The New Zealand Government has reported an operating balance before gains and losses (OBEGAL) of $10,920 million for the ten months to 30 April. This compares with a deficit of $5,194 million for the same period in the previous year and a surplus of $6,034 million three years earlier.
Gross Crown debt has escalated to $71,564 million or 37% of GDP.
Government finances (1 July to 30 April period)
| ($ million) | Ten months ended | |||
| April 2011 | April 2010 | April 2009 | April 2008 | |
| Total Crown Revenue | 46,448 | 46,257 | 48,804 | 50,885 |
| Expenses | ||||
| NZ superannuation | 7,283 | 6,856 | 6,394 | 6,080 |
| Other social security | 10,630 | 10,299 | 9,294 | 8,506 |
| Health | 11,402 | 10,886 | 10,161 | 9,345 |
| Education | 9,596 | 9,527 | 8,833 | 8,062 |
| Other services | 14,908 | 12,832 | 13,522 | 12,123 |
| Finance costs | 2,468 | 1,909 | 2,051 | 1,983 |
| Total Crown Expenses | 56,287 | 52,309 | 50,255 | 46,099 |
| SOE surplus (deficit) | (1,081) | 858 | (373) | 1,248 |
| OBEGAL | (10,920) | (5,194) | (1,824) | 6,034 |
| Gross Crown debt | 71,584 | 51,939 | 40,561 | 31,395 |
OBEGAL is the operating balance before gains and losses
The big problem is the total Crown revenue line, which has seen a reduction in income from $50,885 million for the first ten months of the 2008 year to $46,448 million in the latest period.
The main reasons for this are;
Individuals paid tax of $19,735 million in the latest period compared with $22,457 million three years ago. The decline is due to last year’s tax cuts and higher unemployment
The corporate tax take has fallen from $6,626 million to $5,474 million over the three year period because of lower pre-tax profits
GST revenue has increased from $8,895 million in 2008 to $10,806 mainly due to the rate increase from 12.5% to 15.0%
On the expense side NZ superannuation and health costs continue to rise because of the aging population while higher finance costs are a direct consequence of the huge increase in gross Crown debt.
Finance Minister Bill English is forecasting much lower deficits in the years ahead. This is based a stronger economy and a substantial higher tax take.
Hopefully English is correct because the Government must reduce its deficit and put a cap on its borrowing. When things go wrong with Government finances they can deteriorate very quickly until dramatic action is taken.
Ireland is a good example of this. Irish Government debt has escelated from 25% to 96% of GDP over the past three years because of a number of poor decisions and the Irish economy has suffered hugely as a result.