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New Zealand government lowers expectations on falling revenue forecasts

(Xinhua)

13:56, March 06, 2012

WELLINGTON, March 6 (Xinhua) -- New Zealand's government accounts ran up a higher than expected deficit in the seven months to January, and the figures could get worse, the Treasury warned Tuesday.

The deficit before gains and losses was 4.3 billion NZ dollars (3.51 billion U.S. dollars), which was 473 million NZ dollars higher than forecast in the Treasury's Pre-election Economic and Fiscal Update (PREFU) released on Oct. 25 last year.

Offsetting the higher than expected deficit was the fact that government expenditure, at 39.4 billion NZ dollars, was 1.24 billion NZ dollars below forecast.

The Treasury, in its monthly financial statement on Tuesday, said the higher deficit was driven in part by 290 million NZ dollars paid out by the government insurer, the Earthquake Commission, after a further strong earthquake in Canterbury region on Dec. 23 last year.

But the other major factor was that the economy was not performing as well as anticipated, and core tax revenue of 31.4 billion NZ dollars was 2.9 percent below the PREFU forecast.

Source deductions were 383 million NZ dollars, or 3 percent, below forecast, reflecting weaker than forecast labor market conditions, the Goods and Services Tax, a consumption tax, was 345 million NZ dollars, or 4 percent below.

Corporate tax was 245 million NZ dollars, or 5.1 percent, below forecast, and likely to fall further, said chief financial officer Fergus Welsh in a statement from the Treasury.

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