The Government's deficit has dropped to $4.6 billion, $10.6 billion better than forecast in Budget 2021, which is attributed to growth in the economy during widespread alert level 1.
This is due to the Government receiving $98 billion in tax over the past year, $12.9 billion higher than in 2020, and it's helped to fund record spending on health due to COVID-19.
The end of year audited Crown accounts released on Tuesday illustrate how the coronavirus pandemic has shaped the Government's spending, with a record $22.8 billion spent on health, a 14.5 percent increase on 2020.
A breakdown of COVID-19 costs shows that in 2021, $848 million was spent on managed isolation and quarantine (MIQ), $375 million was spent on vaccines, $280 million on testing, and $119 million to purchase personal protective equipment (PPE).
And despite the Government imposing a fee on returnees in MIQ, only $124 million has been received, paling in comparison to the almost $1 billion cost of the operation. There is still $59 million in unpaid fees.
The Government has borrowed significantly to pay for its response to COVID-19, with total borrowings at $162.6 billion, $9.8 billion more than last year.
Net core Crown debt has increased by $18.7 billion from $83.4 billion in 2020 to $102.1 billion in 2021. As a share of the economy, net core Crown debt increased to 30.1 percent of GDP compared to 26.3 percent of GDP a year earlier.
The value of the Government's property and equipment portfolio has increased by $26.7 billion, a result of assets including land, buildings, state highways, electricity generation and rail networks. Treasury documents show $5.8 billion is owing to social housing land held by Government agencies like Kainga Ora.
The increase in property value is no surprise, given CoreLogic's most recent quarterly property market and economic update showing how the national average value of housing stock rose by 22.8 percent over the past year.
Finance Minister Grant Robertson acknowledged there will be an impact on the economy given Auckland has been under lockdown for eight weeks.
"Will there be an impact? Absolutely there will be an impact. You can't have New Zealand's largest city in lockdown and not have an impact," he told reporters.
But Robertson said the accounts show that the New Zealand economy has performed better than forecast. He said it "shows a strong rebound from the first lockdown in 2020, and bodes well for emerging from the current outbreak".
"All countries around the world have done well, we have had to take on some debt to support businesses and workers through this COVID-19 pandemic - any responsible Government would have done the same thing.
"However the level of debt remains lower than expected and far lower than most of our international counterparts. The average for advanced economies is above 90 percent net debt. In addition the cost of servicing that debt also remains very low by historical standards."
This is a reference to the Reserve Bank's official cash rate, or interest rates, which have been historically low to ease the economic pain of the pandemic. The Reserve Bank increased interest rates slightly, for the first time in seven years, due to inflation pressure. It has signalled plans to do more.
The Reserve Bank had intended to raise interest rates in August as the economy boomed with the country at alert level 1, but the delta outbreak threw cold water on those plans.
"We will continue to take a balanced approach," Robertson said, "investing heavily to support wellbeing, our transition to being a low carbon economy and to improve productivity, while carefully managing our resources with an eye to the long term sustainability of the economy."
