The worsening financial position in the Government's accounts shows it will take time for the economic recovery to flow through to the Crown's revenue, Finance Minister Bill English said today.
The Crown accounts for the first three months of the current financial year showed a worse performance than forecast as the recession dented income and raised costs.
The operating balance excluding gains and loses which strips out unrealised investment gains or losses, for the three months to September 30 was a deficit of $2 billion, or 77 percent worse than the forecast made in May's budget of a deficit of $1.15 billion, the Treasury said today.It said the bigger deficit was largely because of lower corporate tax revenue, which was down $900 million on forecast.
Mr English said there were welcome signs that New Zealand was moving out of recession and unemployment peaking next year lower and earlier than forecast."However the road to recovery will be quite bumpy and this is reflected in the financial statements issued today. Certainly the impact on the Government's revenue will be felt for some time," Mr English said.
"A clearer picture of the implications for the Crown accounts in 2010 is likely to emerge in the next few months, when seasonal volatility in provisional tax is expected to have settled down."The Government's net operating balance was a deficit of $175m, about $400m better than forecast as higher investment returns offset the tax result.
Labour's finance spokesman David Cunliffe said the performance of the New Zealand Superannuation Fund and ACC's investments showed Mr English had been shortsighted in stopping contributions to the fund and casting doubt on the future viability of ACC.Net government debt stood at $21.25b, which was $367m higher than forecast, equating to 11.8 percent of gross domestic product, against a forecast 11.6 percent.
Mr English said the aftermath of the recession would mean borrowing $250m on a week for the next four years.
