Media StatementFinancial Statements of the Government of New Zealand for the Seven Months Ended 31 January 2010

5 Mar 2010

Colin Lynch
Deputy Secretary to the Treasury

The Financial Statements of the Government of New Zealand for the seven months ended 31 January 2010 were released by the Treasury today.

The monthly financial statements are compared against monthly forecast tracks based on the 2009 Half Year Economic and Fiscal Update (Half-Year Update) published in December 2009.

Results for the seven months ended 31 January 2010

• Core Crown tax revenue was $72 million (0.2%) higher than forecast.  Within this result, there was some variation across individual tax types.
  Excluding the settlement of structured finance transactions, corporate tax revenue was around $150 million or 4.3% below forecast due to weaker-than-expected current tax year profitability.  There was also an underlying corporate tax receipts shortfall highlighting a potential future risk to tax revenue.  Weaker-than-expected business profitability is also contributing to the other individuals’ tax shortfall, which is likely to persist through to year end.
  Despite a shortfall in underlying income taxes, GST provided a partial offset ($258 million or 3.9% higher than forecast).  Indicators of December quarter private consumption, such as retail sales volumes, are tracking above what had been expected at the Half-Year Update, suggesting that GST is likely to remain above forecast for the rest of the 2010 fiscal year.
• Core Crown expenses were $678 million (1.8%) lower than forecast due to the timing of Treaty of Waitangi settlements being later than forecast ($146 million) and a $128 million reduction in the provision for the deposit guarantee scheme.  The remainder of the variances are individually small across a number of departments. 
• Given the higher tax revenue and lower expenses, the operating balance before gains and losses deficit was $883 million smaller than expected. 
• After taking account of the impact of gains and losses (primarily driven by gains on the Crown’s investment portfolios and an actuarial gain on the valuation of the ACC insurance liability), the operating deficit was $1.4 billion smaller than forecast. 
• Gross debt was $2.9 billion lower than forecast, with Treasury bills on issue $2.1 billion lower than expected reflecting reduced market demand for the securities at cost effective levels.  In addition, the Reserve Bank’s unsettled trade liabilities and NZDMO’s collateral liabilities were lower than forecast. 
• In contrast, net debt was close to forecast at $22.8 billion (12.3% of GDP) as the factors driving the gross debt variance had a neutral impact on the net debt position.

1. Using GDP for the year ended 30 September 2009 of $184,917 million (Source: Statistics New Zealand).
2. Using forecast GDP for the year ended 30 June 2010 of $184,466 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.