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Budget 2008 Home Page Budget Economic and Fiscal Update 2008

Cash Position

Core Crown Residual Cash

Core Crown residual cash represents core Crown operating cash flows less capital investment and contributions to the NZS Fund.

Table 2.9 - Reconciliation of residual core Crown cash
    Year ended 30 June
    2007 2008 2009 2010 2011 2012
  $ million Actual Forecast Forecast Forecast Forecast Forecast
  Core Crown revenue 58,211 61,936 61,891 63,664 66,416 69,159
Less Core Crown expenses (54,003) (57,364) (61,883) (63,890) (67,016) (69,943)
Plus Core Crown gains/(losses) and other items 2,395 (841) 1,422 1,670 1,925 2,172
Plus Net surpluses/(deficits) of SOEs and CEs 1,420 (1,172) 1,675 1,565 1,454 1,346
Equals Operating balance 8,023 2,559 3,105 3,009 2,779 2,734
Less Net total Crown (gains)/losses and other items (2,163) 2,668 (1,787) (2,005) (2,286) (2,580)
Equals Operating balance before gains and losses (OBEGAL) 5,860 5,227 1,318 1,004 493 154
Less NZS Fund net revenue after tax 390 (8) 36 44 50 53
Equals OBEGAL excluding NZS Fund retained revenue 6,250 5,219 1,354 1,048 543 207
Less Net retained surpluses of SOEs and CEs (1,652) (655) (1,310) (1,230) (1,093) (938)
  Non-cash items and working capital movements 3,988 2,454 2,507 2,171 2,455 2,275
Equals Net core Crown cash flow from operations 8,586 7,018 2,551 1,989 1,905 1,544
Less Contribution to NZS Fund (2,048) (2,103) (2,242) (2,151) (2,270) (2,290)
Equals Net core Crown cash flow from operations after contributions to NZS Fund 6,538 4,915 309 (162) (365) (746)
Less Purchase of physical assets (1,755) (1,544) (1,541) (1,683) (1,327) (1,146)
  Advances and capital injections (1,906) (1,773) (1,985) (855) (978) (638)
  Forecast for future new capital spending -  (690) (261) (602) (777) (927)
Equals Core Crown residual cash 2,877 908 (3,478) (3,302) (3,447) (3,457)

Source: The Treasury

Figure 2.9 – Core Crown residual cash 
Figure 2.9 - Core Crown residual cash.
Source: The Treasury

Cash surpluses become deficits …

Core Crown residual cash is in deficit for most of the forecast period. The cash deficits are around $3.5 billion for each forecast year from 2008/09.

Net core Crown cash flow from operations decreases in line with movements in core Crown revenue and core Crown expenses.

Table 2.10 – Application of core Crown residual cash from 2007/08 to 2011/12 inclusive ($ billion)
Table 2.10 - Application of core Crown residual cash from 2007/08 to 2011/12 inclusive ($ billion).
Source: The Treasury

After taking into account contributions to the NZS Fund of $11.1 billion, purchases of physical assets (including new capital spending) of $10.5 billion and advances and capital injections of $6.2 billion, there is a residual financing requirement of $12.8 billion. This will be met by a decrease in net financial assets of $6.4 billion and monies raised from the Government's domestic bond programme, after meeting repayments on maturing debt of $6.4 billion.

… while capital investment continues

New capital commitments are $0.813 billion in 2007/08 and $1.911 billion for 2008/09 to 2011/12, totalling $2.7 billion. In addition $2.2 billion is committed in future Budgets at $0.9 billion per year phased over four years (Table 2.11). The total new capital investment is $4.9 billion ($2.7 billion plus $2.2 billion).

Table 2.11 - Forecast future new capital allowances
Year ended 30 June 2008 2009 2010 2011 2012  
$ million Forecast Forecast Forecast Forecast Forecast Total
Budget 2009 -  20 480 250 150 900
Budget 2010 (three years of phasing) -  -  20 480 250 750
Budget 2011 (two years of phasing) -  -  -  20 480 500
Budget 2012 (first year of phasing) -  -  -    20 20
Future capital allowances -  20 500 750 900 2,170

Source: The Treasury

Figure 2.10 – Core Crown and Crown Entity purchase of physical assets by sector ($billion and % of total spend)
Figure 2.10 – Core Crown and Crown Entity purchase of physical assets by sector ($billion and % of total spend).
Source: The Treasury

Core Crown forecasts for the purchase of physical assets ($10.5 billion) and advances and capital injections ($6.2 billion) comprise purchases met from existing baselines plus the $4.9 billion new capital allocation above.

To give an indication of how core Crown capital investment is distributed by sector, it is necessary to consider the purchase of physical assets by both the core Crown and Crown entities (Figure 2.10).

These purchases will include new capital spending in addition to the replacement of exisiting physical assets. The recently announced purchase of Toll Holdings Limited ($0.690 billion) and the NZ Fast Forward initiative ($0.7 billion) are included as new spending.

Table 2.12 - Residual cash comparison to the Half Year Update
Year ended 30 June 2008 2009 2010 2011 2012
$ million Forecast Forecast Forecast Forecast Forecast
Residual cash          
Half Year Update 759 (763) (779) (851) (937)
Tax receipts 180 (1,790) (1,506) (2,229) (2,917)
Changes to baselines 3 (3) 41 96 112
Expense transfers (operating and capital) 761 (546) (175) (158) 91
Payments (above)/below allocations (952) (505) (368) (231) (161)
Reduction in operating allowances -  -  178 359 552
Benefits (42) (170) (386) (98) (192)
KiwiSaver 54 (45) (188) (210) (57)
Net finance costs (57) (54) (168) (347) (560)
Top down adjustment -  345 -  50 100
Other items 202 53 49 172 512
Total residual cash impact 149 (2,715) (2,523) (2,596) (2,520)
Budget Update 908 (3,478) (3,302) (3,447) (3,457)

Source: The Treasury

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