The plunge in international dairy prices has added an element of uncertainty to the New Zealand government's aim of returning to an operating surplus this financial year, according to Treasury figures out Friday.
The government's financial statements for the first quarter of the financial year, ending September, showed an operating deficit of 725 million NZ dollars (557.18 million U.S. dollars), which was 79 million NZ dollars (60.71 million U.S. dollars) more than forecast in budget projections released in May.
Expenses of 18.1 billion NZ dollars (13.9 billion U.S. dollars) was in line with the projections, but sales tax revenue was 175 million NZ dollars (134.39 million U.S. dollars) under forecast.
Finance Minister Bill English said the accounts highlighted the challenge of returning to surplus this financial year.
"The economy is growing solidly and this is supporting more jobs, allowing wages to rise faster than inflation and keeping interest rates lower for longer," English said in a statement.
"But we have an unusual situation with the nominal economy -- which is what drives revenue to the government -- increasing more slowly. This is partly because falling dairy prices are impacting on nominal growth," he said.
"While it's good for New Zealand families to have low interest rates, low inflation and less debt-driven consumption, it makes the government's fiscal position more challenging.
"These accounts reflect only the first three months of the financial year, so uncertainty remains regarding the outlook for tax revenue for the rest of the financial year."
Opposition parties argued that economic growth was set to stall with Treasury forecasting net debt to rise from 62.3 billion NZ dollars (47.88 billion U.S. dollars) to 67.9 billion NZ dollars ( 52.18 billion U.S. dollars) in 2018 -- almost 3 billion NZ dollars (2.3 billion U.S. dollars) more than forecast in May.
"Economists forecast the economy to turn down from here," Green Party co-leader Russel Norman said in a statement, adding the goal of returning to surplus was looking "increasingly dubious."
The main opposition Labour Party said the economy was seriously unbalanced, with growth over-reliant on the dairy industry, in which prices had halved this year, and the rebuild of the earthquake-battered Canterbury region.
"The struggle for surplus shows the storm clouds are gathering on the horizon," Labour finance spokesperson David Parker said in a statement.