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Budget 2012 Home Page Budget Economic and Fiscal Update 2012

Total Crown Balance Sheet

Table 2.15 - Summary balance sheet forecasts, 2011 to 2016
Year ending 30 June
Change between
2011 and 2016

Total Crown Assets

Budget Update 245.2 249.2 244.3 254.5 255.1 264.1 18.9
Pre-election Update 245.2 245.6 242.0 253.0 256.4 267.4 22.2

Total Crown Liabilities

Budget Update 164.3 178.9 178.1 186.3 182.6 185.0 20.7
Pre-election Update 164.3 177.3 176.0 185.5 184.9 190.2 25.9

Total Net Worth Attributable to the Crown

Budget Update 80.6 70.0 64.6 65.2 68.1 73.2 (7.4)
Pre-election Update 80.6 68.0 65.6 67.2 71.2 76.9 (3.7)

Source: The Treasury

Growth in assets is expected over the forecast period, but at a more muted pace than in recent years

By 2016, total Crown assets are forecast to increase by $18.9 billion (net of asset reductions) to $264.1 billion. This growth is slower than in previous years, at roughly half the rate forecast for the 2010 to 2015 period in last year’s Budget Update. This reflects ongoing fiscal constraint and the beginning, from this year, of an unwinding of financial assets built-up in recent years to help fund upcoming government bond maturities.

Figure 2.9 - Total Crown assets - portfolio break-down
Figure 2.9 - Total Crown assets - portfolio break-down.
Source: The Treasury

As discussed in previous Economic and Fiscal Updates, the Crown's balance sheet can be thought of as divided into three areas – the Social, Commercial and Financial Portfolios.[8]

Social asset growth is expected to form roughly half of all growth, increasing from $113.6 billion in 2010/11 to $124.4 billion by 2015/16. This is driven largely by continued investment in priority social areas, including education, health and state highways. The student loan book is another driver which, after loan repayments, is expected to grow by $2.3 billion in net terms as new loan issuances continue to outpace repayments.

Total Crown commercial assets are expected to grow strongly through commercial expansion, particularly in the electricity and banking areas. This is forecast to see commercial assets grow by $12.2 billion over the next five years. Commercial assets include assets from the companies included in the Government's partial sale of shares.[9]

The Financial Portfolio is the only area expected to experience a decline in asset levels, from $73.5 billion in 2010/11 to $69.4 billion by 2015/16. As mentioned, this is primarily owing to the realisation of assets accumulated by the New Zealand Debt Management Office (NZDMO) in recent years to help meet government bond maturities in 2012/13 and 2014/15. Ongoing reductions in Earthquake Commission assets, as claims from the Canterbury earthquakes are paid out, will also reduce financial assets. These reductions are expected to more than offset financial returns made on the remaining financial investments.

This growth will be funded from a range of sources

Once asset reductions are added to net growth, gross asset growth is forecast at $75.7 billion over the forecast period. This gross growth will be funded from a range of sources across the three balance sheet portfolios (Figure 2.10).

While proceeds from the Future Investment Fund are forecast to fund all new capital investments (such as new projects announced in each year's Budget) these represent only a small portion of the total forecast capital spend. Of the remaining capital spend, the majority of funding from core Crown funding sources (eg, general taxation, borrowing) is expected to be invested in the Social Portfolio, contributing half of social funding. Only $250 million of core Crown funding is currently forecast to be required for the Commercial Portfolio, for KiwiRail's ‘Turnaround Plan'.

Aside from the KiwiRail injection, the remaining commercial growth is currently forecast to be funded from within the portfolio, for example through operating returns ($9.3 billion) and SOE borrowing ($3.5 billion). For the purposes of these forecasts, growth in Kiwibank loans is assumed to be directly funded by growth in deposits ($7.1 billion).

Financial Portfolio growth is also forecast to be funded from sources within the portfolio, through financial and operating returns on investments and valuation gains ($22.3 billion). Contributions to the NZS Fund are not expected to resume until the 2017/18 fiscal year.

Figure 2.10 - Forecast funding sources, 2012-2016
Figure 2.10 - Forecast funding sources, 2012-2016.
Source: The Treasury

Growth in liabilities is expected to outpace the growth in assets...

The value of total Crown liabilities is also forecast to increase over the next five years, from $164.3 billion in 2010/11 to $185.0 billion by the end of the forecast period, $1.8 billion more than assets.

These forecasts are higher in the early years than those of the Pre-election Update, reflecting larger borrowings than previously forecast owing to larger initial operating deficits. However, borrowings are now expected to be lower over later years, resulting in total liabilities in 2015/16 being $5.2 billion lower than in the last forecasts.

Figure 2.11 - Total Crown liabilities - portfolio break-down
Figure 2.11 - Total Crown liabilities - portfolio break-down.
Source: The Treasury

From 2011 to 2016, the largest increase in liabilities is expected in the Financial Portfolio, increasing from $120.7 billion to $132.5 billion. Rising core Crown borrowing, issued by the NZDMO, is the main driver. However, the majority of this is expected before the 2014/15 return to surplus, with borrowings remaining largely flat in the last two years of the forecast. Liabilities in relation to the Canterbury earthquakes, held by both the Earthquake Commission and Southern Response Earthquake Services Limited, are expected to peak in 2012/13 before declining as these claims continue to be paid out.

Commercial liabilities are also expected to increase, from $27.2 billion to $37.5 billion. Of this, $7.1 billion is from forecast growth in Kiwibank deposits with most of the remainder driven by higher borrowings being carried out by other SOEs.

Social liabilities are expected to reduce by $1.4 billion, owing largely to earthquake provisions relating to Christchurch's reconstruction held by the Department of Internal Affairs and the Canterbury Earthquake Reconstruction Authority being paid out.


  • [8]The ‘Social Portfolio’ consists of the assets and liabilities held primarily to provide public services or to protect assets for future generations; the ”Financial Portfolio” reflects assets and liabilities held by the Crown to finance or pre-fund government expenditure; while the Crown’s ”Commercial Portfolio” consists of the portfolio of companies held with purely commercial objectives. For more details, see the Investment Statement of the Government of New Zealand 2010 on the Treasury website
  • [9]For more details on the balance sheet impacts of the Government’s partial sale of shares in five companies see page 42.
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