The Government collected $1.2 billion less core Crown tax in the nine months ended March than was forecast in Treasury’s half year update.
Core Crown tax revenue across those three quarters was $88.5 billion, or 1.3% below forecast.
Treasury said this was largely due to a $1.7 billion drop in corporate taxes as economic conditions have reduced taxable profits.
This trend has been ongoing for some time but has been partly offset by higher individual taxes, driven by faster than normal nominal wage growth.
Income taxes were up $3.9 billion, or 11.2%, from the previous year due to the strong labour market and associated wage growth.
Goods and services tax revenue was $300 million below forecast, indicating some weakness in consumption for the March quarter. GST numbers were up year-on-year but below inflation.
“It is possible that this weakness relative to forecast could continue through to the end of the fiscal year,” Treasury said in the notes.
Lower-than-expected revenue from the Emissions Trading Scheme added to the Crown’s financial underperformance and dragged total core Crown revenue to $1.6 billion below forecast.
While you might expect this to translate into a deeper deficit, it hasn’t had a big impact yet, as core Crown expenses were also tracking $1.4 billion below forecast.
The operating balance before gains and losses (OBEGAL) deficit was at $5 billion, which is about $600 million worse than forecast.
Favourable movements in financial instruments, the ‘gains and losses’ part of OBEGAL, meant the overall operating balance was in surplus of $1.7 billion.
Treasury said this was primarily due to higher returns on listed equities and derivatives held by the NZ Super Fund and interest rate swaps held by ACC.
This was mostly due to a $9 billion increase in the valuation of financial instruments, minus a $3.1 billion decrease in non-financial instruments.
Net core Crown debt—a measure which the new Government has reverted to using—was at $173.7 billion, or 42.9% of GDP, and was $600 million lower than had been forecast.
The Government’s net worth was $185.5 billion, 45.8% of GDP, and almost $5 billion above forecast, due to the better operating balance result.
Finance Minister Nicola Willis will deliver her first budget on May 30.
82 Comments
Neither should be in the Crown Accounts, I believe it was Labour who added them in to try and make debt to GDP look better.
Also, fair value accounting for investments/derivatives is not "real" income in that the liabilities they match are often not fair valued. It looks like ACC are actually in negative equity as well?
2023 annual report looks like 5.4b difference between investment returns and the Outstanding Claims Liability. Doesn’t mean a lot as the OCL is the predicted cost of all current claims for the predicted life of them according to the report, so unless they go belly up now it is of little impact.
The deficit/surplus we talk about is OBEGAL, which doesn't include all the stuff you are unhapy with.
However, those additional things are Government assets/liabilities which contribute to the current financial position of the crown, and have to be reported in the financial statements!
No no. It's all National and Act. They took Labour's booming economy and wrecked in in 3-6 months. How posters on here can even think that this is somehow the new administrations fault is absolutely comical. It was obvious that after 6 years of lunacy there would be massive hangover and a lot of pain. If I had to predict.....it's going to be painful for the next 18-24 months. No pain, no gain.
Methinks Willis will be looking at introducing quite a few new tax bands with rates completely unfamiliar to most people. Given how mathematically challenged many are, they'll not know what has happened until they receive their first pay packet under the new bands and by then they'll be an isolated single voice in the wilderness. [yeah. I'm stirring the pot. I don't believe they have the imagination to effect this.]
Unsure if that "tens of billions" you talk about is from the Taxpayers. Can you provide a source? From 2015, the total rebuild was estimated to be $40b and at that stage insurers had paid $26b.
The Reserve Bank currently estimates the total construction cost of the rebuild to be about $40 billion (in 2015 dollars), comprised of slightly more than $16 billion each for residential and commercial construction and around $7 billion for infrastructure.
As at 30 September 2015, insurers had paid out $26 billion, with the median insurer having paid out around 80 percent of estimated final payout (figure 4).
https://www.rbnz.govt.nz/-/media/project/sites/rbnz/files/publications/…
Govt deficit spend (OBEGAL) in 2011 was 8.9% of GDP, followed by 4.3% in 2021. This was quite a bit higher than our big COVID bailout in 2020 and 2021 when deficit spend was 7.3% and 1.3% respectively.
The Govt cash injection in 2011 and 2012 was accompanied by a major injection of insurance cash (including from global reinsurers).
This injection of cash saved us from a deep recession. Note that private sector debt was too high and confidence too low to play the housing ponzi card in 2011/12. We are now back in the same position... but with no sign of any fiscal stimulus.
OK let's talk about North v South impact on NZ balance of payments deficit. I doubt they are ever published, but I would wager the South would earn more overseas funds than it spends, and the North the opposite. ie the North lives beyond its means. For that reason I believe the South will be a separate state well before this century is out.
Lordy. It's not like macro data from across the history of multiple countries isn't clear about the sequence of events:
Consumer demand drops > corporate tax take drops > dole queue grows quickly > income tax drops > Govt cuts spending to 'live within its means' > consumer demand drops (and around and around we go).
The data has March 2009 written all over it.
Yep it’s all cyclical. My 25 year old son, at an engineering consultancy, is now facing exactly the same challenges I faced as a 35 year old at an engineering consultancy in 2008/2009.
Low morale, redundancies, reduced hours, and the potential for more redundancies
Back then we had the ability to slash the OCR, get massive support from China’s booming economy, and ultimately massive fiscal stimulus post-earthquakes. None of those conditions apply now, at least for now…
It does, doesn't it !!!
