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Budget 2017 Home Page Fiscal Strategy Report - Budget 2017

Managing the Crown's Assets and Liabilities

The Crown's assets support the delivery of valuable public services. Its liabilities help to fund these services and consist mostly of debt issued by the Crown.

The most recent year-end results show the Crown owns $293 billion of assets and has $197 billion of liabilities. The difference between these two numbers reflects the Crown's net worth.

Between Budget 2017 and Budget 2020 the Government intends to commit a further $11 billion in new capital investment. As a result, the Crown's investment in new infrastructure, excluding investments by State-owned Enterprises (SOEs) except KiwiRail, will be around $32.5 billion over the next four years (Figure 13).

Figure 13 - Crown infrastructure investment
Figure 13 - Crown infrastructure investment  .
Source: The Treasury

The Government has many liabilities requiring careful management. They mostly consist of debt, but can also result from other contractual obligations such as government employee superannuation schemes or insurance obligations such as the Accident Compensation Commission (ACC) and Earthquake Commission (EQC). In addition, the Government is exposed to contingent liabilities such as Crown guarantees, and a range of commitments driven by existing policy settings, the largest of which is New Zealand Superannuation.

The Government has been taking a more consistent and deliberate approach to balance sheet management. This involves improving long-term planning, introducing private sector capital and disciplines where appropriate, improving monitoring, increasing transparency and more systematically considering financial risks across the balance sheet.

Disciplined balance sheet management will ensure the Government gets the best value possible from its capital spending, and from the Government's existing assets.

Budget 2017 forecasts the Government's fiscal position to continue strengthening, with both core Crown net and gross debt beginning to decline in dollar terms within the forecast period.

New Zealand government bonds (NZGBs) account for the vast majority of core Crown gross debt and are the Government's main debt funding tool.

The Government recognises the importance of maintaining a sustainable NZGB market. This is necessary to:

  • ensure ongoing government access to debt funding, supporting fiscal resilience in the event of future economic shocks
  • reduce volatility of government borrowing programmes through economic cycles, and
  • provide wider capital markets benefits, including reliable pricing benchmarks for other issuers.

The Government therefore intends to maintain levels of NZGBs on issue at not less than 20 per cent of GDP over time.

Maintaining the size of the NZGB market will generate equivalent increases in core Crown liquid assets. As a result this commitment will have no impact on the Government's overall fiscal strategy, including the profile of net core Crown debt and the timing of resuming contributions to the NZS Fund.

Based on current projections, levels of NZGBs on issue are not expected to fall to 20 per cent of GDP until the mid-2020s.

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