The Government is now looking at a one billion dollar turnaround on its promised surplus to a deficit of nearly $600 million for the year to June.

The Budget last year forecast a surplus of $400 million.

However today’s Government accounts to March 31 have confirmed that Treasury now expects the figure to be a $600 million deficit.

And Opposition parties are asking whether the turnaround will see Mr English’s ability to spend money cramped in next week’s Budget.

The accounts do not forecast outcomes  for 15/16, 16/17 or 17/18.

Those will come in the Budget on May 21.

But regardless,  Finance Minister Bill English was today getting some (predictable) stick from the Opposition parties.

Labour’s Finance spokesman Grant Robertson said the accounts showed  National would  break its promise of seven years and two election campaigns and fail to get the books in order.

“The Government is set to fail its own test and miss surplus for 2014/15 – a target it staked its economic credibility on,” he said.

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““According to these forecasts and with the ongoing fall in dairy prices, next year’s surplus is in jeopardy too.

“That would make this the first Government since Muldoon to post eight deficits in a row.”

Green Co-Leader Russel Norman said  National had the opportunity to make the most of the economic recovery and get back into surplus, but instead they chose to cut taxes for the richest New Zealanders.

“The Government’s failure to get its books back in the black, while the economy’s been growing, will bite in the next few years as the effects of lower dairy prices, low inflation, and the levelling off of the Canterbury rebuild are felt,” said Mr Norman. 

“National’s decision to cut taxes for the wealthy will leave it with few options other than to increase debt and cut spending wherever possible in next week’s Budget.

“The Green Party will be holding the Government to account and making sure that any cuts to essential services like health and education don’t go unnoticed.”

Defending the outcome, Mr English said that although tax was ahead of expectations, the  figures underscored the difficulty in forecasting the difference between two large numbers.

 “Treasury consider that around $400 million of the variance was the result of tax being paid earlier than expected – rather than an ongoing increase in the tax take.

“Treasury’s latest forecasts have tax for the 2014/15 year lower than forecast at Budget 2014, primarily due to lower inflation which currently sits at 0.1 per cent in the year to March.”

“The Government continues to control its own expenditure, with core Crown expenses in the year to March coming in $127 million below forecast.

“Core Crown expenditure for 2014/15 is now expected to be $4.1 billion lower than forecast in 2011, when the surplus target was first set.

“We’re getting on top of spending, but lower inflation, while good for households and businesses, means Treasury’s Budget forecasts will show a small deficit for 2014/15.”  

$millionMarch 2015

Half yearly Fiscal Update

March 2015 Forecast

 

Difference %June 2015 Forecast
Core Crown

 

   
Tax Revenue$48,175$47,3311.8%$65,626
Core Crown  Revenue$52,495$51,5251.9%$71,466
Core Crown Expenses$53,732$53,8590.2%$73,018
Residual Cash$-3,419$-4,73127.7%$-4,009
Gross Debt$88,155$83,748-5.3$80,289
Gross Debt as % of GDP37.1%35.2% 33.6%
Net Debt$63,036$64,7662.7%$63,494
Net Debt as % of GDP26.5%27.2% 26.5%
Total Crown    
Operating balance before gains and losses (OBGAL)$-358$-1,21470.5%$-572
Operating Balance$-1,298$607-313.8%$-1,900
Net worth atrributable to Crown$74,211$76,118-2.5%$77,376