Govt accounts show strong position
Hon Grant Robertson
Minister of Finance
31 October 2019
Govt accounts show strong position, impact of tax timing changes
The Government is in a strong position to help the economy counter international headwinds, according to the first set of accounts for the new financial year.
“It’s becoming clearer that issues like the US-China trade war are affecting confidence overseas and in New Zealand. Our wariness of the global situation has been reinforced by talks I’m having with global counterparts in Japan and Vietnam,” Grant Robertson said.
“Last year’s strong surplus means the Government’s current net debt position of 20.3% of GDP is lower than the 21.0% expected at the Budget. The low debt gives us space for further opportunities to invest to strengthen the economy against global headwinds.”
The Treasury today released the Crown accounts for the first three months of the new 2019/20 financial year. The underlying numbers show we are in good shape.
“However, some figures, like the new year’s OBEGAL to date, have been temporarily affected by timing issues related to Inland Revenue’s upgraded computer system.
“When we announced the surplus for 2018/19, the Treasury said changes to Inland Revenue’s system meant some tax previously expected to be recognised in the 2019/20 accounts was bumped forward into 2018/19.
“The new system has also changed when monthly tax revenue is recognised in the accounts within the current financial year, particularly for corporate tax.
“The timing issues are highlighted by today’s accounts. They show recognised tax revenue in the first three months of the year was $1.5 billion below forecast at $20.4 billion. However, the Treasury says this variance is set to reverse out over the year as the timing issues even out.”
Because the OBEGAL always starts again in each new financial year, revenue coming in lower than expenditure means the new year’s OBEGAL is in deficit at this point.
It’s not unusual to have a deficit in the first three months of a financial year. This is because expenses are more evenly spread across the year, while revenue increases towards the end. There was a deficit at the start of the last year which later reversed out.
“Other measures in the accounts not affected by timing issues show we are in good shape,” Grant Robertson said.
“These include the lower-than-forecast net debt position at 20.3% of GDP. Also, the corporate tax ‘receipts’ measure – which tracks the actual amount of cash coming in – was $356 million (10%) higher than forecast, indicating stronger business profits over the past year.
“This fits with other real data like the low unemployment rate of 3.9%, which indicate the fundamentals of the economy are strong.”