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Budget 2011 Home Page 2011 Tax Expenditure Statement - Budget 2011

2 How the Balance Sheet is Forecast to Change over the Next Five Years

The Forecast Statement of Financial Position

The Investment Statement classified each of the assets and liabilities of the Crown into three categories - social, financial and commercial. This Supplement follows the same portfolio categorisations:

Social assets and liabilities Assets and liabilities held by the Crown primarily to provide public services or to protect assets for future generations. These include, for instance, roads, schools and the national parks. For the purposes of this document, social assets also include tax receivables and student loans managed by Inland Revenue, and Crown companies that do not have purely commercial objectives (such as the Crown Research Institutes [CRIs] and TVNZ).
Financial assets and liabilities Assets and liabilities held by the Crown to finance or pre-fund government expenditure and to recognise the obligation for future expenditure. This category is comprised of the CFIs (NZS Fund, ACC, EQC and GSF), the central bank (RBNZ) and government borrowing (NZDMO).
Commercial assets and liabilities A portfolio of companies held by the Crown with purely commercial objectives. The companies are largely self-sustaining entities operating in openly competitive environments. This category is comprised of all the SOEs and Air NZ.

Table 2.1 shows the forecast movements in the balance sheet over the next five years. The forecast asset values in the table below do not include revaluations of physical assets. The information they contain is consistent with that in the Forecast Financial Statements in the Budget Economic and Fiscal Update (BEFU), which have been based on the Treasury's best professional judgement.

Table 2.1 - Forecast Statement of Financial Position as at 30 June
2010
Actual
$m 		2011
Forecast
$m 		2012
Forecast
$m 		2013
Forecast
$m 		2014
Forecast
$m 		2015
Forecast
$m 		Change between
2010 and 2015
%

Assets

Cash and cash equivalents 7,774 9,103 8,886 8,929 9,032 9,332 1,558 20.04
Receivables 13,884 17,514 16,709 15,269 15,108 15,705 1,821 13.12
Marketable securities, deposits and derivatives in gain 43,687 49,006 43,034 36,404 41,989 37,607 (6,080) -13.92
Share investments 12,179 14,206 16,095 18,540 21,506 24,042 11,863 97.41
Advances 18,447 19,851 22,433 24,635 25,140 25,634 7,187 38.96
Inventory 1,160 1,309 1,380 1,426 1,434 1,461 301 25.95
Other assets 1,661 1,668 1,662 1,655 1,648 1,645 (16) -0.96
Property, plant and equipment

Land

16,688 16,803 16,892 16,990 17,090 17,193 505 3.03

Buildings

24,019 24,822 25,232 25,436 25,718 25,609 1,590 6.62

Electricity distribution network

2,251 2,812 3,553 4,104 4,327 4,607 2,356 104.66

Electricity generation assets

13,642 13,953 14,915 15,468 15,642 16,121 2,479 13.17

Aircraft

1,731 2,083 2,587 2,864 3,280 3,409 1,678 96.94

State highways

24,838 25,838 26,504 27,273 28,171 29,236 4,398 17.71

Rail network

12,437 12,554 12,755 12,803 12,790 12,755 318 2.56

Specialist military equipment

 3,413 3,382 3,377 3,210 3,383 3,579 166 4.86

Specified cultural and heritage assets

8,505 8,522 8,559 8,590 8,616 8,645 140 1.65

Other plant and equipment

5,806 6,164 6,812 7,567 8,097 8,317 2,511 43.25
Equity accounted investments 9,049 9,398 9,613 9,815 10,010 10,295 1,246 13.77
Intangible assets and goodwill 2,184 2,524 2,714 2,703 2,679 2,629 445 20.38
Forecast for new capital spending - - 142 146 147 147 147
Top-down capital adjustment - (100) (270) (270) (270) (270) (270)
Total assets 223,355 241,412 243,584 243,557 255,537 257,698 34,343 15.38

Liabilities

Issued currency 4,020 4,380 4,598 4,828 5,070 5,323 1,303 32.41
Payables 9,931 9,169 9,603 9,608 9,887 10,221 289 2.91
Deferred revenue 1,628 1,433 1,371 1,343 1,323 1,324 (304) -18.67
Borrowings 69,733 91,003 101,383 104,652 113,994 111,023 41,290 59.21
Insurance liabilities 27,131 31,802 30,533 29,680 30,543 32,271 5,140 18.95
Retirement plan liabilities 9,940 9,271 8,895 8,580 8,316 8,085 (1,855) -18.66
Provisions 5,984 8,835 8,929 7,927 7,153 5,598 (385) -6.43
Total liabilities 128,367 155,893 165,312 166,618 176,286 173,845 45,478 35.43

Asset breakdown by:

Social 110,938 113,300 115,882 117,809 120,019 122,360 11,422 10.30
Commerical 52,410 55,722 60,289 64,126 65,912 67,414 15,004 28.63
Financial 60,007 72,390 67,414 61,622 69,606 67,923 7,916 13.19

Liability breakdown by:

Social 13,938 16,349 17,186 16,089 15,543 14,146 (42) -0.30
Commerical 21,975 25,133 28,815 31,790 32,693 33,494 11,769 53.56
Financial 92,455 114,411 119,311 118,740 128,059 126,205 33,751 36.51
Total net worth 94,988 85,519 78,272 76,939 79,251 83,853 (11,135) -11.72

Source: The Treasury

Table 2.1 shows that, as reported in the inaugural Investment Statement, liabilities are forecast to grow faster than assets over the next five years. These projections would result in net worth falling by $11.1 billion by 2015, from $95 billion to $83.9 billion.

There are a number of key drivers of this change:

  • Share investments represent the largest area of asset growth, contributing over a third of total asset growth. This is driven primarily by expected gains in the value of current investments and the reinvestment of returns.
  • The forecast changes will see the social portfolio experience growth in net worth of $11.4 billion, in accordance with the Government's intentions to reprioritise capital to its highest value use.
  • The Government's focus on investment in infrastructure is evident over the next five years, including $4.4 billion of investment in the value of state highways and a combined $4.8 billion of investment in electricity generation and the distribution network.
  • The jump in insurance liabilities in 2010/11 reflects the EQC's obligations arising from the Canterbury earthquakes. While these obligations will be paid out fully over the forecast period, this will be offset by the continued growth in the gross ACC liability, resulting in the Crown's insurance liabilities remaining around this elevated level throughout the forecasts.
  • Around 90% of the increase in the Crown's liabilities is from the forecast increase in borrowings. This is forecast to peak at $114 billion in 2014, before falling to $111 billion in 2015. The $41.3 billion increase over the forecast period is the single largest movement on the balance sheet.
  • The overall fall in the Crown's net worth is driven primarily by forecast deterioration in the net value of the financial portfolio, from -$32.4 billion to -$58.3 billion, as a result of this borrowing.
Figure 2.1 - Net values of portfolios in 2010 and forecasts for 2015
Figure 2.1 - Net values of portfolios in 2010 and forecasts for 2015.
Source: The Treasury
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