Financial Statements of the Government of New Zealand for the Five Months Ended 30 November 2007

November highlights#

• OBEGAL was $240 million (12.5%) higher than forecast at $2,161 million (compared to a forecast of $1,921 million) with core Crown operating expenses under forecast;
• However, the operating balance was $506 million (28.3%) lower than forecast at $1,284 million (compared to a forecast of $1,790 million).  This was driven primarily by lower than expected investment returns for the NZS Fund (refer below);
• Core Crown residual cash was $208 million higher than forecast at $774 million (compared to a forecast of $566 million).  This was mainly the result of tax receipts being ahead of forecast ($90 million) and core Crown capital expenditure lower than forecast ($138 million);
• GSID (excluding settlement cash) was 19.0% of GDP compared to a forecast of 18.5% (based on September 2007 GDP);
• Net core Crown debt was $171 million lower than forecast at $2,547 million (compared to a forecast of $2,718 million); and
• The NZS Fund operating balance was a deficit of $143 million compared to a forecast surplus of $395 million.  The decline in return was driven in large part by the recent slowing in United States’ economic activity, and future growth uncertainty generated by the recent fall out in the sub-prime lending market. The Fund is not directly exposed to sub-prime assets but it does hold growth assets such as global equities.  These assets are known to have volatile returns over short horizons but provide significant financial gain over a 30-plus year horizon, the period over which the Guardians of New Zealand Superannuation are investing for.  Total assets of the NZS Fund at 30 November 2007 were $13.9 billion compared to a forecast of $14.5 billion.

1  NZS Fund revenue is the sum of its revenue (ie, interest and dividends) adjusted to add back tax revenue received by Inland Revenue from the Fund.

2  GDP for the year ended 30 September 2007 (Source: Statistics New Zealand).

ENDS