Government Reports $9.3 Billion Deficit, Finance Minister Highlights Progress

The government has concluded the financial year with a deficit of $9.3 billion, which, while lower than anticipated, still reflects ongoing fiscal challenges. According to Treasury figures, this deficit represents an increase of $533 million from the previous year ending in June 2024, but is $869 million less than what was projected in the May budget. This figure is derived from a new calculation method that excludes costs related to the Accident Compensation Corporation (ACC).

Finance Minister Nicola Willis expressed optimism regarding the financial management, stating that the figures demonstrate significant progress in restoring fiscal discipline. “This progress reflects the government’s ongoing work to restore fiscal discipline with cumulative savings of around $44 billion being delivered over the government’s first two Budgets,” she stated. These savings have been allocated towards essential sectors such as health, education, police, and defence, while also providing tax relief and funding the Investment Boost programme introduced in the budget.

The government has faced pressure to implement more aggressive cuts in expenditure. However, Willis defended a more measured approach, citing international evidence that suggests gradual deficit reduction yields better long-term results. The May budget projected a steady decline in the deficit, with expectations of achieving a surplus by 2028/29. Updated forecasts will be available in the half-year economic and fiscal update (HYEFU) scheduled for December 16, 2024.

Tax Revenue Increases and Spending Trends

Despite the deficit, key fiscal indicators are showing signs of improvement. The tax revenue has exceeded expectations, totaling $121 billion—an increase of $900 million compared to forecasts. This rise is attributed to higher collections from goods and services tax (GST), corporate tax, provisional tax, and employee PAYE, although some of these gains were offset due to adjustments in tax thresholds.

The three majority state-owned power companies—Genesis, Meridian, and Mercury—contributed to a $1 billion increase in Crown sales revenue, primarily driven by elevated wholesale power prices. Meanwhile, total government expenses rose by nearly 2% to $183.5 billion compared to the previous year, yet remained approximately $610 million below the budget forecast. Much of this expense increase is attributed to rising superannuation and welfare costs, partially mitigated by reductions in other areas.

Treasury noted that this increase in expenses marks the lowest rate of growth since 2021, suggesting a potential shift in fiscal management moving forward. As the government prepares for the upcoming update in December, the focus will likely remain on balancing budgetary needs with commitments to essential public services.