Govt books plunge $3.5b into red
Friday, 05 December 2008The international economic storm has turned the Government's books a nasty shade of red.
The headline operating surplus plunged to a $3.5 billion deficit – $5 billion worse than forecast – on the back of the global financial meltdown, according to the Crown accounts out today.
The government's financial statements shows the crown operating balance was $3.5b in deficit at October 30, against a forecast surplus of $1.5b.
The big blow in the first four months of the financial year came from unrealised losses on government investments as a result of severe turbulence on global sharemarkets.
The losses were $4.3b greater than expected.
However the news is not all bad for new Finance Minister Bill English, as once unrealised investment losses are stripped out the operating balance it comes in at $898m in surplus – $117m better than forecast.
The cash deficit was $900m better than expected, coming in at $3.7b due to delays in transferring $700m to the previous government's Fast Forward research fund and higher than expected petroleum mining royalties.
Mr English said the deficits showed the need for action to make the economy more productive and competitive.
"They also show Labour's legacy of deepening operating balance deficits, rising debt and a deteriorating economic and fiscal situation," Mr English said.
Next year would be a challenging year for everyone and the books would get worse before there was any improvement.
National would press ahead with its three year plan of tax cuts, boost infrastructure spending, reform the Resource Management Act and get the New Zealand Superannuation Fund to invest 40 percent of its assets locally.
The Crown accounts today showed that it was super fund that took the biggest from the economic turmoil with a $3.5b hit, while ACC suffered $600 million in losses and the Earthquake Commission (EQC) $200 million.
The super fund's return for October was minus 13.5 percent, the lowest return for a single month since it was set up in late 2003.
The fund's annualised return since inception is now 4.86 percent compared to 6.92 percent for the risk free rate of return.
The separate Government Superannuation Fund and ACC also recorded losses of $1b and $400m respectively as a result of revaluations of liabilities.
The accounts show gross crown debt climbing $3.1b higher than expected to $33.6b – 18.8 percent of GDP.
This was mainly due to the popularity of government stocks as nervous investors put cash into safe havens.
Net core crown debt was $1.9b lower than forecast at $2.2b, mainly due to the lower than expected cash deficit and higher than forecast circulating currency.
Tax revenues overall were about $400m more than forecast, but that was probably due to timing issues, Treasury said.
- NZPA
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