Spending restraint needed for foreseeable future

Ongoing spending discipline and higher than expected corporate tax revenue have helped keep the Government's finances on track at a time of heightened global uncertainty, Finance Minister Bill English says.

Government spending, tax revenue and net debt were all slightly lower than expected in the Crown accounts for the four months to 31 October issued today, contributing to a operating deficit before gains and losses of $3.36 billion. The variances - due to timing issues - are expected to reduce in coming months.

"Balancing the books and returning to surplus is one of the most important things the Government can do to build a stronger and more competitive economy," Mr English says.

"The Government is keeping a tight lid on spending and that will need to continue into the foreseeable future so we can return to surplus as quickly as possible in a highly uncertain global environment.

"We are tracking towards the forecast $10.8 billion deficit for the year to 30 June, 2012 – down from over $18 billion last year. This is forecast to more than halve to $4.4 billion next year, before returning to surplus in 2014/15.

"While the outlook for Europe has deteriorated since the Pre-Election Economic and Fiscal Update, the local economy is continuing to grow, with higher than forecast corporate tax revenue.

"But getting back to surplus won't be easy. In many ways, restraint in the public sector has only just started.

"The Government is committed to meeting this challenge. We've taken steps to control spending and get on top of debt, while putting in place policies that build a more competitive economy and more real jobs.

"We will continue with that plan over the next three years," Mr English says.