Fergus Welsh, Acting Chief Government Accountant
The Financial Statements of the Government of New Zealand for the eight months ended 28 February 2014 were released by the Treasury today. These statements are compared against forecasts based on the Half Year Economic and Fiscal Update (HYEFU), released on 17 December 2013.
Core Crown tax revenue has increased by $1.9 billion (or 5.0%) compared to the same time last year. However this was $1.1 billion less than expected and is reflected across most tax types, continuing the pattern of recent months. While some weakness is expected to persist as a result of some assumptions made at HYEFU for GST, other individuals’ tax and customs and excise duties in the current year not eventuating, the lower than forecast tax relating to corporate tax ($372 million) and source deductions ($136 million) are thought to be mostly timing in nature.
Overall, it is expected that slightly over half of the $1.1 billion weaker year to date outturn will remain at year end once the elements that appear timing-related reverse. There are risks associated with this view and, owing to the timing of tax assessments, much of the expected narrowing may not be apparent until June data is received.
Updated tax revenue forecasts will be released as part of the Budget Economic and Fiscal Update in May. At this stage, it is anticipated that a stronger outlook for the economy will further boost tax revenues from their current position, largely offsetting the current weakness in revenue outturns, resulting in an outlook for tax revenue for 2014/15 that is broadly similar to that presented in the HYEFU. As a result tax revenue developments are not likely to impact on the forecast surplus for 2014/15.
The operating balance before gains and losses (OBEGAL) was in deficit by $1.4 billion, which was $884 million more than expected, mainly due to the lower core Crown tax revenue. This result was partially offset by higher returns from Crown Entities largely due to an updated EQC valuation.
Continued strength in equity markets saw gains recorded on financial instruments of $3.5 billion, which was $1.9 billion ahead of forecast. As a result, the operating balance surplus was $891 million higher than forecasts at $3.7 billion.
Net debt was $435 million higher than forecast at $60.0 billion or 27.1% of GDP. This variance was primarily due to a higher than forecast residual cash deficit driven by lower than expected core Crown tax receipts and higher than expected operating payments.
At 28 February, total Crown assets were $246.8 billion and liabilities were $171.4 billion and the Crown’s share of net worth strengthened to $70.9 billion.
|Year to date||Full Year|
|Core Crown tax revenue||39,471||40,609||(1,138)||(2.8)||62,491|
|Core Crown revenue||43,176||44,382||(1,206)||(2.7)||68,493|
|Core Crown expenses||45,856||45,924||68||0.1||72,181|
|Core Crown residual cash||(3,951)||(3,279)||(672)||(20.5)||(4,076)|
|as a percentage of GDP||37.6%||37.6%||35.8%|
|as a percentage of GDP||27.1%||26.9%||26.3%|
|Operating balance before gains and losses||(1,393)||(509)||(884)||(173.7)||(2,320)|
|Net worth attributable to the Crown||70,923||70,332||591||0.8||69,165|
1 Using GDP for the year ended 31 December 2013 of $221,417 million (Source: Statistics New Zealand).
2 Using forecast GDP for the year ended 30 June 2014 of $227,793 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. Net debt may fluctuate during the year largely reflecting the timing of tax receipts.
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