The latest data, covering the four months to October, indicates that fiscal pressures are building ahead of the upcoming Half Year Economic and Fiscal Update, due on 16 December.
The operating deficit before gains and losses, excluding ACC, reached $4.9 billion for the period—around $700 million higher than projected in the May budget. When ACC finances are included, the deficit expanded to $5.2 billion, roughly $439 million above forecast. Treasury described the overall position as mixed, reflecting the uneven pattern that has characterised recent months.
Revenue shortfalls were a key driver of the weaker outcome. Core tax receipts fell $600 million below expectations, landing at $39.5 billion. Corporate tax and individual tax payments both underperformed against forecasts, primarily due to softer provisional tax collections. This weakness was partly counterbalanced by stronger terminal tax payments, but not enough to close the gap overall.
The expenditure picture was similarly varied. Crown spending totalled $48.5 billion, sitting about $200 million above forecast. A significant contributor was higher-than-expected transport costs, with expenses related to the discontinued iReX Cook Strait ferry project coming through earlier than planned. Additional education spending added to the upward pressure. These overruns were partially offset by lower write-offs of tax debts and reduced expenditure on foreign aid programmes.
Despite the wider deficit, the government’s net debt position came in slightly better than anticipated. Net debt stood at $186.5 billion, equivalent to 42.8 percent of GDP. Treasury attributed this improvement to a lower-than-expected debt level at the beginning of the financial year.
The May budget projected a full-year deficit of $12.1 billion for the year ending June 2026. With revenue under strain and expenditure pressures emerging in several major portfolios, the updated HYEFU forecasts will be closely watched by businesses, investors and policymakers. The new projections are expected to provide a clearer sense of how fiscal settings may shift in response to slowing revenue momentum and evolving economic conditions.
The uneven performance in tax collections underscores a broader trend of softer corporate profitability and moderating household income growth across the region. At the same time, shifting expenditure priorities signal areas where governments may redirect funding in response to emerging service delivery challenges.
As tighter fiscal conditions take shape, businesses should prepare for the possibility of further policy adjustments aimed at stabilising the budget in a period of slowing economic momentum.
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