25 Jan 2013

Govt happy with state of books and surplus 'on track'

9:28 pm on 25 January 2013

The Government is trumpeting an improvement in its books as further evidence it is on track to reach its surplus target.

An increase in the tax take led to a slight reduction in the deficit, compared with forecasts made by the Treasury late last year.

A strong performance from world share markets also boosted the bottom line.

The operating deficit before gains and losses on the Government's investments for the five months to November 2012 was $3 billion, some $200 million better than the Treasury's most recent forecasts. The tax take was $127 million better than predicted.

Including gains and losses on investments, there was a surplus of $706 million for the period - $1.2 billion better than the forecast deficit of $500 million.

Radio New Zealand's economics correspondent said the turnaround in the operating balance was mainly due to a better-than-expected performance from New Zealand Superannuation Fund and Accident Compensation Corporation share portfolios.

Net debt stood at $56.4 billion, or 27.1% of gross domestic product.

Prime Minister John Key said on Friday the latest figures confirm that the Government no longer has a problem with its finances and the big challenge now is economic growth.

Mr Key said that there would not be a zero Budget this year.

Finance Minister Bill English said he remains confident that the Government will achieve its target of getting back to surplus by 2014/15.

But Infometrics economist Benje Patterson said the target remains ambitious, despite the latest improvement in the Government's books.

Mr Patterson said if the Government is serious about getting back to surplus, it needs to cut large spending programmes such as National Super and student loans.

Other economists believe that a surplus is unlikely, given the weak global recovery.