Financial Statements of the Government of New Zealand for the Eight Months Ended 28 February 2010

Colin Lynch
Deputy Secretary to the Treasury

The Financial Statements of the Government of New Zealand for the eight months ended 28 February 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.

Overall, excluding income not immediately available to the Crown, February results were broadly in line with the Half-Year Update with both core Crown tax revenue and core Crown expenditure lower than forecast.

Results for the eight months ended 28 February 2010:

• Core Crown tax revenue was $361 million (1.1%) lower than forecast.  Within this result, there was some variation across individual tax types.  Excluding structured finance settlements ($320 million) underlying tax revenue was $681 million (2.1%) below forecast.  We expect this variance to remain until the end of the fiscal year.
  
  The key driver is lower than expected business profitability, causing shortfalls in provisional and terminal tax.  As a result, other individuals’ tax and underlying corporate tax are both behind forecast ($267 million and $228 million respectively).  Source deductions are also lower than forecast ($455 million) due to the effective tax rate being lower than estimated.
  
  GST revenue ($389 million or 5.3% above forecast) provided a partial offset to the shortfall in income taxes.  Better than expected retail sales volumes and consumer confidence resulted in increased consumption and therefore GST revenue.  This trend continued from last month and is expected to continue to the end of the fiscal year.
• Core Crown expenses were $915 million (2.2%) lower than forecast due to the timing of Treaty of Waitangi settlements being later than forecast ($337 million), and deferred funding to Transport agencies ($144 million).  The remainder of the variances are individually small across a number of departments. 
• Excluding structured finance settlements and delayed expenses which are expected to occur prior to year end, the operating balance before gains and losses is close to the forecast deficit of $5.1 billion.
• When we combine the results of State Owned Enterprises and Crown Entities and gains from the Crown’s investment portfolio (the most notable being ACC and the NZS Fund) the operating balance deficit was $1.6 billion ($1.1 billion smaller than forecast). 
• Excluding the income retained by entities such as ACC and the NZS Fund and taking account of capital payments, the residual cash deficit and net debt are broadly in line with the Half-Year Update. Net debt has increased by $10 billion in the year since February 2009.

1. Using GDP for the year ended 31 December 2009 of $185,549 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.

ENDS