Government Grows by NZD 2 Billion
May 11, 2011 New Zealand Taxation
New financial figures released by the government show that the New Zealand is facing a much higher budget deficit than was forecasted last year, and the upcoming government budget plan is set to reflect the new financial situation.
The New Zealand government has released its financial statements for the nine months ending March 31st 2011, showing that that although core crown tax revenues were marginally higher than expected, the operating deficit for the period is nearly 15 percent worse than was forecasted in March 2010.
The latest statements , which were released on May 10th, showed that core Crown tax revenues for the nine months were NZD 37.9 billion, approximately 0.1 percent above estimates. However, a weaker than expected economy and the costs arising from the recent Christchurch earthquakes mean that the government is currently facing a NZD 10.16 billion operating deficit, compared to the NZD 8.86 billion forecasted a year ago.
On the same day the Finance Minister Bill English confirmed that next week the government will release its budgetary plan for the coming year, confirming a higher than expected operating deficit. However, the Minister also added that there will be a clear outline of the government’s strategy to see a “meaningful [budget] surplus” no later than 2016. It was explained that thorough and in-depth reviews had been conducted on all public spending priorities, and financial positions had been rebalanced to “set a credible path back to budget surplus”.
It was also announced that the Treasury’s Debt Management Office is now set to borrow approximately NZD 20 billion to finance the budget deficit, and contribute towards the expected deficit for next year. The new borrowings are equivalent to approximately 10 percent of the national GDP. Philip Combes, Treasurer of the Debt Management Office, conceded that the new borrowing levels were higher than absolutely necessary, but current market conditions allow for a higher level of borrowing to offset the need for future loans and bond issuance.
Photo by keaw_yead_3