With all the talk that gets done referring back to previous lows - i.e. "we need to go back to 2009 to see it that bad" - you'd expect people to be drawing the same conclusions and looking back at how to avoid it. But no. Like lemmings we do the same things expecting a different result.
Like I said, November 2023.
It depends what side of the financial fence you are on. New Zealand has 327 billion of combined savings and term deposits sitting in the main banks. 50 Billion more than only two years ago. Two guesses where all that extra money came from? Worst case for them if it all goes pear shaped. They will just hoover up some more assets at knock down prices. Just like they did in 2010-2011 in the aftermath of the GFC.
On the one hand you keep saying we need to turn stimulus back on to save the economy. On the other hand you complain that monetary stimulus will just get gathered up by rentiers, which would generate no real growth and make everyone else poorer in the process. I must be missing some subtle distinction because your views seem wildly self-contradictory to me.
You're right. I'm absolutely torn. We need stimulus to pull us out of the nosedive. But, we also know that the stimulus will be quickly gathered up by people with rent-extracting assets (new worlds, rentals, wholesale businesses etc). When rich people get money, they either save it or use it to buy more rent-extracting assets. This perpetuates our stagnation.
Ideally, we would introduce stimulus at the same time (or after) changing our tax system so that the stimulus doesn't get quickly squirreled away. CGT, land tax, inheritance tax, whatever. Our current tax system takes money off working people rather than those that extract rent from working people. It's broken.
I'm much less torn. ;-)
Governments (not this one) have historically been prepared to invest in the development of 'inter-generational' assets. You know, the really big ones that private enterprise would never invest in because they need a quick buck. This type of spending is always a good place to throw money. I don't know which is best (because the damn! businesses cases aren't made public) but maybe that giant battery in the South Island? Or maybe some public transport? Or maybe a solid inter-island connection? (Alas, that'll never fly now as the Nat's and Willis's ego will never allow it.) Sure, the rentier classes will suck up some of the spend but they can't suck up the assets created (usually - Think Big (Nats again) excluded.).
"Our current tax system takes money off working people rather than those that extract rent from working people. It's broken. "
Thanks again for saying it. Alas, no one listens. Terry's recent sit-downs with the tax doyens prove this beyond all doubt!
If the government deficit targets transfer payments to recipients which primarily increases consumption then inflation is highly likely.
Yes, 'if'. Inflation typically happens when price rises in a systemically important sector (e.g. energy) propagates through to prices in other sectors. For example, fuel prices go up, transport costs go up... gas prices go up, fertiliser and manufacturing costs go up. Eventually that propagation of price pushes enough on the cost of living to put pressure on wages, which then feedback through to prices.
Govt can invest in things that interrupt that propagation. For example, temporary tax reductions when fuel prices spike, which prevent that cost spreading into other prices. Or, far less efficiently, the central bank can try and stop the higher costs of living spreading through to wages... by increasing unemployment and worker bargaining power.
Well, Labour weren’t lavishly dolling out $12 billion in tax cuts, for which national will be borrowing heavily to pay for. They also aren’t stupid enough to cut government spending in the middle of a recession, which is the exact opposite thing one should be doing to avoid an even bigger recession (to spell it out in simple terms, if you decrease government spending in a recession, it makes the recession deeper due to the simple fact that you are curtailing economic activity. If you instead INCREASE government spending in a recession, it will get you out of the recession faster due to increasing economic activity. This is basic economics 101 here, which National is too incompetent to perform apparently.)
So all things considered I imagine going forward Labour deficits would have been much lower actually.
confusing!!
giving people a tax cut that they will need to spend will be an economic boost
especially if Govt is still running a deficit
and your assumption is that Govt can get a better bang for each buck than the individual - that theory is very dubious
and personally I dont give a toss - Tax cuts were promised so deliver and if that makes for a smaller govt that is just fine with me
People can't think beyond themselves and would rather encourage investment to keep going into unproductive assets that benefit them, then to actually do things that will improve our economy long term. So our best people keep leaving and our houses stay unaffordable. It's a sh*t show.
The trick is making it so people can’t just hoover all the assets by making it less incentivised to do so, but I can’t see the average voter being intelligent enough to vote for something that doesn't benefit their housing investments, and the rich dont want people to become educated enough to turn the tide.
If you bring in land tax just for investment property, you disincentivise subdivision and encourage people to invest in just their own home instead. A bunch of gated mansions will do nothing for the housing crisis nor for social cohesion.
Perhaps you could argue for owner occupied land to be exempted up to a modest threshold, which would offer some sort of bribe to homeowning voters whilst maintaining most of the benefits of the policy.
Wouldn't it incentivise subdivisons? The land at the edges of cities would be worth more so taxed more so the holding costs rise. And perhaps higher holding costs will lower the value of land banks to start with.
There are sections sitting on the edges now not being sold because the developers aren't incentivised to discount and meet the market as their holding costs are low so they are just waiting it out. This is one of the things putting a floor on prices and it's not a free market at all.
tourism can never compensate for lower primary produce prices.
Anyone notice how many airlines flew across the pacific every night this season , anyone notice how quickly routes were dropped when loadings dropped.
We are so expensive for tourists, that cruise ship passengers only buy a cup of coffee, free camping sites are full and parking down the road, Chinese tour buses stay in Chinese owned hotels, Indians are buying hotels and cranking up the prices, tour guides are employed overseas, paid overseas and work in NZ at half the minimum wage. No GST paid, no ACC paid, no PAYE paid.
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