Core Crown tax revenue was about $500 million below forecast in the five months ending 30 November, reinforcing the need for ongoing spending restraint and responsible fiscal management, Finance Minister Bill English says.

“The Government is committed to reducing its deficits over the next two years and returning to surplus in 2014/15,” he says. “This won’t be easy, particularly with ongoing debt problems in Europe reducing forecasts for global growth.

“However, returning to surplus and repaying debt are among the most important things the Government can do to ensure New Zealand can withstand future shocks and build a more competitive economy based on exports and new jobs.”

The Government’s operating deficit before gains and losses was $4.48 billion in the five months to 30 November. This was $252 million larger than forecast in the pre-election update in November – reflecting lower than forecast tax revenue, which was partly offset by lower than forecast core Crown expenses.

Costs from the latest Canterbury earthquake on 23 December will be included in the Crown accounts when the Earthquake Commission has measured the financial impact.

Mr English says the Budget Policy Statement, to be issued on 16 February, will confirm the Government remains on track to post a budget surplus in 2014/15.

“Not surprisingly, given the more subdued global economic outlook, that surplus now looks like being smaller than the $1.5 billion forecast in the pre-election update – at somewhere between $300 million and $500 million.

“As the Prime Minister said yesterday, returning to surplus is important to our plan to limit debt and take pressure off interest rates and the exchange rate,” Mr English says.