Govt cash deficit hits $12.4 bln in March as quake costs rise; kiwi falls

By Paul McBeth

May 10 (BusinessDesk) – The government’s cash deficit hit $12.4 billion in the nine months ended March 31 as the cost of the Canterbury earthquakes widened by $1.5 billion. The New Zealand dollar dropped almost half a cent after the release.

The cash deficit was $100 million more than forecast, according to the financial statements published by the Treasury. The deficit is forecast to peak at $15.6 billion in the 12months ending June 30, according to the December half-year update. The kiwi dollar fell as low as 79 U.S. cents from 79.40 cents immediately before the release and recently traded at 79.20 cents.

The overrun comes as officials add a further $1.5 billion to the net cost of Canterbury’s two earthquakes, the second of which added some $4.2 billion to the Crown’s now $6.3 billion insurance and underwriting expense. The government’s operating balance before gains and losses was $1.3 billion below forecast at a deficit of $10.2 billion.

That comes ahead of next week’s budget, where Finance Minister Bill English is expected to rein in spending in a bid to deal with a cash deficit tipped by the International Monetary Fund to hit 9% of the country’s gross domestic product.

“It’s essential that the Government gets its own finances in order as quickly as possible, so it can join households and businesses in lifting national savings and reducing New Zealand’s vulnerability to foreign lenders,” English said in a statement. “The Budget next week will confirm a very large deficit for the current year, including the immediate costs of rebuilding Christchurch.”

The quake sapped revenue from Goods and Services Tax, which was $263 million below forecast, and core Crown revenue was $466 million short of expectations at $37.9 billion. Still, corporate tax was 1.8% above forecast with profits from listed companies higher than anticipated.

The government’s operating balance beat expectations by $3.8 billion to sit at a deficit of $3.3 billion in the period as the New Zealand Superannuation Fund Accident Compensation Corp. portfolio booked gains on equity investments, while ACC and the Government Superannuation Fund made actuarial gains.

Gross debt was $2.5 billion higher than forecast at $66.7 billion, or 34.3% of GDP, with March reporting a record month of bond issuance. Net debt was $174 million lower than forecast at $39.4 billion, or 20.2% of GDP.

Earlier this month, the New Zealand Debt Management Office said wants to raise another $3.5 billion in the 12 months ended June 30 to help meet the looming cash deficit. That would the year’s bond issues to $20 billion.

(BusinessDesk)

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