The interim Financial Statements of the Government of New Zealand for the three months ended 30 September 2019 (the financial statements) were released by the Treasury today. The financial statements are compared against forecasts based on the Budget Economic and Fiscal Update 2019 (BEFU 2019) published on 30 May 2019.
The key variances to forecast were driven by volatility around tax revenue recognition and discount rates. These drivers have had an adverse impact on the operating balance before gains and losses (OBEGAL), the operating balance and residual cash.
The OBEGAL result for the 30 June 2020 was expected to be lower than the 2018/19 year-end results. This is partly owing to a number of one-off factors that increased the OBEGAL result in 2018/19 and growth in expenses exceeding growth in revenue. The lower than expected net core Crown debt and higher net worth attributable to the Crown position from 30 June 2019 have carried forward into September 2019.
Core Crown tax revenue of $20.4 billion was $1.5 billion (6.8%) below forecast. Corporate tax revenue is the main driver of this variance and is expected to reverse out during the year.
Core Crown expenses of $22.7 billion were close forecast.
The operating balance before gains and losses (OBEGAL) was in deficit by $0.6 billion and was $1.6 billion below forecast, primarily due to lower tax revenue.
When total gains and losses are added to the OBEGAL result, the operating balance was a $3.5 billion deficit and was $5.4 billion weaker than forecast. This variance was primarily driven by changes to discount rates used to calculate the ACC outstanding claims liability, which resulted in losses greater than expected of $4.3 billion.
Core Crown residual cash was a deficit of $3.0 billion, $0.9 billion higher than the deficit forecast. This was mainly due to tax receipts being $0.3 billion lower than forecast and operating payments being $0.9 billion higher than forecast. The variance in operating payments is largely timing in nature, with payments expected to occur in the 2019 year moving into the current fiscal year and payments for this fiscal year occurring earlier than expected.
Net core Crown debt was $60.8 billion (20.3% of GDP) at the end of September 2019, $2.1 billion less than forecast. The lower than expected net debt is largely due to a stronger opening position, from the 30 June 2019 result (which was $2.6 billion less than forecast). This net debt position was partially offset by the increased residual cash deficit of $0.9 billion discussed above.
Gross Debt at $89.6 billion (29.9% of GDP) was $4.2 billion higher than forecast. Government stock was around $1.9 billion higher than forecast due to the higher positon at 30 June 2019, as a result of less repurchasing activity occurring. In addition, losses on derivatives were higher by around $2.0 billion, which will mostly reflect changes in the market since the monthly forecasts were completed.
Total borrowings at 30 September 2019 was $119.3 billion, $4.6 billion higher than forecast, primarily due to the increase in gross debt explained above.
Net worth attributable to the Crown (NWAC) was $136.0 billion, $4.2 billion higher than forecast at BEFU 2019. The majority of this variance relates to property, plant and equipment revaluations that were higher than expected by $11.9 billion at 30 June 2019, partially offset by the operating balance deficit for the first three months of the year.
|$ million||Year to date||Full Year|
|Core Crown tax revenue||20,356||21,831||(1,475)||(6.8)||89,245|
|Core Crown revenue||22,260||23,659||(1,399)||(5.9)||96,427|
|Core Crown expenses||22,697||22,608||(89)||(0.4)||93,262|
|Core Crown residual cash||(2,970)||(2,059)||(911)||(44.2)||(4,191)|
|Net core Crown debt4||60,795||62,936||2,141||3.4||64,695|
|as a percentage of GDP||20.3%||21.0%||20.4%|
|as a percentage of GDP||29.9%||28.5%||27.4%|
|Operating balance before gains and losses||(593)||1,004||(1,597)||(159.1)||1,313|
|Operating balance (excluding minority interests)||(3,502)||1,849||(5,351)||(289.4)||4,680|
|Net worth attributable to the Crown||136,034||131,857||4,177||3.2||134,730|
|as a percentage of GDP||45.3%||43.9%||42.5%|
- Using the most recently published GDP (for the year ended 30 June 2019) of $300,032 million (Source: Stats NZ).
- Favourable variances against forecast have a positive sign and unfavourable variances against forecast have a negative sign.
- Using BEFU 2019 forecast GDP for the year ending 30 June 2020 of $316,957 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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