The Shape of the Crown's Balance Sheet Matters for Managing Future Demands
Better fiscal management also requires taking a more comprehensive approach to managing the Crown balance sheet. Adopting this approach across the whole of government means we are looking at all of the Government's assets and liabilities - a net stock of around $100 billion - to ensure our investments and risks are managed effectively.
- Figure 7 - Changes in assets over the forecast period
- Source: The Treasury
The shape of the balance sheet will alter over time depending on government decisions on how much to invest, where to allocate capital and returns from commercial exposures. The major changes in the forecast period reflect the Government's focus on infrastructure, together with retained earnings within the commercial operations.
Over the forecast period, assets are forecast to increase in value by $32 billion (about 15%). About $11 billion of this is in social assets, largely in roads; $16 billion in commercial assets, mainly in electricity generation and transmission; and about $5 billion in financial assets.
Decisions about how to utilise Crown capital need to be well considered. As with all spending, it is current or future taxpayers who bear the cost. Most investment over the next few years is largely expected to be debt funded, imposing an interest cost on taxpayers. Others, such as electricity transmission, are ultimately funded by consumers. In either case it is essential that the Government ensure that capital is both efficiently allocated and well managed. For example, a 5% improvement in capital efficiency across the entire balance sheet would fund the Government's new capital allowance for nearly a decade.
Budget 2010 focuses capital spending on the drivers of economic performance
New capital investment in Budget 2010 continues to be prioritised to the Government's policy drivers of productive infrastructure and better delivery of public services. Major infrastructure investments funded by new capital in Budget 2010 are set out in Table 3.
| Investment in productive infrastructure | Better delivery of public services |
|---|---|
|
|
Table 4 shows increases in capital spending by functional category. As can be seen, the net new spending matches the capital allowance of $1.45 billion.
| $ million, June years | 2009/10 | 2010/11 | 2011/12 | 2012/13 | 2013/14 | Total |
|---|---|---|---|---|---|---|
| Economic Development | - | 38 | 38 | 5 | 1 | 81 |
| Education | - | 206 | 61 | 59 | 71 | 397 |
| Government Administration | 7 | 112 | (34) | - | 10 | 96 |
| Health | 4 | 4 | 105 | 30 | 3 | 146 |
| Infrastructure | 3 | 491 | 57 | 189 | 217 | 957 |
| Law and Order | - | 14 | 1 | 3 | - | 18 |
| Research, Science and Technology | - | - | - | - | - | - |
| Social Services | - | 21 | - | 2 | 3 | 26 |
| Reprioritisation of Baselines | (75) | (266) | (125) | (121) | (130) | (718) |
| Contingency | - | 185 | 94 | 86 | 83 | 447 |
| Total Budget 2010 Initiatives | (61) | 805 | 196 | 253 | 258 | 1,450 |
Note: Reprioritisation of Baselines includes an operating to capital swap and technical adjustments for a small number of items which are offset by separate revenue streams or where savings can only be partially utilised.
