(Bloomberg) -- New Zealand’s annual budget deficit narrowed much less than forecast in May as slower economic growth saw tax revenue fall short of estimates.

The deficit was NZ$9.45 billion ($5.6 billion) in the year ended June 30, little changed from NZ$9.69 billion a year earlier, according to final financial statements issued by the Treasury Department Thursday in Wellington. In the May budget, the government projected a shortfall of NZ$6.96 billion.

New Zealand’s economic growth slowed in late 2022 as rising costs hit households. The central bank raised interest rates to counter surging inflation, pushing down house prices, while more expensive food and fuel forced consumers to reduce spending.

The government’s fiscal position has left political parties with limited scope for extravagant pledges ahead of the Oct. 14 general election.

Tax revenue rose 3.6% from a year earlier to NZ$111.7 billion but was NZ$2.9 billion less than forecast in the budget. Most of that was due a weaker-than-expected company tax take.

Total expenses rose 7.2% from a year earlier to NZ$161.8 billion, little changed from the budget projections.

Net debt at June 30 increased 15% from a year earlier to NZ$71.4 billion, or 18% of gross domestic product. That matched the budget projection.

The budget deficit was slightly smaller than the unaudited NZ$10 billion gap included in the pre-election economic and fiscal update published last month.

The Treasury said the NZ$588 million improvement from the PREFU reflected a revenue benefit from reclassifying income from the Reserve Bank’s Funding for Lending Program.


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