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Budget 2010 Home Page 2010 Investment Statement of the Government of New Zealand

The Forecast Balance Sheet

The following table shows the forecast movement in the balance sheet over the next five years. The forecast asset values in the table below do not include revaluations of physical assets.

Forecast Statement of Financial Position as at 30 June
2010 2011 2012 2013 2014 2015 Change between
2010 and 2015
Actual
$m
Forecast
$m
Forecast
$m
Forecast
$m
Forecast
$m
Forecast
$m
$m %

Assets

Cash and cash equivalents 7,774 9,687 9,624 9,597 9,938 10,201 2,427 31.2
Receivables 13,884 14,970 14,026 13,563 13,530 13,886 2 0.0
Marketable securities, deposits and derivatives in gain 43,687 42,375 38,641 34,382 38,970 35,504 (8,183) -18.7
Share investments 12,179 13,704 16,945 19,627 22,379 25,346 13,167 108.1
Advances 18,447 19,642 23,354 24,181 24,407 24,600 6,153 33.4
Inventory 1,160 1,245 1,293 1,338 1,369 1,421 261 22.5
Other assets 1,661 1,705 1,703 1,709 1,705 1,703 42 2.5
Property, plant & equipment 0.0
   Land 16,688 16,895 16,934 16,966 17,097 17,238 550 3.3
   Buildings 24,019 24,921 25,437 25,568 25,767 25,595 1,576 6.6
   Electricity distribution network 2,251 2,722 3,336 3,822 4,022 4,224 1,973 87.6
   Electricity generation assets 13,642 13,830 13,818 14,372 14,818 15,247 1,605 11.8
   Aircraft 1,731 1,842 2,365 2,648 3,071 3,204 1,473 85.1
   State highways 24,838 26,033 26,795 27,548 28,407 29,374 4,536 18.3
   Rail network 12,437 13,076 13,418 13,875 14,283 14,505 2,068 16.6
   Specialist military equipment 3,413 3,494 3,526 3,391 3,179 2,965 (448) -13.1
   Specified cultural and heritage assets 8,505 8,480 8,526 8,555 8,579 8,604 99 1.2
   Other plant and equipment 5,806 6,035 6,336 6,395 6,642 6,793 987 17.0
Equity accounted investments 9,049 9,345 9,554 9,773 9,976 10,173 1,124 12.4
Intangible assets and goodwill 2,184 2,369 2,464 2,429 2,371 2,308 124 5.7
Forecast for new capital spending 292 1,024 1,731 2,712 3,882 3,882
Top-down capital adjustment (350) (500) (500) (500) (500) (500)
Total assets 223,355 232,312 238,619 240,970 252,722 256,273 32,918 14.7

Liabilities

Issued currency 4,020 4,137 4,344 4,561 4,789 5,028 1,008 25.1
Payables 9,932 9,562 10,092 10,226 10,705 11,117 1,185 11.9
Deferred revenue 1,628 1,436 1,360 1,320 1,298 1,298 (330) -20.3
Borrowings 69,733 85,876 95,189 97,949 107,278 106,651 36,918 52.9
Insurance liabilities 27,131 29,604 30,464 32,001 33,685 35,557 8,426 31.1
Retirement plan liabilities 9,940 9,436 9,113 8,832 8,580 8,352 (1,588) -16.0
Provisions 5,983 6,452 6,353 6,620 6,003 5,146 (837) -14.0
Total liabilities 128,367 146,503 156,915 161,509 172,338 173,149 44,782 34.9

Asset Breakdown by:

Social 110,938 113,858 115,958 117,893 120,510 123,044 12,106 10.9
Financial 60,007 62,629 61,832 59,925 66,879 66,348 6,341 10.6
Commerical 52,410 55,825 60,829 63,152 65,333 66,881 14,471 27.6
Total assets 223,355 232,312 238,619 240,970 252,722 256,273 32,918 14.7

Liability Breakdown by

Social 13,938 14,708 14,892 14,999 14,487 13,654 (284) -2.0
Financial 92,455 107,807 113,617 116,662 126,782 127,566 35,111 38.0
Commerical 21,975 23,988 28,406 29,847 31,070 31,929 9,955 45.3
Total liabilities 128,367 146,503 156,915 161,509 172,338 173,149 44,782 34.9
Total net worth 94,988 85,809 81,704 79,461 80,384 83,124 (11,864) -12.5

Source: The Treasury

The table above shows that although assets are forecast to increase by $32.9 billion from $223 billion to $256 billion over the period, liabilities are forecast to increase by $44.8 billion, driven largely by an increase in borrowing and an increase in the ACC liability. This results in a $12 billion decrease in net worth over the period.

