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Media StatementFinancial Statements of the Government of New Zealand for the Four Months Ended 31 October 2010

6 Dec 2010

Colin Lynch
Deputy Secretary to the Treasury

The Financial Statements of the Government of New Zealand for the four months ended 31 October 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.

The October results are consistent with the general picture outlined in the recently published financial statements for the first three months of the fiscal year. 

Tax revenue in the four months to 31 October was $1.1 billion (6.3%) lower than forecast.  Corporate tax and goods and services tax (GST) were again the key contributors to the lower-than-forecast tax revenue result.

  • Corporate tax revenue was $784 million (28.0%) lower than forecast mostly due to a slower economic recovery than expected. 
  • GST revenue also continues to be below forecast, by $190 million (4.2%), a significantly lower shortfall than recorded in the three months to 30 September.  Overall, an underlying weakness remains in private consumption, with households exercising greater than expected spending constraint.

The net expenses for settling claims for damage arising from the Canterbury earthquake were recorded by The Earthquake Commission (EQC) at an estimated net cost of $1.5 billion.  The Government’s commitment to reimburse a proportion of the restoration costs of critical local government infrastructure, and certain other costs remains unquantified as reliable estimates of the amounts concerned have not yet been established. 

The combined impact of all of these factors was that the deficit in the operating balance before gains and losses was $1.9 billion higher than expected at $4.4 billion.

This result was partly softened by gains made on investment portfolios.  The NZS Fund gains were $1.1 billion higher than expected while net gains made by ACC were $287 million above forecast.  Overall, the Crown’s operating balance deficit was $450 million higher than forecast, at $2.2 billion.

Lower-than-forecast tax receipts contributed to the residual cash deficit being $798 million higher than forecast at $7.4 billion.  This variance flowed into debt indicators, with net debt being $1.0 billion higher than expected at $34.7 billion (18.4% of GDP).

Year to date Full Year
$ million October
2010
Actual1
October 2010
BEFU
Forecast1
Variance
to BEFU
$m
Variance
to BEFU
%
June 2011
BEFU
Forecast2
Core Crown
Core Crown tax revenue 16,824 17,948 (1,124) (6.3) 53,912
Core Crown revenue 18,416 19,815 (1,399) (7.1) 60,260
Core Crown expenses 22,076 22,516 440 2.0 70,651
Core Crown residual cash (7,446) (6,648) (798) (12.0) (13,325)
Gross debt3 58,550 57,797 (753) (1.3) 66,969
   as a percentage of GDP 30.9% 30.5% 32.8%
Net debt4 34,749 33,773 (976) (2.9) 39,965
   as a percentage of GDP 18.4% 17.8% 19.6%
Total Crown
Operating balance before gains and losses (4,400) (2,454) (1,946) (79.3) (8,632)
Operating balance (2,208) (1,758) (450) (25.6) (7,067)
Net worth 92,642 93,071 (429) (0.5) 89,416

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

ENDS

Officer for Enquiries

Kamlesh Patel | Macroeconomic and Fiscal Environment Portfolio
Tel: +64 4 917 6094
Fax: +64 4 471 5956
Email: kamlesh.patel@treasury.govt.nz
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