Weak revenue underlines brittle fiscal position

Weaker than expected business profits are reflected in lower tax revenue for the Crown in the nine months to 31 March and will keep tax revenue below forecasts for the rest of the fiscal year.

Without one-off gains from structured finance transaction settlements with the banks, underlying tax revenue was $900 million – or 2.4 per cent – below forecast in the nine months, Finance Minister Bill English says.

“This shows through across company tax, provisional tax payments by individuals and source deductions.

“We now expect this revenue to remain below forecasts throughout the rest of the current fiscal year – and probably into the 2010/11 year.

“Just two weeks out from the Budget, it underscores the brittle fiscal position faced by the Government and how finely balanced the situation is.

“The slightly better economic outlook will take time to feed into the Government’s books. It certainly won’t bring any dramatic changes to the Budget’s fiscal forecasts, compared to the Half-Year Update in December.

“There may be slightly stronger revenue from some areas and slightly lower spending on income support, but nothing that significantly eases our medium-term fiscal pressures – namely several more years of Budget deficits.”

The Crown accounts for the nine months to 31 March show that, including $400 million in one-off gains, the operating deficit before gains and losses was $5.3 billion, compared with $5.8 billion forecast in December.

The core Crown cash deficit at $7.9 billion for the nine months was in line with forecasts and net Crown debt was about $200 million higher than forecast at $25.6 billion.

ENDS

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