How investment in property, plant and equipment is funded over the forecast period
2010
Actual
$m
2011
Forecast
$m
2012
Forecast
$m
2013
Forecast
$m
2014
Forecast
$m
2015
Forecast
$m
Crown funding of operations 2,404 2,450 2,575 2,689 2,644 2,636
Allocations from the capital allowance 1,024 1,104 249 253 258
Transport-related taxes 860 948 820 759 784 973
Other funding sources 2,267 3,660 3,984 3,323 3,099 2,884
Total additions 6,555 8,162 7,628 7,024 6,785 6,493
  1. These figures are a proxy based on the assumption that funding for purchasing PPE by departments and Crown entities equates to depreciation expenses.
  2. These figures have been calculated by subtracting depreciation from total purchases of PPE.

Source: The Treasury

The table above identifies the sources of forecast funding for investment in PPE. These sources include existing agency funding from operational revenue, allocations from the annual capital allowance up to and including Budget 2010 (future allocations are not included, but some spending from earlier allocations is being phased over future years) and hypothecated taxes such as fuel excise. The figures provided are estimates of how actual capital expenditure will be funded and the anticipated timing of expenditure.

Forecast changes in asset values
$million 2010
Actual
2011
Forecast
2012
Forecast
2013
Forecast
2014
Forecast
2015
Forecast
5-Year
Total
Addition of Property, plant and equipment       6,555       8,162       7,628       7,024       6,785       6,493     36,092
Other large asset investments:
 - Student loans issued       1,525       1,547       1,558       1,580       1,602       1,622      7,909
 - NZS Fund reinvestment of returns       1,968       1,403       1,236       1,340       1,456       1,583      7,018
 - ACC reinvestment of returns       2,694       3,538       2,621       2,924       3,166       3,357     15,606
 - Forecast for new capital spending            -            292          732          707          981       1,170      3,882
Approximate gross change in assets      12,742      14,942      13,775      13,575      13,990      14,225     70,507
Reduction in assets:
 - Depreciation on PPE      (3,582)      (3,756)      (4,008)      (4,146)      (4,225)      (4,360)    (20,495)
 - Reduction in NZDMO/RB financial assets      (2,846)         (176)      (5,675)      (6,367)       3,273      (5,385)    (14,330)
Other changes in assets         (110)      (2,053)       2,215         (711)      (1,286)         (929)     (2,764)
Net change in assets       6,204       8,957       6,307       2,351      11,752       3,551     32,918
Total assets    223,355    232,312    238,619    240,970    252,722    256,273  

Source: The Treasury

The table above shows how different assets are forecast to increase owing to cash expenditure or reinvestment, and how total asset values will be reduced by, for example, depreciation on PPE and the reduction of financial assets.[1]

Figure 32 - Changes in assets over the forecast period (2010 to 2015)
Figure 32 - Changes in assets over the forecast period (2010 to 2015).
Source:  The Treasury

The large “other changes in assets” movement in 2011 is a result of a reduction in EQC assets following on from the Canterbury earthquake, and the large upward movement in 2012 reflects Kiwibank forecast of deposits.

The table shows that:

  • total investment over the next 5 years is large, at just over $70 billion, and is about double the forecast increase in assets, at $32.9 billion
  • about half the total investment is in PPE ($36.1 billion), and about a third of this investment is by SOEs and the other half by social agencies - largely in roads, schools and hospitals
  • the other half of the total investment is largely in CFIs (NZSF and ACC), but also a sizeable increase in student loans ($8 billion), and
  • new capital invested by the Government each Budget is a relatively small proportion of the total investment, at $4 billion.

As illustrated for the 2009/10 year in Section 1 of this Investment Statement, public capital expenditure supporting the growth in these assets is funded by different means:

  • Specific or hypothecated tax revenue - Capital expenditure on roads is the largest category of spending. Capital expenditure on roads is funded from hypothecated tax revenue in the form of Petrol Excise Tax and Road User Charges. Other specific taxes include ACC levies.
  • New borrowing - During periods where an operating deficit is being run, a large proportion of capital expenditure on social assets is funded by new borrowings. For example, the second largest category of capital spending after roads is education. Expenditure on the health sector and defence is also funded out of new borrowing.
  • KiwiRail is the third largest area of spending on physical assets. KiwiRail is not expected to generate an operating surplus over the forecast period, therefore this capital expenditure will also be funded by core Crown borrowing.
  • SOE and Air NZ cash surpluses - The three electricity generators/retailers are cash flow positive and will fund their forecast capital expenditure from their own surplus cash at the expense of dividends returned to the Crown. Transpower and Air NZ capital expenditure is also funded from their surplus cash.
  • Sale of existing assets - A small proportion of expenditure is funded from the sale of existing assets. For example, housing capital expenditure is funded from a combination of the sale of existing state houses, HNZC operating surpluses and some funding received from the Crown (funded from new borrowings).

Notes

  • [1]Annex 1 provides an alternative presentation of forecast changes in asset values, as well as changes in liabilities. It also provides more comprehensive forecast and historic balance sheet data.
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