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Social assets

Forecast through to 2015

Figure 33 - Forecast movements in social assets
Figure 33 - Forecast movements in social assets.
Source:  The Treasury

The largest balance sheet grouping is the Crown's social assets and particularly the physical investment in roads and housing. The 2009 Budget brought forward planned spending on infrastructure and also introduced larger capital allowances for school property, housing and road projects.

Figure 33 shows how social assets are expected to move between 2010 and 2015.

Social assets are expected to increase from $111 billion to $123 billion. The major contributions to this forecast increase are:

  • An increase to PPE. Fifty-five percent of the increase in PPE is owing to a $4.4 billion increase in the value of state highway roading over the period. Other contributing areas are a $1.2 billion increase in the value of hospitals, and a $520 million increase in the value of schools. These movements do not include revaluations.
  • Student loans are expected to increase by $1.7 billion over the five-year period after impairments and other changes ($7.9 billion in new loans advanced will be initially written-down by $3.6 billion, and offset by repayments of approximately $5 billion).
  • New spending. “Capital allowance” is the amount set aside in future Budgets for new capital expenditure that has yet to be allocated to specific organisations or assets.

These forecasts to 30 June 2015 take into account current levels of funding and approved forecast expenditure. Information is also collected from capital-intensive government agencies regarding their capital intentions, which includes details of what projects they intend to seek additional funding for in future years, as well as those they will advance within their current forecast funding levels. Capital intentions represent the asset-related spending scenario that individual agencies consider is most likely to apply given three things: the state of existing asset portfolios; a common set of economic, demographic and fiscal settings; and, importantly, continuation of current policy settings.

Agency intentions indicate that the new capital funding that will be sought for projects that are not yet approved is significantly higher than what will be available for allocation in future Budgets even within the forecast period. While it is unlikely that all signalled intentions will go on to be developed into business cases or go on to be funded, this highlights the need for careful prioritisation of new spending, alongside initiatives to manage demand levels better through changes to policy settings and service levels, improved utilisation of existing assets and delivering projects and services through cost-effective alternative procurement options.

Projections into the longer term under current policy settings

Capital intentions for the 10-year period to 2019/20 signal expenditure intentions that are also higher than those that can be managed within current baselines and future allowances beyond the forecast period. This confirms that current policy settings are not affordable under the current fiscal strategy, and either changes to policy settings or service levels, or additional capital investment, will be required. Given other concurrent demands for capital and operating funding, any attempt to fund the scale of signalled intentions within the social assets area would have a negative impact on net debt and net worth measures.

Recent changes in the state housing and defence sectors to get better value out of existing resources and reduce future investment pressures illustrate that corrective action can significantly reduce agencies' 10-year intentions.

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