Crown accounts already slipping below May Budget forecast

Thursday, 8 June 2023

Disappointing company tax receipts were behind the shortfall.

The Government’s Crown accounts have already slipped below the Treasury’s Budget projections due to a shortfall in tax revenues.

Its operating (Obegal) deficit for the 10 months to the end of April was almost $1.3 billion or 22% above forecast at just over $7b, versus the Budget forecast of a $5.7b deficit.

The shortfall could be entirely attributed to tax revenues for its financial year to date lagging the Budget forecast by just under $1.4b.

Economist Brad Olsen reacts to Budget 2023.

* Opening the books: The Budget in 5 charts

* Tax shortfall and cheaper carbon credits dent Crown accounts ahead of Budget

Net core Crown debt stood at 20.1% of GDP, which was fractionally above the Budget forecast of a round 20% figure.

The Treasury said the tax shortfall was due to the money raised from company tax being $1.7b lower than forecast, when businesses posted their final tax returns.

A silver lining was that core Crown expenses for the year so far were $330m lower than expected, at $103.5b.

Finance Minister Grant Robertson said the accounts reflected “a further moderation in economic activity” but the country was well-placed to face the challenges of living costs, recent extreme weather and a subdued global economy.

The Government’s books were “not immune to a cooling economy” and it was playing its part to respond to that in a responsible and careful manner, he said.

“The deficit is significantly smaller than it was at the same time a year ago and Budget 2023 is forecasting real government consumption to fall 5% by the beginning of 2025.”

The Treasury forecast in the Budget that the Government not would get back into the black until the year ending June 2026, when it is forecasting a slim $600m surplus.

However, the April accounts appear to demonstrate the fragility of that projection.

Infometrics economist Brad Olsen had warned before the latest monthly accounts that the small size of the projected 2026 surplus meant the balancing of the Government’s books could be pushed back again for what would be a third year.

The Treasury has been forecasting net core Crown debt to peak in real terms at just over $91b, or 22% of forecast GDP, in the year to June next year.