Crown accounts deteriorate as early impacts of Covid-19 show through

Friday, 8 May 2020

Deteriorating financial markets and the first payments of wage subsidies have started to show through in the Crown accounts.

The Government has reported an operating deficit of $2.7 billion for the nine months to March 31, which was $4b worse than the surplus it had forecast in December.

The deficit was a much heftier $9.8b — or $11.8b worse than forecast — once other gains and losses, such as the paper impacts of the deteriorating investment market on the New Zealand Super Fund and ACC's accounts, were factored in.

The NZ Super Fund reported in mid-March that its funds had fallen by $10b, or 22 per cent, since the start of the year as a result of coronavirus market downturn.

The Treasury's chief government accountant, Paul Helm, reported that net core Crown debt rose to $66.4b, or 21.3% of GDP, which was $4.2b higher than forecast.

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Economists expect government debt to balloon out much further to 40 to 50 per cent of GDP as a result of measures the Government is putting in place to mitigate the impact of the coronavirus pandemic on the economy.

The Treasury said that only small amount of the new spending authorised to mitigate the impact of the coronavirus pandemic showed through in the March figures.

Nevertheless, the figures do reflect the payment of the first $3.9b of the $10.6b now paid out by the Government under its wage subsidy scheme.

Core Crown tax revenue was $65.9b, which was $400m or 0.7 per cent above forecast.

Expenses were $72.5b, which was $4.4b above forecast, mainly due to the wage subsidies and extra health spending.

Finance Minister Grant Robertson said the accounts showed how quickly the Government got money out the door to help New Zealanders as Covid-19 hit the country.

“We used our Government’s strong balance sheet to move quickly with our public health response, reduce the impact on workers and businesses, and position the economy for recovery.”