The government’s finances worsened more than expected in the past year as inflation and interest rates lifted expenses quicker than than a rise in the tax take.
Final government accounts for the year ended June show a deficit of $12.9 billion compared with forecasts in May of a deficit of $11.1b, and the previous year’s $9.4b shortfall.
The accounts showed the impact of a slowing economy on company profits, and higher expenses through wage settlements and higher pension and benefit payments.
A strong labour market and higher interest rates underpinned the increase in tax revenue, but it did not keep pace with the lift in expenses.
Finance Minister Nicola Willis said the government books were “not in great shape” and made “sobering” reading.
“We need to tidy them up and impose restraint.”
She said the previous Labour government had set the budget policies and spending for much of the 2023/24 financial year, but the coalition government’s mini-budget in December 2023 had limited the deficit increase by $1b.
However, Willis said the government was looking to drive more value from its spending, but was looking for improved economic growth and productivity to help increase revenue and reduce expenses.
She said near term, spending would be a challenge and about half of next year’s allowance for new budget policies of $2.4b had already been committed, but that would not lead to “dramatic change” in planned spending plans.
Willis laid responsibility for much of the current state of the books on the previous Labour administration.
“Government spending has skyrocketed over the last six years and so has government debt.
“The coalition government is committed … to getting the books back in surplus and starting to bring down net debt as a proportion of gross domestic product.”
However, Willis said higher unemployment and an increase in benefit payments were downside risks to spending plans.
