Mr Douglas releases 11-month tax figure

Press, 8 April 1987, Page 3

Mr Douglas releases 11-month tax figure

By

BRENDON BURNS

in Wellington The Minister of Finance, Mr Douglas, re- ; leased the Government’s 11-month tax and spending figures yesterday and again pointed to a budget ! deficit of $2.45 billion. ■ The expenditure and ; revenue figures for the ! financial year to February i 28, 1987, showed a deficit ! of $4.6758. But this is expected to ■ be cut by more than $2 billion by higher than ex- . pected tax payments last month. Some commentators have said the March tax-

take appears big enough to allow a Budget deficit of about S2B.

Questioned on this yesterday, Mr Douglas was cautious.

“I’ve got no evidence to show that. I’m sticking to the $2.45. There are suggestions that the tax flows have been heavier but then one has to take into account what has happened on the other side (spending),” he said. The Budget deficit had ballooned late last year through extra expenditure to $2.98.

Mr Douglas’s recent

suggestions that the deficit would return to its original projected figure were interpreted as a signal that interest rates might fall. However, in the last few days several banks and financial institutions have announced interest rate increases of up to 1.5 per cent. An explanation for this, said Mr Douglas, was that banks borrowed too much money late last year and now had to recoup some. The higher than expected tax-take was a factor in reducing their liquidity in recent weeks. “Some of them are paying a price for trying to expand their market share,” he said. “They took an aggressive stance on expansion of lending. So they were caught out.” The increase in interest rates was likely to be of short-term duration. “Interest rates will come down,” he said. A lower Budget deficit would certainly assist.