Government Deficit Declines to $9.3 Billion, Progress Noted

The government of New Zealand closed the fiscal year with a deficit of $9.3 billion, a figure that, while still substantial, was significantly lower than earlier forecasts. The Treasury reported that the deficit for the year ending June 2024 was $533 million higher than the previous year, yet $869 million less than anticipated in the May budget. This revised figure was calculated using a new formula that excludes the financial obligations of the Accident Compensation Corporation (ACC).

Financial Progress and Budget Discipline

Nicola Willis, New Zealand’s Minister of Finance, expressed optimism about these results, indicating a positive trend in the government’s fiscal management. She emphasized that the figures demonstrate progress in restoring fiscal discipline, with cumulative savings of approximately $44 billion achieved over the first two budgets of the government.

“This progress reflects the government’s ongoing work to restore fiscal discipline,” Willis stated. She highlighted that these savings have been allocated to crucial sectors such as health, education, police, and defense. Additionally, tax relief measures and the launch of the Investment Boost program were funded through these savings. Willis noted that the government has opted against more aggressive spending cuts, citing international evidence suggesting that deficits are more effectively reduced over several years.

The May budget projected a gradual approach to reducing the deficit, aiming for a surplus by the fiscal year 2028/29. Updated forecasts are expected to be released during the half-year economic and fiscal update (HYEFU) on December 16, 2024.

Improved Tax Revenue and Controlled Spending

According to Treasury, after a period marked by significant deficits and rising debt, several key fiscal indicators are showing improvement. The tax revenue for the year was reported at $121 billion, which is $900 million higher than previously forecast. This increase was driven by higher collections from goods and services tax (GST), corporate taxes, and employee PAYE payments, although adjustments to tax thresholds partially offset the gains.

Additionally, the three major state-owned power companies—Genesis, Meridian, and Mercury—contributed an extra $1 billion to Crown sales revenue due to elevated wholesale power prices.

While total government expenses increased by nearly 2% to $183.5 billion compared to the previous year, they remained $610 million below the budget forecast. Much of this rise can be attributed to increased costs related to superannuation and welfare, although these were partially balanced by reduced spending in other areas. Notably, Treasury indicated that this increase in expenses represents the lowest growth rate since 2021.

Overall, the government’s financial position, while still in deficit, reflects a commitment to fiscal responsibility and strategic investment in key public services, setting a course for gradual recovery in the years ahead.