Finance Minister Bill English says a stronger economy and tight control on spending is benefiting the Government's books.
Excluding unrealised investment gains or losses, the Government's operating deficit stood at $4 billion for the 10 months to the end of April - 14% better than the Treasury forecast in the Budget in May.
Bill English. Photo: NATIONAL PARTY
The better-than-expected deficit is due in large part to a jump in corporate tax. The Treasury says this tax was $532 million above forecast, more than half of which was due to higher corporate profits.
Some economists say the improvement is probably overstated, reflecting volatile equity markets as well as timing with some large firms filing returns in April. Nevertheless, rising economic activity is underpinning higher tax revenue, with income tax and GST rising steadily.
Expenses came in close to expectations at $57.8 billion, while net debt stood at $60 billion or 28.7% of gross domestic product.
If the Government's investments through the New Zealand Superannuation Fund and ACC are included, the Crown reported a surplus of $2.8 billion. That is $142 million below forecast because of ACC's higher than expected claims liabilities.
The Treasury is forecasting a budget deficit of $6.3 billion for the year to June and $2 billion the year after. It is forecasting the Government's books to return to surplus in the June 2015 financial year and chief economist Girol Karacaoglu says an improving tax take has made that more likely.
"We're on track for that. If anything the recent tax takes are a bit on the encouraging side, because the revenues especially reflecting the corporate profit taxes is a bit stronger than ewe had expected."
Mr Karacaoglu also says the New Zealand dollar may begin to devalue relative to foreign currencies over the next year or so.
The Government is aiming for a forecast surplus of $66 million in the 2014/15 fiscal year. Bill English says the Government is on track to return to surplus soon and will keep its spending under control to reduce debt.
