A combination of lower spending and higher revenue in the 11 months to May resulted in a better-than-expected $4.74 billion operating deficit before gains and losses in the 11 months to May 31.
Finance Minister Bill English is sensibly saying this doesn’t change the government’s commitment to sound management of its finances and ongoing fiscal discipline.
Treasury expects revenue to come in close to forecasts for the full financial year ending June 30 and at least part of the lower spending track to be reversed in June.
“The Government has made good progress in keeping spending under control and delivering a faster-growing economy that will help grow our revenue.
“However, in many ways, restraint in the public sector is only just starting. We still have a significant medium-term challenge to get back to surplus as soon as possible. Budget forecasts show that will not happen until 2015/16 – but I would like us to be back into surplus sooner,” Mr English says.
“In our first two Budgets, the Government took early steps to bring deficits and government debt under control. We will build on that over the next few years by living within our $1.1 billion annual allowance for extra operating spending and weeding out lower priority spending.”
Some on the left, like the Council of Trade Unions, see this as an excuse to increase spending which doesn’t say much about their financial understanding.
The deficit may not be as bad as it was expected to be but it’s still worse than it ought to be and the need for fiscal rectitude hasn’t diminished.
Continued restraint now will speed the return to surpluses which are what we need for long term financial stability.