5 Dec 2011

Govt deficit worse than forecast

2:05 pm on 5 December 2011

The latest Government deficit was worse than predicted by the Treasury in its pre-election forecasts.

But Radio New Zealand's economics correspondent says there are signs of some improvement.

The operating deficit for the four months to the end of October was almost $3.4 billion.

That was 4.1%, or $131 million, worse than forecast in Treasury's pre-election update in early October.

But it was better than the $2.5 billion deficit for the three months to the end of September, which was nearly 10% worse than predicted in the update.

Once changes in the value of the Government's investment portfolio are included, the deficit worsened in October.

The operating deficit accounting for those changes was $7.4 billion, $1.2 billion worse than forecast in the pre-election update.

A $1 billion increase in Government Super Fund liabilities, due to a change in life expectancy calculations, was behind the blowout.

Comment by minister

The company tax take was nearly 9% better than predicted in the pre-election forecast.

The Treasury now says company tax could provide higher tax revenue for the current fiscal year than previously expected.

But Finance Minister Bill English is not so sure. He says the Government is on track to halve the deficit this year, but that could change if the crisis in Europe worsens.