Govt accounts reflect extra spending, recession

The combined impact of significant extra spending and the recession are highlighted in the Government's annual accounts for the year to June 30, Finance Minister Bill English says.

"There has been a marked deterioration in the Crown's accounts, from an annual operating surplus of $2.4 billion in 2008 to an operating deficit of $10.5 billion in the year to June 30 2009," he says.

"The deficit is larger than the $9.3 billion forecast in the Budget in May, as tax receipts fell, spending increased sharply and a number of the Crown's investment portfolios sustained significant losses.

"We cannot afford for these trends to continue indefinitely," Mr English says.

Faced with expected cash deficits of between $10 billion and $12 billion over each of the next four years, Mr English says the Government expects to have to double Crown debt by 2013.

"We will be borrowing about $40 billion in the next four years, to maintain public services and welfare entitlements, and to invest in productive infrastructure and support jobs.

"This extra debt will increase the Crown's interest costs by about $700 million each year - preventing this money being spent in more worthwhile areas.

"That means by 2013, total Crown interest costs are forecast to top $5.4 billion a year - more than the combined annual spending on law and order and defence.

"This underlines the need for us to get our books in order as soon as possible - because budget surpluses give us choices. Deficits do not," Mr English says.