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How the Crown's Investment will be Funded

Sources of funds

An analysis of the sources and uses of funds provides an insight into overall balance sheet trends and the likely focus of the Government's investment decisions.

The Government's annual capital allowance ($900 million from Budgets 2012 to 2016) is only a small proportion of the Crown's total investment in any given year. Total investment is funded from a variety of sources. These include borrowing, core Crown revenues (taxation and dividends from SOEs) and the Government's existing asset base. Other funding sources available for specific investments include returns from investments held by CFIs, hypothecated levies such as the Road User Charge, third-party revenues such as state house rentals and cash generated and retained by SOEs.

Year-by-year analysis 2011 to 2015

This section analyses the forecast sources of funds and their application on a year-by-year basis for the period from 2011 to 2015.

Table 2.3 breaks investments into broad PPE and non-PPE and other categories, in keeping with the approach generally adopted in the Government's financial statements. It then seeks to examine how those additions will be funded.

Total Crown investment over the next five years is substantial, at $78 billion. Most of this investment, $56.6 billion, is funded by dedicated sources outside the core Crown, such as reinvestment and valuation increases in CFIs, cash retained in SOEs after dividends paid to the Crown in SOEs, commercial borrowing by SOEs and student loan repayments; or from sources available only for particular purposes, primarily transport levies. The remaining $21.4 billion is funded by core Crown activity, effectively from a mixture of additional borrowing, direct and indirect taxation, dividends from SOEs and other sovereign revenue. These general revenue sources are available to fund priority investments across the Government's balance sheet.

Any analysis of source and application of funds requires a number of assumptions. Each dollar spent is interchangeable in the absence of legal constraints, so it is difficult to specify funding sources with precision. In particular, it is impossible to disaggregate funding sourced from core Crown activity. In some cases (eg, the provision of social housing by HNZC), the Crown also charges for goods and services - third-party revenue of that kind is included within general revenue.

Table 2.3 - Summary of forecast investments and sources of funding, 2011 to 2015
$million 2011 2012 2013 2014 2015 Total

Investments:





PPE additions 7,964 8,628 7,433 7,444 7,055 38,524
Non-PPE investments





Student loans additions

 1,579 1,590 1,615 1,644 1,648 8,076

CFI asset investment growth

 5,792 2,931 4,370 5,375 5,680 24,148

Kiwibank mortgages

 836 2,238 1,870 87 86 5,117

Forecast new capital spending

 - 242 454 651 800 2,147
Total investments 16,171 15,629 15,742 15,201 15,269 78,012

Funding sources for investments





Funding sourced from core Crown activity:





Used to purchase PPE 2,597 2,362 2,351 2,870 2,488 12,668
Used for budget capital allowances (incl. forecast new capital spending) 1,052 1,404 888 1,013 923 5,280
Used for issuing student loans 793 756 688 644 572 3,453

4,442 4,522 3,927 4,527 3,983 21,401

Other funding sources:





Student loan repayments 786 834 927 1,000 1,076 4,623
Proceeds from asset disposals 170 194 163 319 229 1,075
Hypothecated revenue for roading 1,400 1,072 1,161 1,214 1,470 6,317
Financial and operating returns from CFIs 1,155 1,110 2,245 2,920 2,912 10,342
Valuation gains/(losses) on CFI investments 4,637 1,821 2,125 2,455 2,768 13,806
Borrowing by SOEs 1,089 2,116 1,009 825 518 5,557
Operating surpluses generated by SOEs 1,656 1,722 2,315 1,854 2,227 9,774
Kiwibank deposits 836 2,238 1,870 87 86 5,117

11,729 11,107 11,815 10,674 11,286 56,611
Total funding 16,171 15,629 15,742 15,201 15,269 78,012

Source: The Treasury

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