Government deficit higher than forecast

The government deficit is tracking higher than forecast on the back of a lower tax take.

Official figures show a deficit of $3.2 billion for the eight months ended February, about $600 million higher than forecast.

Tax revenue was $1b below forecast at $73.3b, due to lower GST, personal tax, source deductions and customs duties.

Treasury said it was largely because of weaker-than-forecast consumption, labour market and business profits.

Net debt of $71.9b was 18.9 percent of the value of the economy, compared to the forecast of 20 percent, aided by an increase in the value of investments.

Expenses were $800m below forecast, mainly because of lower Covid-19 spending. It was also due to lower expenses on core government services, social security, environmental protection, housing and community development, and economic and industrial services.

It was offset by finance costs that increased as a result of higher-than-expected interest rates.

Minister of Finance Grant Robertson said the government books were in "solid shape" despite the higher-than-expected deficit.

"As I've previously said, 2023 is going to be a difficult and testing year. We are well-placed to respond as New Zealand navigates a pathway through cost of living pressures, the impact of recent extreme weather and an uncertain global environment."

Robertson said the February result included some of the impacts of recent severe weather, and warned the government's finances would take a further hit as a result.

"We are continuing to strike a balance to support Kiwis through these challenging times and invest in strong public services and a resilient infrastructure network while carefully managing our resources to ensure the long term sustainability of the economy."

Robertson added the government had the fiscal headroom to deal with the effects of Cyclone Gabrielle and future economic shock.

He said New Zealand's debt levels at 18.9 percent of GDP was among the lowest in developed nations.