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Budget 2013 Home Page Budget Economic and Fiscal Update 2013

Total Crown Balance Sheet

Operating balance surpluses result in increasing net worth...

Net worth attributable to the Crown is expected to increase in 2012/13 for the first time since the global financial crisis and the Canterbury earthquakes. At its height, net worth peaked at $105.1 billion in 2007/08, but has since nearly halved to stand at $59.3 billion as at 30 June 2012.

This year, net worth attributable to the Crown is forecast to increase by $2.2 billion, largely owing to the operating balance surplus (of which $5.9 billion is attributable to gains on the Crown's investment portfolio), and reach $61.5 billion. Net worth is expected to grow another $12.4 billion to stand at $73.9 billion by 2016/17, as shown in Figure 2.12. As a share of GDP this is 28.7%, roughly half the level of the peak 56.6% of GDP in 2007/08.

Figure 2.12 - Net worth attributable to the Crown
Figure 2.12 - Net worth attributable to the Crown.
Source: The Treasury

...with assets increasing $32.8 billion over the forecast period...

Assets are forecast to increase by $32.8 billion, with the growth over the forecast period made up of investment of $79.3 billion offset by reductions of $46.5 billion, as shown in Table 2.7.

Figure 2.13 - Total Crown assets
Figure 2.13 - Total Crown assets.
Source: The Treasury

The largest asset growth over the forecast period is in the financial portfolio, and reflects investment growth in CFIs such as the NZS Fund and ACC. Much of this growth is recognised as gains in the operating balance; however, there is also growth in the asset base from reinvestment. For example, this year, ACC and NZS Fund financial assets grow by $8.2 billion, with roughly $5.3 billion coming from holding gains with the remaining $2.9 billion being new investments.

Commercial assets increase $9.1 billion over the forecast period, which is largely attributable to growth in the Kiwibank mortgage assets (that grow as their deposits from customers grow) and as SOEs increase their investment in physical assets.

The social asset portfolio increases as a result of new capital spending (funded by the Future Investment Fund, as detailed below), and as existing assets are replaced and student loans are issued.

Table 2.7 - Asset growth by portfolio
Year ending 30 June
Opening commercial assets 46.6 47.9 50.0 52.2 54.5 46.6
Gross investment 3.2 3.6 3.5 3.8 4.3 18.4
Gross reductions (1.9) (1.5) (1.3) (1.5) (1.8)  (8.0)
Closing commercial assets1 47.9 50.0 52.2 54.5 57.0 57.0
Opening financial assets 72.5 70.9 75.1 69.8 75.6 72.5
Gross investment - CFIs 8.2 3.7 4.2 4.7 5.0 25.8
Other investments 2 (9.8) 0.5 (9.5) 1.1 3.9  (13.8)
Closing financial assets 70.9 75.1 69.8 75.6 84.5 84.5
Opening social assets 121.2 121.9 125.1 126.9 128.8 121.2
Gross investment 5.5 7.7 7.4 7.1 7.4 35.1
Gross reductions (4.8) (4.5) (5.6) (5.2) (4.6)  (24.7)
Closing social assets 121.9 125.1 126.9 128.8 131.6 131.6
Opening total assets 240.3 240.7 250.2 248.9 258.9 240.3
Gross investment 16.9 15.0 15.1 15.6 16.7 79.3
Gross reductions (16.5) (5.5) (16.4) (5.6) (2.5)  (46.5)
Closing total assets 240.7 250.2 248.9 258.9 273.1 273.1


  1. The full value of the assets in the companies involved in the Government's partial share sales remain on the Crown's balance sheet after the sale. The ownership of those assets does change, and this is reflected in the increase in minority interests
  2. Other investments include assets managed by the Debt Management Office, which fluctuate with the borrowing programme (discussed on page 36)

Source: The Treasury

...including $1.5 billion allocated from the Future Investment Fund...

