Financial Statements of the Government of New Zealand for the Eleven Months Ended 31 May 2014

Fergus Welsh, Acting Chief Government Accountant

The Financial Statements of the Government of New Zealand for the eleven months ended 31 May 2014 were released by the Treasury today.  These statements are compared against forecasts based on the Budget and Fiscal Update (BEFU), releasedon 15 May 2014. 

The operating balance before gains and losses (OBEGAL) was in deficit by $1.1 billion, which was $332 million more than expected.  Core Crown expenses of $64.2 billion were 0.1% less than forecast and core Crown tax revenue of $56.5 billion was 0.8% less than forecast.

Core Crown tax revenue was $2.5 billion or 4.6% higher than in the year-earlier eleven month period.  This year-on-year growth reflected positive macroeconomic conditions leading to growth largely in source deductions and GST. 

While tax revenue has increased year-on-year, the result was $459 million below forecast with both GST and corporate tax being less than expected ($238 million and $120 million respectively).

The GST revenue variance mostly reflected lower than forecast domestic consumption growth, although some of the variance is expected to have reversed in the month of June.  The corporate tax variance was partially due to lower than forecast terminal tax assessments and the timing of provisional tax assessments differing from forecast.

It is too early to determine the likely impact of these results on the current and future financial years as both downside and upside risks exist.

The Treasury’s next set of economic and fiscal forecasts (Pre-election Economic and
Fiscal Update) will be published on 19 August.  It will include updated assessments of macro-economic conditions and fiscal forecasts including updates on the expected tax outturn for the fiscal year that ended on 30 June 2014 and the following four financial years.

The operating balance (including gains and losses) was in surplus by $4.3 billion.  Continued strength in equity markets saws gains recorded on financial investments of $4.8 billion, which was $1.4 billion ahead of forecast.  These gains were somewhat offset by an increase in ACC’s insurance liability due to recent decreases in short-term discount rates.

The core Crown residual cash deficit was $3.8 billion, $398 million more than forecast due to lower than forecast tax receipts.  These lower tax receipts also flowed through to core Crown net debt which stood at $59.5 billion, equal to 26.2% of GDP.  At 31 May, total Crown assets were valued at $251.0 billion and liabilities were $174.3 billion and the Crown’s share of net worth strengthened from a month earlier to stand at $71.3 billion.

1. Using GDP for the year ended 31 March 2014 of $226,551 million (Source: Statistics New Zealand).
2. Using forecast GDP for the year ended 30 June 2014 of $230,717 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. Net debt may fluctuate during the year largely reflecting the timing of tax receipts.

ENDS