Responsible management of accounts needed - English

Continued responsible management of the Crown accounts is needed given the state of the Government books, Finance Minister Bill English says.

Treasury today said that in the five months to the end of November, including gains and losses, the operating balance was $2.5b in deficit, $2.3b or 47.9 percent less than forecast.

It also said $20.5 billion tax revenue was near what was forecast in the December 2010 Half Year Economic and Fiscal Update.

"While there were some overs and unders on the revenue side, overall the results were pretty much in line with those December forecasts," Mr English said.

"But tax revenue still remained about $1 billion below forecasts issued with the Budget last May - mainly because of lower corporate tax and GST revenue."

As Treasury was forecasting a $15.6 billion cash deficit for the current financial year that would add to New Zealand's overseas debt, he said.

"We need to continue managing the Government's finances responsibly on behalf of taxpayers, reducing the rate of new spending and getting back into budget surplus as soon as possible."

He said the government was focussed on getting the economy back into surplus. Yesterday's announcement about partial state asset sales would reduce borrowing.

"New Zealand as a whole needs to save more, spend less and reduce its heavy reliance on foreign debt - and the Government is a crucial player in this," Mr English said.

"By playing its part in lifting national savings, this Government will help to keep interest rates low and build faster, ongoing economic growth."

Treasury said revenue for the five months from source deductions was $185 million or 2.1 percent higher than forecast, with November the first month that Inland Revenue received PAYE assessments taking in the October personal tax cut.

The forecast had assumed source deductions would decline in November in line with the tax cuts, but they fell less than anticipated.

Corporate tax revenue was $179m or 7.2 percent lower than forecast, while overall tax revenue was $27m or 0.1 percent above forecast.

"While the Treasury's judgment is that the corporate tax variance is likely to be timing in nature, it is too early to predict whether the PAYE variance will persist."

Core Crown expenses were $272m lower than forecast due to individually small variances across a number of departments, the Treasury said.

The operating balance before gains and losses (obegal) was largely in line with forecast at a deficit of $5.8 billion.

Within that, both insurance expenses and other revenue in relation to reinsurance were $1b higher than forecast, as the estimated costs of the Canterbury earthquake had risen to $3b.

Treasury put the variance in the operating balance forecast down to gains recorded by NZS Fund -- $1b higher than forecast -- and ACC which recorded an actuarial gain on its outstanding claims liability of $500m, $1.3b above its forecast actuarial loss.

The residual cash deficit at $9.1b was $181m less than forecast, with the main contributor being GST receipts which were $168m or 3.5 percent higher than forecast.

That variance was likely to relate to forecasting assumptions regarding the October GST rate rise.

At November 30, gross debt was $60.8b or 31.9 percent of GDP, $1.5b higher than forecast across a number of debt instruments, the Treasury said.

That variance did not translate into a corresponding increase in net debt, at $35.9b or 18.8 percent of GDP, because there were similar increases in financial assets during the period.