“This makes it even more important for the Government to continue carefully managing its spending as we target a return to surplus next year,” he says.
The Government’s financial statements for the seven months show the operating deficit before gains and losses at $1.06 billion, or almost $640 million larger than forecast in the Half-Year Update in December.
This was due mainly to core Crown revenue at $38.3 billion coming in $830 million below forecast. It was offset partly by lower core Crown expenses and higher returns from crown entities.
“While we have spending under control, government revenue can move around and is therefore more difficult to forecast,” Mr English says. “We remain on track to surplus in 2014/15 but, as we’ve said, this is a challenging goal and we need to remain disciplined.
“The extent to which tax revenue is likely to remain below forecast will become clearer as officials work through forecasts for the Budget. Timing issues appear likely to see some of the current variation narrow by the end of the financial year.
“The lower revenue is at odds with other macro-economic indicators that have been broadly in line with the Half-Year Update forecasts and, if anything, point to even stronger economic growth in the second half of the 2014 fiscal year.”
Continuing strength in sharemarkets generated gains on financial instruments of $2.8 billion, which was $1.4 billion ahead of forecast. As a result, the Government’s operating surplus at $3.4 billion was $690 million larger than forecast.
This reinforces the need for continued care over public spending and policies which promote growth.
It also shows there is no money for big spending promises and any party with expensive policies will be taking us in the wrong direction.