Lower tax take stretches New Zealand gov't deficit

The New Zealand government deficit widened further in the four months to the end of October as tax revenues fell below expectations. The Financial Statements released by the Treasury Wednesday showed the operating balance before gains and losses deficit was 169 million NZ dollars (139.4 million U.S. dollars) more than the Budget forecast in May. Tax and interest revenues were both below forecast, putting the deficit for the four months at 2.87 billion NZ dollars, although it was partly offset by lower expenses. Tax revenue of 17.9 billion NZ dollars was down 292 million NZ dollars or 1.6 percent from the forecast, said a statement from the Treasury. The gap was mainly due to in lower-than-forecast revenues from the Goods and Services Tax, a consumption tax, and wage deductions due to weaker-than-expected wage growth. That was offset by an increase in the effective tax rate paid by non-incorporated businesses. Other core revenue was 244 million NZ dollars lower than forecast, primarily due to lower-than-expected interest rates, resulting in lower interest revenue. Meanwhile, government expenditure of 22.9 billion NZ dollars was 343 million NZ dollars or 1.5 percent lower than forecast, with most areas under-spending, particularly in health and welfare. Gross debt was close to forecast at 81.5 billion NZ dollars (39. 8 percent of GDP), as was net debt at 55.5 billion NZ dollars (27. 1 percent of GDP). Finance Minister Bill English said the figures confirmed the government was continuing to control new spending and getting better results from existing programs in its aim to return to surplus in 2014-2015. "With the world economic position remaining uncertain, it is important that the government remains focused on responsible and prudent fiscal policy well beyond its 2014-2015 surplus target," English said in a statement. However, the main opposition Labour Party said the figures showed the New Zealand economy was "continuing to stagnate." Labour finance spokesperson David Parker said the deficit was more than 6 percent higher than forecast, undermining the government's credibility. "Unemployment is over 7 percent, manufacturing outside the primary sector is in trouble and New Zealand exports are down. Our external deficit is getting worse as exports drop an 11 percent drop in value over the last year," Parker said in a statement. The lower-than-expected tax take was a sure sign that businesses were not growing and working people were not earning, he said. "That's why the country is in deficit and it's not just the government deficit. New Zealand's external deficit this year is the second worst in the developed world, after Greece, and next year is projected to be the worst."