Hon Bill English
Minister of Finance

4 December 2009
Media Statement

Lower company profits impact Crown accounts

The fiscal challenges facing the Government as the economy comes out of recession are again highlighted in the Crown’s financial statements for the four months to 31 October, Finance Minister Bill English says.

A feature of the latest data is the impact of lower-than-expected business profits on tax revenue – particularly indications that lower company profits in 2009 will flow through to reduced 2010 tax revenue.

“This lower tax revenue was the main contributor to the operating balance before gains and losses (OBEGAL) being in deficit by $3.2 billion in the four months to 31 October - $1.2 billion larger than forecast,” Mr English says.

“It’s clear that the impact of the recession will be felt by many businesses and, in turn, on the Government’s books for some time. This will influence our decisions around both revenue and spending.

“It means there will be little or no new money for government departments and ministries for the foreseeable future – and certainly not at the unsustainable rate of increase provided by the previous government.

Mr English says this challenging environment reinforces the real value of the significant economic programme the Government already has in place.

“Without this balanced programme, there is no doubt that New Zealand would have emerged from the recession in much worse shape than it has, at the cost of thousands more jobs and even more debt.”

The Budget Policy Statement and Half-Year Economic and Fiscal Update on 15 December will set out the Government’s economic framework and update forecasts for 2010 and beyond.

“They will help shape our decisions for Budget 2010, as we focus on getting a better performing economy that supports more jobs and higher incomes.”

ENDS

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