Higher-than-expected tax revenue plugs most of the cost of the Delta outbreak

Friday, 29 October 2021

Government revenues minus expenses were only $782m worse in the three months to end of September than forecast in the Budget.

The cost of supporting businesses through the Delta outbreak resulted in government expenditure coming in $3.2 billion above forecast at $31b during the three months to the end of September.

But 72 per cent of the extra costs were offset by higher-than-expected tax revenues during the quarter, interim Crown accounts published by the Treasury show.

Overall, the Crown’s capital balance was only $782m worse than forecast at $5.4b in deficit, before gains and losses, despite the $3.5b paid out in wage subsidies and Covid resurgence support payments.

Net core Crown debt stood at 33 per cent of GDP at the end of the quarter, compared to the 36.2 per cent figure forecast in Budget, thanks to the better-than-expected result in the earlier June quarter.

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The Treasury said the economy had continued to perform better than expected during the first quarter of the year ending in June next year, resulting in tax revenue being higher than forecast.

“However, the increase in Covid alert levels triggered a number of government fiscal support measures

which meant expenses were higher than forecast and more than offset the increased tax

revenue.”

Finance Minister Grant Robertson described the results as better than expected “particularly given the impacts of the current alert level restrictions”.

He noted GST revenue was $184m above forecast during the quarter, owing to stronger-than-expected consumer demand.

The first financial results for the new financial year showed the continued strength of the economy, despite the challenges of Covid, he said.