Government’s latest accounts show tax take turning south

Tuesday, 5 March 2024

The Government’s accounts are still tracking better than the Treasury had forecast late last year, but now not by much.

The Government’s latest monthly accounts show some of the positive developments reported earlier in the year have since vaporised.

The Treasury previously reported last month that the Government’s operating budget (Obegal) was tracking about $1.2 billion better than forecast, with a $2.7b deficit recorded for the six months to the end of December.

But fresh accounts published on Tuesday show the deficit had climbed to just under $3.7b in the seven months to the end of January.

That is just $71 million less than the Treasury had forecast would be the position when it released its Half-Year Economic and Fiscal Update (Hyefu) in December.

Finance Minister Nicola Willis said the economy wasn’t growing as fast as the Government had hoped before Christmas.

“When the economy grows slower, that means less tax revenue.”

Nicola Willis says NZ in same position as a household living beyond its means.

That made it harder to balance the budget, she said.

The latest accounts reported tax revenue for the seven months to the end of January at fractionally over $69b — $752m below Treasury’s Hyefu forecast.

The previous month the tax take had been tracking $375m ahead of forecast.

The Government’s net debt at the end of January stood at just under $83b, or 20.7% of GDP.

That was just under $3b less than forecast in the Hyefu.

But it also represented a deterioration from the previous month in terms of the variance from forecast, as net debt had been tracking $4.5b better-than expected at the end of December.

The Treasury said the disappointment on tax could be attributed to estimated and actual taxable profits being lower than expected due to “deteriorating macroeconomic factors”.