NZ govt fiscal deficit worse than expected - Treasury

WELLINGTON, Nov 4 (Reuters) - The New Zealand government's fiscal position was worse than forecast in September as the prolonged recession dented income and raised costs. The operating balance excluding gains and loses (OBEGAL), which strips out unrealised investment gains or losses, for the three months to Sept. 30 was a deficit of NZ$2.0 billion ($1.4 billion), or 77 percent worse than the forecast made in May's budget of a deficit of NZ$1.15 billion, the Treasury said on Wednesday. It said the larger deficit was largely because of lower corporate tax revenue, which was down NZ$900 million on forecast. The net operating balance was a deficit of NZ$175 million, about NZ$400 million better than forecast as higher investment returns offset the tax result. Net government debt stood at NZ$21.25 billion, which was NZ$367 million higher than forecast, equating to 11.8 percent of gross domestic product, against a forecast 11.6 percent. The government's net cash position, the difference between all income and spending -- operational and capital -- was a deficit of NZ$3.29 billion compared with a forecast deficit of NZ$3.61 billion. The Treasury forecast in the 2009/10 budget an OBEGAL deficit of NZ$7.7 billion for the fiscal year to June 30 2010, an overall operating deficit of NZ$5.7 billion, and net cash shortfall of NZ$11.9 billion. It has forecast large budget deficits for much of the next 10 years and increased borrowing to cover the shortfalls. The government's net debt is forecast to peak at around 40 percent of gross domestic product in 2016/17. See Last month, Finance Minister Bill English said the government would need to borrow large amounts, particularly in the near term, to cope with the impact of the global financial meltdown and economic recession. ($1=NZ$1.39) ((Wellington newsroom tel [phone], fax [phone] [e-mail])) Keywords: NEWZEALAND ECONOMY/FISCAL (If you have a query or comment on this story, send an email to [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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