21 Feb 2013

Modest gains in tax take

7:30 am on 21 February 2013

The gradual economic recovery is being reflected in modest gains in the tax take.

The Government's budget deficit improved due to delays in Treaty of Waitangi settlements.

Excluding unrealised investment gains or losses, the operating deficit stood at $3.2 billion for the six months to December - 4.7% better than Treasury forecast in December.

Core tax revenue came in on target at $27.3 billion but is more than 3.5% above the same period a year ago.

Infometrics economist Benje Patterson says activity is improving, though the make up of the tax take shows the patchy nature of the recovery.

Mr Patterson says, for example, company taxation is improving but not as rapidly as Treasury thought it might in December.

He says the Government's cost-cutting measures kept expenses in check, rising just 0.1% from the previous year, with welfare spending and health the only areas where spending grew significantly.

The Government expects a return to surplus in the June 2015 financial year but Mr Patterson say that's unlikely given a weak global recovery.