The interim Financial Statements of the Government of New Zealand for the ten months ended 30 April 2020 (the financial statements) were released by the Treasury today. The financial statements are compared against forecasts based on the 2020 Budget Economic and Fiscal Update (BEFU 2020) published on 14 May 2020.
Core Crown tax revenue was $72.5 billion, $0.2 billion (0.2%) above forecast. This is mainly owing to higher than forecast GST revenue, which was not as adversely affected by lower economic activity as assumed in the GST forecast. This variance was partly offset by lower than forecast corporate tax with Portfolio Investment Entity (PIE) tax, terminal tax and provisional tax all below forecast.
Core Crown expenses were $87.1 billion, $0.4 billion lower than forecast owing mainly to lower than forecast take up of the Business Finance Guarantee Scheme, partially offset by increased health and transport expenditure.
The operating balance before gains and losses (OBEGAL) was a $12.8 billion deficit, $0.6 billion lower than forecast mainly reflecting the core Crown results discussed above.
When total net losses of $9.9 billion ($1.8 billion higher than the losses forecast) are added to the OBEGAL result, the operating balance (excluding minority interests) was a $22.6 billion deficit, $1.2 billion higher than the deficit forecast. This is mainly due to losses on the ACC outstanding claims liability, $6.1 billion higher than the losses forecast, primarily driven by a decrease in the discount rates used to calculate the liability. This was partly offset by net investment losses, $4.4 billion lower than the losses forecast, mainly due to favourable changes in market prices.
Core Crown residual cash was a deficit of $20.9 billion, $1.3 billion higher than the deficit forecast. Core Crown tax receipts were below forecast by $0.1 billion while core Crown payments were $1.0 billion higher than forecast. Capital cash out flows were $0.4 billion higher than forecast. We expect this timing variance to reverse by year end.
Net core Crown debt of $78.8 billion (25.3% of GDP), was $2.3 billion higher than forecast mainly due to the residual cash variance and the timing of unsettled trades ($1.6 billion higher than forecast) partially offset by valuation changes.
Gross debt at $92.9 billion (29.9% of GDP) was $2.6 billion higher than forecast primarily due to an increased balance of Treasury bills and foreign-currency borrowings as a response to significant cash requirements due to the impacts of COVID-19 ($3.6 billion higher than forecast in total). In addition, unsettled trades were higher than forecast by $1.6 billion. These variances were partly offset by Government stock being $3.0 billion lower than forecast which is in part due to Reserve Bank’s Large Scale Asset Purchase Program (LSAP).
Total borrowings at 30 April 2020 were $149.5 billion, $9.0 billion higher than forecast. This is primarily owing to increased settlement deposits with Reserve Bank ($7.8 billion higher than forecast) as Reserve Bank is putting more cash into the system to support the economy. Treasury bills were $7.3 billon, $2.7 billion higher than forecast discussed above. This was partly offset by derivatives in loss being lower than forecast by $1.8 billion due to market conditions changing since the forecast was prepared.
Net worth attributable to the Crown was $114.4 billion, $1.2 billion lower than forecast. The majority of this variance relates to the operating balance for the first ten months of the year as discussed above.
|Year to date||Full Year|
|Core Crown tax revenue||72,458||72,281||177||0.2||82,330|
|Core Crown revenue||78,347||78,196||151||0.2||89,474|
|Core Crown expenses||87,116||87,542||426||0.5||113,998|
|Core Crown residual cash||(20,909)||(19,595)||(1,314)||(6.7)||(32,031)|
|Net core Crown debt4||78,758||76,431||(2,327)||(3.0)||88,935|
|as a percentage of GDP||25.3%||24.6%||30.2%|
|as a percentage of GDP||29.9%||29.0%||33.9%|
|Operating balance before gains and losses||(12,780)||(13,409)||629||4.7||(28,293)|
|Operating balance (excluding minority interests)||(22,567)||(21,369)||(1,198)||(5.6)||(37,115)|
|Net worth attributable to the Crown||114,439||115,639||(1,200)||(1.0)||100,093|
|as a percentage of GDP||36.8%||37.2%||34.0%|
- Using the most recently published GDP (for the year ended 31 December 2019) of $311,034 million (Source: Stats NZ).
- Favourable variances against forecast have a positive sign and unfavourable variances against forecast have a negative sign.
- Using BEFU 2020 forecast GDP for the year ending 30 June 2020 of $294,207 million (Source: The Treasury).
- Net core Crown debt excluding student loans and other advances. Net debt may fluctuate during the year largely reflecting the timing of tax receipts.
- Gross sovereign-issued debt excluding settlement cash and Reserve Bank bills.
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