Deputy Secretary to the Treasury
The Financial Statements of the Government of New Zealand for the eight months ended 28 February 2011 were released by the Treasury today.
The monthly financial statements are compared against monthly forecast tracks based on the 2010 Half Year Economic and Fiscal Update published in December 2010.
The 22 February earthquake in Christchurch occurred just six days before month-end. As such these financial statements do not include the full costs of the earthquake. However, they do include an estimate of the Earthquake Commission’s (EQC’s) net cost of $1.5 billion which is the main reason for the operating balance before gains and losses deficit exceeding forecast by $1.7 billion. Additional earthquake related costs will be included in coming months when they can be reliably quantified and as subsequent policy decisions regarding earthquake recovery are made.
Core Crown revenue in the eight month period stood at $36.6 billion, 1.7% lower than forecast in part due to lower than expected interest and dividend income. Core Crown tax revenue was very close to forecast overall, with source deductions above forecast while corporate and GST were below forecast. In addition to the impact the Christchurch earthquakes will have on New Zealand’s economic growth and the government’s tax take, global events such as Japan’s earthquake and tsunami and unrest in the Middle East and North Africa pose a negative risk to global economic growth, and hence also pose a negative risk to New Zealand’s economy and tax revenue.
Core Crown expenses in the eight month period stood at $44.3 billion, 0.6% lower than forecast. This was mainly due to underspends of $574 million across a number of departments offset by a $331 million revision in the estimate of recoveries relating to the deposit guarantee scheme which was not forecast.
EQC’s booking of the estimated net costs from the 22 February quake has increased the operating balance deficit by $1.5 billion, however, the operating balance was boosted by unforecast gains of $5.2 billion. Of these gains, $3.2 billion came from equity investments in the NZS Fund and ACC and $2.0 billion were actuarial gains on ACC and GSF liabilities.
Net debt (at $37.6 billion or 19.3% of GDP) was $489 million lower than forecast. With the core Crown residual cash deficit close to forecast at $10.8 billion (1.1 % lower than forecast) most of this variance related to issues of circulating currency which was $276 million higher than forecast.
Gross debt stood at $63.4 billion (32.6% of GDP), which was $14.0 billion higher than the same time last year. As a result of the higher debt position, finance costs for the eight months ended 28 February 2011 were $1.9 billion compared with $1.5 billion in the same period last year.
|Year to date||Full Year|
|Core Crown tax revenue||33,705||33,737||(32)||(0.1)||52,527|
|Core Crown revenue||36,574||37,198||(624)||(1.7)||58,446|
|Core Crown expenses||44,293||44,548||255||0.6||70,560|
|Core Crown residual cash||(10,828)||(10,950)||122||1.1||(15,602)|
|as a percentage of GDP||32.6%||32.2%||33.3%|
|as a percentage of GDP||19.3%||19.6%||20.8%|
|Operating balance before gains and losses||(9,187)||(7,494)||(1,693)||(22.6)||(11,098)|
1 Using GDP for the year ended 30 September 2010 of $190,740 million (Source: Statistics New Zealand)
2 Using forecast GDP for the year ended 30 June 2011 of $202,398 million (Source: Treasury)
3 Gross sovereign-issued debt excluding settlement cash and Reserve Bank bills
4 Net core Crown debt excluding student loans and other advances
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