Rail revaluation bolsters Crown 2019 accounts as tax take swells
The government's annual accounts were healthier than predicted, due in large part to a $2.6 billion reversal in earlier writedowns to the value of the rail network, and a bigger tax take.
The operating balance before gains and losses (obegal) was a surplus of $7.5 billion in the 12 months ended June 30, from a surplus of $5.5 billion a year earlier and well above the $3.5 billion predicted in the 2019 budget forecasts. The nation's 3,700 kilometre-rail network is now being valued on a public benefit basis rather than a commercial for-profit basis, which led to previous impairment charges on the network being reversed.
Stripping out the accounting adjustment, the surplus would still have exceeded forecasts as tax revenue grew 7.9 percent to $86.5 billion, more than the $84.7 billion forecast. The introduction of a new tax recognition scheme brought forward the recognition of some tax, particularly for corporate taxpayers. Still, the dominant personal income tax take was buoyed by more people in work and rising average tax rates.
The tax take was equal to 28.8 percent of gross domestic product, up from 27.7 percent a year earlier and was more than 28.2 percent forecast.
Core Crown spending was almost $300 million below forecast at $87 billion, or 29 percent of GDP, up from $80.6 billion, or 27.8 percent, a year earlier.
"This is a timely reminder that the underlying fundamentals of the New Zealand economy are solid," Finance Minister Grant Robertson said in a statement.
"It's important that we don't talk ourselves into a downturn just because it suits some people's negative narrative."
The government has been coming under increased pressure to add its capital spending stimulus to the Reserve Bank's record low interest rates to help stimulate the economy. However, businesses remain cautious about investing and taking on new staff.
Robertson acknowledged there are capacity constraints, but said he was confident the economy could absorb the current spending programme.
The Crown's core capital spending rose $800 million to $6.7 billion in the year. That included a doubling of the contribution to the New Zealand Superannuation Fund to $1 billion.
Including non-core entities such as state-owned enterprises, cash spent on the purchase and construction of physical assets rose about $800 million to $8.8 billion, although that was below the $10 billion forecast in the budget.
The residual cash deficit of $710 million, or 0.2 percent of GDP, was smaller than the forecast shortfall of $2.8 billion. That turned around a surplus of $1.3 billion a year earlier. The deficit was funded by an increase in nominal net debt to $57.7 billion from $57.5 billion. However, as a proportion of GDP it shrank to 19.2 percent from 19.9 percent and below the 20 percent target in the government's self-imposed budget responsibility rules.
Robertson said he isn't seeing any signs that the economy is heading into a recession and that he is working hard to ensure it keeps growing.
"That's what the investment in infrastructure, innovation and training is all about," he told a briefing in Wellington.
The operating balance, which includes gains and losses on the Crown's investment portfolio and long-term insurance liabilities, was a deficit of $2.3 billion, turning around a surplus of $8.4 billion a year earlier and wider than the $284 million shortfall predicted. That was largely due to an $11.4 billion actuarial loss for Accident Compensation Corp, due to the low interest rate environment.