Deputy Chief Executive to the Treasury
The Financial Statements of the Government of New Zealand for the three months ended 30 September 2010 were released by the Treasury today.
The monthly financial statements are compared against monthly forecast tracks based on the 2010 Budget Economic and Fiscal Update published in May 2010.
Two main factors impacted these results:
1. Operating expenses include costs associated with the Canterbury earthquake. The Earthquake Commission (EQC) recorded an estimated net cost of $1.5 billion for settling claims for damage arising from the earthquake. While the total cost incurred by EQC are likely to exceed this figure, EQC has reinsurance cover for costs above $1.5 billion.
In addition, the Government is committed to reimburse a proportion of the restoration costs relating to critical local government infrastructure and certain other costs. These costs have not been included in the financial statements at this stage, as reliable estimates of the amounts concerned have not yet been established.
2. Tax revenue was $1.1 billion (8.2%) lower than forecast, with the underlying drivers of this result indicating that the economy is recovering more slowly from the recession than previously expected. The two main variances were:
- GST revenue was $0.6 billion (15.8%) lower than forecast, mainly due to a smaller than expected boost in consumer spending before October’s GST rate rise. It is possible that there will be some recovery in the December quarter, given that consumption was not brought forward into the September quarter as much as expected. Evidence suggests that spending in the September quarter continued to be subdued generally.
- Corporate tax revenue was $0.5 billion (22.4%) lower than forecast mostly due to lower than expected provisional tax assessments. This suggests that while corporate profits were higher than they were at the same time last year, they were still lower than anticipated.
The combined impact was that the operating balance before gains and losses (OBEGAL) deficit was $2.2 billion higher than expected at $3.7 billion.
This result was partly softened by net gains made on investment portfolios that were higher than expected. Overall, the Crown’s operating balance deficit was around $1.5 billion higher than forecast, at $2.4 billion.
Gross debt was $2.5 billion higher than anticipated, at $59.1 billion. However, $1.4 billion of this variance was due to a liability in relation to the Deposit Guarantee Scheme that was subsequently extinguished in October, without impacting net debt.
Lower than forecast tax receipts contributed to net debt being $0.9 billion higher than expected at $33.8 billion.
|Year to date||Full Year|
|Core Crown tax revenue||12,506||13,627||(1,121)||(8.2)||53,912|
|Core Crown revenue||13,640||14,875||(1,235)||(8.3)||60,260|
|Core Crown expenses||16,629||16,735||106||0.6||70,651|
|Core Crown residual cash||(6,449)||(5,564)||(885)||(15.9)||(13,327)|
|as a percentage of GDP||31.2%||29.9%||32.8%|
|as a percentage of GDP||17.9%||17.4%||19.6%|
|Operating balance before gains and losses||(3,709)||(1,467)||(2,242)||(152.8)||(8,632)|
1 Using GDP for the year ended 30 June 2010 of $189,295 million (Source: Statistics New Zealand)
2 Using forecast GDP for the year ended 30 June 2011 of $203,876 million (Source: Treasury)
3 Gross sovereign-issued debt excluding settlement cash and Reserve Bank bills
4 Net core Crown debt excluding student loans and other advances
Officer for EnquiriesKamlesh Patel | Macroeconomic and Fiscal Environment Portfolio
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