Under-forecast tax take puts Kiwi gov't surplus goal at risk

A lower-than-expected tax take is putting pressure on the s target of returning to an operating surplus by the end of this financial year, Finance Minister Bill English warned Tuesday.

The government's operating deficit narrowed for the third consecutive year to 2.9 billion NZ dollars (2.26 billion U.S. dollars) in the year ending June, down from 4.4 billion NZ dollars (3.43 billion U.S. dollars) the previous year, English said in a statement after the New Zealand Treasury released the government financial statements for the period.

However, core tax revenue at 61.5 billion NZ dollars (47.96 billion U.S. dollars) was about 400 million NZ dollars (312.2 million U.S. dollars) below forecast in the May Budget, mainly due to weaker than expected consumption affecting sales tax revenue, while expenses at 71.5 billion NZ dollars (55.8 billion U.S. dollars) were just 100 million NZ dollars (78.05 million U.S. dollars) below forecast.

"It is possible that revenue will continue to track below forecast in the current financial year, which reinforces the need for the government to continue controlling its spending," English said.

The latest deficit was equal to 1.3 percent of GDP, down from 2. 1 percent of GDP the previous year, and 4.4 percent of GDP the year before that, he said.

Net government debt increased from 55.8 billion NZ dollars (43. 5 billion U.S. dollars) to 59.9 billion NZ dollars (46.76 billion U.S. dollars) year on year, but as a proportion of GDP it fell from 26.3 percent to 26.2 percent.

"New Zealand's economic growth of 3.9 percent in the year to June was the highest for a decade. But one or two years of growth will not change our economic prosperity -- we need to stay on course over many years to really lift our long-term economic performance," said English.

"Getting back to surplus this year and building larger surpluses into the future remains a significant challenge."

New Zealand's economic outlook remained positive, particularly compared with those of other developed economies.

"Growth is expected to return to more normal levels, reflecting international economic conditions and lower dairy prices," said English.