This month’s fiscal accounts are a story of unexpected revenue, and rosy gains and losses forecasts.
Modest, targeted spending increases sit behind Budget 2013. The Minister of Finance, Hon Bill English, indicated that the Government will return to surplus by 2014/15. Hailed as a budget that was building momentum, Budget 2013 indicates a slow and cautious approach whereby no money will be set aside for capital spending over this and the following three Budgets, and any new capital spending will come from the existing balance sheet.
Treasury lowered its forecast 2014-15 surplus to $66 million (on the Total Crown OBEGAL measure), but is still holding out for a surplus.
As we expected, the risks identified in the Treasury’s July Monthly Economic Indicators squeezed the positives according to the Government’s just released annual accounts for 2011/12. Initially, the latest annual government accounts looked like some positive reading: Core Crown revenue was up 5 percent, and expenses down by 2 percent on their 2011 levels. But in dollar terms, as revenue was only $60.6 billion while expenses were $69.1 billion, the Government ran a deficit.
Treasury’s latest Monthly Economic Indicators conclude that the “domestic economy is looking in relatively good shape”, while acknowledging that “the global outlook worsened further in July, with downside risks increasing”. It sees “a pick up in coming quarters” that will see inflation accelerate and spare capacity be absorbed (by growth).
The latest fiscal accounts (for the 11 months to May 2012) have some positives in them, and continue a recent trend of applying discipline (but not austerity) to the government accounts. The following table and figures summarise the actual and forecast Core Crown accounts.
First, returning the government’s books to surplus by 2014/15 despite an increasing austere global environment is achieved through a forecast surplus of $197 million in that year. This is $1.1 billion lower than last year’s Budget forecast for that year. Thereafter, the fiscal surplus is set to grow further to reach $2.1 billion in 2015/16.
Treasury has released the final set of fiscal accounts before the release of the Budget in about a fortnight. The media release, however, is slightly misleading, as it does not always clearly distinguish when it is referring to Core Crown versus Total Crown figures. So while the government deficit is still bad, the actual figures are perhaps not as bad as one might interpret from a scan of Treasury’s media release.
Treasury regularly publishes data on the monthly tax take – the tax “outturn” data. These publications are usually released about six weeks after the end of the month. It is some of the earliest data available on how the economy is tracking. The data are reported for both “receipts” (cash that has been received by the collecting agency) and “revenue” (tax that is due, but which may not have actually been paid yet). The latter is an accrual measure, and is the most useful for gauging activity.
The latest financial statements for Treasury for the seven months to January 2012 show a big hole in the fiscal accounts.