New Zealand’s budget deficit was NZ$395 million ($323 million) wider than forecast in the eight months through February as tax revenue slowed and earthquake costs increased, according to a Treasury Department report.
The government’s operating deficit before gains and losses on investments was NZ$5.53 billion in the eight months ended Feb. 29, compared with a NZ$5.14 billion gap forecast in the pre- election fiscal update published in October, the Treasury said in the report released today in Wellington.
New Zealand’s government is cutting non-essential spending and selling assets to speed up a return to surplus from a record deficit in the year through June 30, 2011. Finance Minister Bill English yesterday said he will present a budget with zero or very little new spending over the next four years.
“We will have to remain disciplined to meet the challenging goal of getting back to surplus by 2015,” English said in a statement today. “I’m encouraged that we’ve kept core expenses below forecast. As we move toward the budget, this discipline around spending will remain our strong focus.”
Tax revenue was NZ$825 million less than forecast, the report showed. Company tax revenue was lower because business profitability was weaker than expected, while income tax payments were lower because of slower employment and wages growth, the department said.
Expenses were NZ$1.4 billion less than forecast, including the NZ$287 million reversal of some child-support penalties and NZ$375 million less spent on the emissions trading program as carbon prices fell.
The government’s earthquake-related insurance costs were NZ$500 million higher than forecast for the eight months, according to the report. That was a result of continued quakes and aftershocks in the Canterbury region, with damage caused by a Dec. 23 temblor estimated at NZ$450 million.
“These extra cost estimates from the earthquakes are outside our control,” English said. “It reinforces the need to remain focused on the things we can influence such as government spending.”
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