Treasury reports NZ$1.176 bln Budget surplus for 11 mths to May; Corporate taxes above forecast; GST below forecast; Spending less than expected

By Bernard Hickey

Treasury has reported a much bigger than expected Budget surplus for the 11 months to May, increasing the chances the Government may meet its four year old surplus target after all.

Treasury reported there was an Operating Balance Excluding Gains and Losses (OBEGAL) surplus of NZ$1.176 billion in the 11 months to the end of May, which was well above the NZ$193 million surplus forecast for the 11 months in the May 21 Budget.

With just one month to go in the financial year to June 30, the ‘run-rate’ for the Budget is well ahead of the current forecast for the full 12 months for a NZ$684 million deficit. Finance Minister Bill English had appeared to give up on the prospect for a surplus in 2014/15 in the May 21 Budget, but recent monthly results have suggested a surplus could still be possible and English has been more upbeat about the prospect in recent weeks.

English was cautious in his initial statement after the release of the Treasury figures.

“There is always volatility in the monthly Crown accounts and we won’t know for some time if there will be a full-year surplus in 2014/15,” English said.

“What is important is that these results indicate the Government is on track to anchor Crown debt levels at a low, sustainable level,” he said.

Treasury said tax revenues were NZ$401 million stronger than forecast, due largely to corporate tax being NZ$395 million better than expected and ‘other individuals’  being NZ$112 million higher than expected. It said the bulk of this improvement was expected to persist through to June and resulted from higher than forecast provisional taxes and higher Portfolio Investment Entity taxes.

However, GST receipts continued to track below forecasts, being NZ$261 below forecasts, “implying downside risk to the full-year GST result.”

Core Crown expenses were NZ$433 million below forecasts with Education spending NZ$205 million below forecasts. Treasury said a large portion of the variance was due to timing factors, although “some of the variance may persist until year end.”

Treasury said the Core Crown residual cash deficit for the 11 months to May NZ$1.291 billion was NZ$155 million better than expected with capital payments NZ$142 million less than expected, “largely relating to delays in Canterbury rebuild capital projects.”



(Updated with more detail, reaction from Bill English, chart)