Although Finance Minister Bill English continued to point to weaker-than-expected business profits bringing in lower tax revenue for the nine months to March 31, a year-on-year comparison paints a rosier picture.
In the nine months ended March this year, tax revenue fell by $4.1 billion to $36.5 billion from $40.6 billion in the previous corresponding period.
Total core revenue fell nearly $3.6 billion to $40.8 billion.
Crown expenses rose 4.3%, or nearly $2 billion, to nearly $47 billion to give a March 2010 operating balance before gains and losses (obegal) of -$5.3 billion compared with -$5 billion in the previous corresponding period.
However, once nearly $4 billion of gains were added, compared with a loss of $7.7 billion in the pcp, the 2010 operating deficit dropped to $1.3 billion compared with a deficit of $7.7 billion in March last year.
Treasury said the $11.7 billion difference was mainly due to the recent recovery in financial markets resulting in positive investment returns.
In the March 2010 period, the New Zealand Superannuation Fund and ACC reported gains on their investment portfolios that were $891 million and $466 million higher than forecast respectively.
ACC reported a year-to-date actuarial gain of $173 million on the value of its outstanding claims liability, compared with a forecast loss of $18 million. Treasury said the gain was driven by updated claims experience and economic assumptions.
That ACC gain angered the Council of Trade Unions.
"This appears to be confirmation of the cuts in entitlements from government and administrative actions," CTU economist and policy director Bill Rosenberg said.
"It confirms reports of more ACC claims being turned down. This is despite the increases in ACC levies, driven mainly by the full cost recovery model."
On the other hand, the ACC and New Zealand Superannuation investment funds continued to contribute to the Government's operating balance, he said.
On an actual versus forecast basis, the Government's balance was close to what was expected.
Government expenses of $59.9 billion were down $1.2 billion on forecast, net gains of $4 billion were $1.6 billion ahead of forecast and the operating balance was $2 billion ahead of forecast at $1.3 billion.
Social security and welfare spending was up $1.5 billion on the previous year, probably as a result of the recession, meaning more people needed the unemployment benefit.
Mr English said that without one-off gains from structural finance transaction settlements with the banks, underlying tax revenue was $900 million, or 2.4%, below forecast in the nine months.
"This shows through across company tax, provisional tax payments by individuals and source deductions."
The Government expected that revenue to remain below forecasts throughout the rest of the financial year and probably into the 2010-11 year, he said.
"Just two weeks out from the Budget, it underscores the brittle fiscal position faced by the Government and how finely balanced the situation is."
