New Zealand’s budget deficit was NZ$1.13 billion ($908 million) narrower than forecast in the 11 months through May as tax revenue exceeded expectations, according to a Treasury Department report.
The government’s operating deficit before gains and losses on investments was NZ$5.91 billion in the period ended May 31, compared with a NZ$7.04 billion gap forecast in the budget published on May 24, the Treasury said in monthly financial statements released today in Wellington.
New Zealand’s government is cutting non-essential spending and selling assets to speed up a return to surplus by 2014-15. Finance Minister Bill English presented a budget with very little new spending over the next four years, and forecast a deficit of NZ$8.44 billion in the year ending June 30, 2012.
The result “is encouraging, but the global environment remains uncertain, leading to a number of fluctuations in the tax take from month to month,” English said in an e-mailed statement. “These fluctuations reinforce the need for the government to keep a firm control on its costs, so it can stay on track to surplus by 2014/15.”
Tax revenue was NZ$667 million more than forecast, the report showed. Company tax revenue was led higher by levies on portfolio investment entities and terminal tax assessments, and the gain is expected to persist in June, it said.
Government expenses were NZ$431 million less than forecast. Fewer units were allocated under the emissions trading plan and there were delays in payments for education programs, the department said.
New Zealand’s economy grew at the fastest pace in five years in the first quarter, boosting company profits and consumer spending, which led to better-than-forecast sales tax revenue, the Treasury said.
“We have seen moderate strength in the economy over the past year despite considerable disruption from global uncertainty,” English said. “Balancing the books and returning to surplus is one of the most important things the government can do to build that resilience, as well as take pressure off interest rates and the exchange rate.”