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|
|Other social security||10,630||10,299||9,294||8,506|
|Total Crown Expenses||56,287||52,309||50,255||46,099|
|SOE surplus (deficit)||(1,081)||858||(373)||1,248|
|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.