In Budget 2012 the Future Investment Fund was established to allocate the estimated proceeds from the partial share sales of certain SOEs (as discussed on page 40) to fund new capital, rather than issuing debt. Budget 2012 allocated $0.6 billion of the Fund, while this Budget allocates another $1.5 billion. A large portion of this allocation is expected to be spent on the Canterbury rebuild as well as investments in technology, irrigation and KiwiRail.

Table 2.8 - Future Investment Fund
$billions Total
Proceeds from partial share sales 6.0
Allocated in Budget 2012 (0.6)
Allocated in Budget 2013 (1.5)
To be allocated  3.9

Source: The Treasury

...while liabilities increase at a slower rate...

The Crown's liabilities are expected to increase by $15.6 billion over the next four years, largely driven by increased borrowing. Borrowings are forecast to increase $22.3 billion to $123.1 billion by 2016/17.

As shown in Figure 2.14, borrowing is mostly held in the financial portfolio (by Treasury, through the Debt Management Office, and RBNZ). Borrowings in this portfolio increase $13.6 billion over the next four years to meet the Crown's cash deficits (refer to page 36 for discussion of the bond programme). The remainder of borrowing is in the commercial portfolio, and is largely made up of Kiwibank deposits, which grow in line with the bank's mortgage assets.

Figure 2.14 - Total Crown borrowings
Figure 2.14 - Total Crown borrowings.
Source: The Treasury

Partially offsetting the growth in borrowings are reductions in liabilities as a result of settling obligations related to the Canterbury earthquakes. The Crown's earthquake-related insurance liabilities held in the financial portfolio (EQC and Southern Response) are forecast to decrease $8.4 billion as all claims are expected to be settled by 2016/17. Similarly, the Crown's social liabilities are expected to reduce by $2.4 billion to $14.2 billion as the earthquake-related liabilities are settled.

Figure 2.15 - Total Crown liabilities
Figure 2.15 - Total Crown liabilities.
Source: The Treasury

...which is critical in order to rebuild the fiscal buffer to absorb future shocks

With the recent deterioration in the Crown's net worth it is important the fiscal buffer is rebuilt to allow headroom for the Government to be able to respond to future shocks, manage volatility and meet contingent liabilities and fiscal risks if they eventuate.

A significant source of balance sheet risk is volatility in asset and liability values owing to movements in external factors such as interest rates, exchange rates and equity prices. This volatility is illustrated by the level of gains and losses being recognised in the operating balance; as shown in Figure 2.16. The CFIs are particularly susceptible to market risk.

Figure 2.16 - Volatility of gains and losses
Figure 2.16 - Volatility of gains and losses.
Source: The Treasury

The long-term liabilities for ACC and the Government Superannuation Fund (GSF) are sensitive to changes in discount rates as their value is based on cash flows up to 80 years into the future, discounted to estimate the current obligation. As an example of this sensitivity, losses on GSF and ACC liabilities totalled $6.8 billion in 2011/12, mostly owing to changes in the discount rate, and if the discount were to reduce by 1.0%, the liabilities would increase by around $7.5 billion.

The Crown is also exposed to risks that may eventuate if certain events occur, or if present liabilities that cannot currently be measured are quantified.[8] For example, the Crown has issued a number of guarantees and indemnities. If events occur that require the Crown to meet any of these guarantees, there will be associated fiscal costs with negative impacts on the operating balance (eg, the Deposit Guarantee Scheme that was established in the wake of the global financial crisis).

Contingent liabilities also include capital that the Crown has subscribed to in International financial institutions, such as the World Bank and the International Monetary Fund (IMF), which is callable by them. If called, the Crown's assets will increase but debt will also rise to fund the increase in capital.

A full description of the Crown's fiscal risks and contingent liabilities is provided in the Specific Fiscal Risks chapter.


  • [8]Refer to the Specific Fiscal Risks chapter for definitions of contingent liabilities and a full list of those that the Crown is currently exposed to.
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