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       Govt on track for increased deficit despite fall in spending
        
 (HTM) Source
        
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       The Government books are worsening as the tax take falls, leaving it
       on course to post a sizable deficit for the financial year.
        
       Treasury figures show a deficit of $5.04 billion for the nine months
       ended March, $619 million more than forecast in the December financial
       update.
        
       Core tax revenue was $88.5b, $1.2b below forecast, with weaker
       corporate and GST revenue, partly offset by a lift in taxes on
       investment returns.
        
       "This was due to reduced taxable profits on both filed and estimated
       tax assessments as a result of economic conditions," Treasury said.
        
       However, the tax take was about 6% higher than the same time last
       year, reflecting the strong labour market and income tax returns,
       although GST returns increased less than the rate of inflation.
        
       "[This is] indicating that consumers have cut back their real spending
       in response to mortgage interest rate and price increases."
        
       Other revenue was below forecast as the value of carbon trading units
       was also weaker, and lower returns from crown and state-owned
       enterprises.
        
       Expenses were nearly $1.4b below forecast at $101b, with reduced
       spending on cyclone recovery costs, housing, and delayed payments of
       some regional grants.
        
       Net debt was slightly lower than expected at $173.7b, or 42.9% of the
       value of the economy, while gross debt was above forecast as the
       government borrowed more short-term to meet normal expenses.
        
       The Organisation for Economic Co-operation and Development's (OECD)
       latest report on New Zealand strongly advised the government to get
       its books balanced as quickly as possible, and said any tax cuts
       should be fully funded by spending cuts and increased revenue.
        
       However, Finance Minister Nicola Willis has said tax cuts in the May
       30 Budget would be fully funded and would go ahead.
        
        
        
        
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