New Zealand posts ‘encouraging’ public finance figures`

8 Mar 13
New Zealand’s budget deficit was $571m smaller than forecast in the seven months to the end of January as a result of higher-than-expected tax revenues, the country’s government said today.

By Nick Mann | 8 March 2013

New Zealand’s budget deficit was $571m smaller than forecast in the seven months to the end of January as a result of higher-than-expected tax revenues, the country’s government said today.

Spending for the period was also lower than expected, helping the government to post an operating deficit before gains and losses of $2.5bn. In its December Half year update, the Treasury had forecast a $3.1bn deficit at the seven month point.

Finance minister Bill English welcomed the ‘encouraging’ figures. ‘The government is continuing to keep control of its spending, so we can remain on track for surplus in 2014/15. That’s reflected in the latest figures, where core Crown expenses have come in $282m below forecast.

‘At the same time, core Crown tax revenue is $486m above forecast. This includes source deductions coming in $225m above forecast, suggesting underlying strength in tax revenue.’

The above forecast income from source deductions – payroll taxes – reflected an increase in the average tax rate as income from higher earners. This made up for a fall in employment at the lower end of the income scale, such as part-time workers.

The government coffers also benefited from $277m more than expected income from ‘other individuals’, such as taxes on the income from peoples’ investments. This increased on the back of strong equity markets, the Treasury noted.

Despite the better-than-forecast figures, English said the government ‘will remain firmly focused on continuing to manage its finances responsibly so we can return to surplus and start repaying debt.’
‘We will also press ahead with our programme to build a more competitive economy and support the business investment needed for growth and jobs.’

In December, English said New Zealand was now aiming to post a $66m budget surplus in 2014/15, far smaller than the $370m forecast in February 2012, as a result of tax revenues being hit by slow economic growth. 

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