The Government cut its operating deficit before gains & losses by more than half in the June year, from a $9.2 billion deficit in 2012 to a $4.4 billion deficit, after collecting more tax and reducing core Crown expenses below forecast. In 2010-11 the deficit was $18.4 billion.
Treasury had forecast a $7.9 billion deficit in the 2012 Budget.
Finance Minister Bill English said the improvement came from the Government’s consistently examining how public services are delivered: “This has allowed us to reduce costs while improving the services New Zealanders receive, as well as helping the people of Canterbury following the earthquakes.
“We are well on track to return to budget surplus in 2014-15. It’s important we get there because, until we do, we will continue to increase our debt. Despite the considerable progress we are making, there is no room for complacency.
“In the past financial year, we were still borrowing a net $110 million/week, compared to almost $260 million/week in 2010-11. Once we reach surplus, we will then have choices about reducing our debt and investing more in priority public services & important infrastructure.”
Treasury’s 2013 Budget forecasts show net core Crown debt rising from $10.3 billion in 2008 to over $70 billion by 2017.
“An active approach to managing the Government’s finances needs to continue for a number of years to get debt down to below 20% of gdp by 2020. That’s why we’re running a balanced programme to reduce the previously unsustainable growth in Government spending and to grow the economy.”
In the June 2013 year, core Crown tax revenue increased by $3.6 billion to $58.7 billion, driven largely by higher incomes & consumption which flowed through to increased revenue. Core Crown expenses increased by $1.2 billion to $70.3 billion, in large part due to costs around student loans.
However, expenses were about $3.4 billion below 2012 Budget forecasts, partly because Canterbury earthquake costs were lower than forecast.
Mr English said the Government remained on track to reduce expenses to 30% of gdp by 2016-17, down from about 35% of gdp in 2010-11.
After gains & losses, the operating balance was in surplus by $6.9 billion – $12.6 billion better than Treasury forecast at the start of the year and $21.8 billion better than in the previous year. Mr English said this turnaround reflected significant returns achieved by Crown financial institutions, particularly the NZ Superannuation Fund, and confirmed the volatile nature of sharemarkets.
Net Crown debt increased from $50.7 billion (24.3% of gdp) in 2012 to $55.8 billion (26.3% of gdp).
Attribution: Ministerial release.