Careful spending in order as surplus within sight

The Government’s latest monthly financial accounts confirm that achieving a surplus in 2014/15 requires a determined focus on careful spending and responsible economic management, Finance Minister Bill English says.

“Just as the Government’s careful fiscal stewardship has taken New Zealand within sight of fiscal surplus in the coming year, the last thing we need is a return to big government spending programmes that would crowd out private investment and put that surplus in jeopardy,” he says.

“New Zealanders should be wary of such approaches from political parties as we head towards the election in September.”

The Crown accounts for the 11 months to May 31 show core Crown expenses were $36 million below the latest forecast, but that was more than offset by core Crown tax revenue coming in $459 million below forecast.

This left the operating deficit before gains and losses at $1.1 billion – $332 million larger than forecast.

Despite the economy growing by 3.8 per cent in the year to March 31, GST, corporate tax and other direct taxes were below forecast for the 11 months – driven in part by lower-than-expected consumer spending.

“These latest figures cover the first 11 months of the 2013/14 fiscal year and we remain fully committed to achieving a surplus in 2014/15,” Mr English says.

“New Zealand has a good economic story to tell with rising wages, growing employment and record exports. But it’s clear that New Zealanders – both households and businesses - are still being careful with their spending and the Government must continue to do the same.

“While tax revenue was lower than forecast, it was $2.5 billion higher than at the same time last year and these figures are within the normal variation for forecasts.”

Meanwhile, the continued strength of equity markets saw higher than forecast gains on financial instruments. But these were largely offset by actuarial losses on the ACC liability, due to changes in short term discount rates.

Overall, the operating balance surplus was $165 million lower than forecast, at $4.3 billion.

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