An $18.4b deficit

Bill English announced:

The Government remains committed to halving the budget deficit this year – and again next year – before returning to surplus in 2014/15, Finance Minister Bill English says.

The Crown’s accounts for the year to 30 June 2011 show net expenses of $9.1 billion for the Canterbury earthquake last year made up almost half of the Government’s $18.4 billion operating deficit before gains and losses.

“This is an unusually large deficit, but it includes the significant costs of the Canterbury Earthquake Recovery Fund and the updated assessment of Earthquake Commission costs,” Mr English says.

“Setting aside the earthquakes, we’ve made good progress compared to estimates five months ago in the Budget. A combination of higher than forecast revenue and lower than forecast spending has reduced the underlying deficit by about $2.8 billion.

An $18.4b deficit is roughly around $10,000 per household. It is clearly unsustainable and the focus has to be on reducing the deficit before public sector debt gets out of control. It is good that the underlying deficit has reduced, and this has to continue.

An interesting summary notes that 2,500 entities make up the Government accounts and that in total they had $82b in income and spent $100b. 63% of the income is from taxes. Overall revenue increased by $7b which was the first increase in three years.

On the expenditure side, 67% of core crown spending was on welfare, health and education to a total of $47.5b.

The asset side in the accounts is interesting – 2,481 schools, 3,100 police cars, 66,352 state houses, 4,000 km of rail lines, 25 hospitals, 11,000 km of state highways and 8,767 hectares of conservation land.