Labour and the Greens say Finance Minister Bill English is sure to break his promise to restore the government books to surplus in 2015.
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 says the Government remains on the right track. Photo: RNZ / Diego Opatowski
Green Party co-leader Russel Norman said today that reaching surplus was one of the promises the National Party made to the public before the general election in September.
"Well, it was always an election promise by Bill English. I mean, he's run deficit after deficit after deficit. And I think we really need to put a kibosh on the idea that he's a sound fiscal manager. All Bill English does is borrow money."
Russel Norman - deficit after deficit. Photo: RNZ / Craig McCulloch
But said the latest financial statements show the challenge ahead and the Government would not actually know whether it would reach surplus or not until October next year.
He defended his record as Finance Minister, saying the election result, in which National won 48 percent of the vote, speaks for itself.
"We have elections to argue they whys and wherefores of that. I think this Government passed the test of economic credibility at least as illustrated by the last election result."
He said the Government remained on the right track, but had no control over the likes of tax revenue, which had a direct impact on the books. He said the economy was experiencing unusual conditions.
"The economy is growing reasonably strongly at over 3 percent. And usually when you add inflation to that you're getting a pretty good increase in the tax base. But because of the drop mainly in the dairy prices, the tax base isn't growing very fast, or not as fast as expected."
Dairy co-operative Fonterra today cut the expected payout from $5.30 to $4.70 a kilo of milk solids due to a global supply glut and subdued demand in China.
Grant Robertson - Government's 'illusion of surplus disappearing'. Photo: RNZ / Diego Opatowski
The Labour Party said the further fall in dairy payouts meant the Government's illusion of a surplus was disappearing. Finance spokesperson Grant Robertson believed the dairy payouts announcement would have a significant impact.
"Around $6 billion will not be flowing in to the rural towns and in to the farmers of New Zealand, and that has a big flow-on effect to the Government's books in terms of the revenue they generate. I think the Government's illusion of a surplus is now completely disappearing."
However, Bill English said spending was only $15 million over budget, which showed the Government was doing a good job controlling its spending.
The tax revenue was 5% lower than the Budget forecast at $97 million, due to reduced GST and source deductions.
Petroleum royalties were also $84 million less than forecast. However, that was partly offset by higher than expected individual and corporate tax.
Government spending was $24 billion, or 5% higher than forecast. That was was caused primarily by the Crown's signing a $103 million Deed of Indemnity for Solid Energy.
Net debt was close to forecast at $61.9 billion, or 27% of GDP.