The Government's tax take is lower than forecast according to latest official financial statements, a sign that people are being careful about opening their wallets.
Latest GST figures show people are spending less than forecast Photo: AFP
The Government's financial statements for the four months until the end of October have the operating deficit at $260 million higher than forecast at $1 billion, owing to lower revenue and higher costs than expected.
Finance Minister Bill English has conceded it will be more difficult than expected to return to a government surplus this financial year.
The figures showed tax revenue was $1.5 billion higher than at the same time last year but was still almost $100 million less than forecast. Much of that was because GST did notr reach expected levels - a sign that people are spending less.
Among New Zealanders being cautious about opening their wallets is grandmother of nine Chris Gray, who said she was keeping a close eye on her spending as Christmas approached.
"I'm keeping it very low-key because the money isn't there. I just buy my grandchildren gifts and that is enough for me - because I have nine of them," she said.
The Federation of Family Budgeting Services's chief executive, Raewyn Fox, said a lot of people were struggling.
"We have come off the end of winter, which means high power bills and health bills, so it always takes people a while to recover from that and we do know a lot of people are nervous about spending too much money at Christmas because maybe it has been a bit of a tough year."
Third-generation bookseller David Hedley of Masterton said much to his suprise, the past November had seen some of the shop's best ever sales. Mr Hedley said that could be because books were no longer a high-ticket item and most of his books were about $30 or under. Mr Hedley said the next few weeks would be crucial in terms of the overall retail year.
"It is looking much more promising that I would have thought it would be six months ago ... I'm very very much more upbeat than I thought I was going to be at this point because we have had quite a difficult few years," he said
Mr Hedley said many retail businesses were adapting by also selling online and slashing prices. But lower prices are bad news for the Government's coffers. Tax revenue came in 5 percent below Budget forecasts, mainly due to reduced GST.
Oliver Hartwich, executive director of business group and thinktank the New Zealand Initiative, attributes the reduction in GST to a fall in commodity prices, such as oil.
"Energy costs are a massive input factor into food production for example. So whenever we have cheap energy - food prices tend to go down because I think about 50 percent of the price actually comes down to energy use. So I think it is all interrelated," Mr Hartwich said.
Oliver Hartwich said lower prices meant people were getting more bang for their buck and less GST was generated.