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Budget 2014 Home Page Budget Economic and Fiscal Update 2014

Net Core Crown Debt

Net core Crown debt peaks as a share of GDP in 2014/15...

Cash deficits are funded by an increase in net core Crown debt4 (through additional borrowing or a reduction in financial assets), while cash surpluses reduce net core Crown debt.

While operating cash flows return to surplus in 2014/15, net capital spending is forecast to exceed operating cash flows until 2017/18, resulting in core Crown residual cash[4] remaining in deficit until then.

Figure 2.12 - Net core Crown debt
Figure 2.12 - Net core Crown debt.
Source:  The Treasury

Over the forecast period, the Government is expected to generate cash flows from core Crown operations of $11.4 billion and will receive the remaining proceeds ($2.9 billion) from the Government share offer. The core Crown is forecast to spend $23.7 billion on capital items, which include purchasing physical assets (eg, school buildings), advances (eg, student loans) and future new capital spending. Overall, there is therefore a residual cash shortfall of $9.4 billion. As a result of the residual cash shortfall, net core Crown debt is expected to increase in nominal terms and to peak on an annual basis in 2016/17 at $65.5 billion, and then reduce once residual cash surpluses are achieved.

Net core Crown debt as a share of GDP peaks in 2014/15 at 26.4% (Figure 2.12). By 2017/18 net core Crown debt is expected to be 23.8% of GDP, consistent with the Government's medium-term target of net core Crown debt at a level no higher than 20% of GDP by 2020.

...but is higher than the Half Year Update...

Core Crown residual cash returns to surplus one year later and at a lower level than forecast in the Half Year Update (Figure 2.13), largely owing to higher operating allowances and lower tax receipts than previously forecast. As a result, net core Crown debt in nominal terms is forecast to be higher than at the Half Year Update. However, as a shareof GDP, it is similar to that previously forecast.

Figure 2.13 - Core Crown residual cash
Figure 2.13 - Core Crown residual cash.
Source:  The Treasury

...with government bond issuances funding residual cash deficits

The bond programme to 2017/18 is $3.0 billion higher than forecast in the Half Year Update, largely owing to a greater cash shortfall over the forecast period ($9.4 billion compared to the previous forecast of $4.4 billion). In order to fund this shortfall, along with bond maturities, the bond programme is expected to raise funds of $36.3 billion over the forecast period, while $25.3 billion of existing debt will be repaid, providing net cash proceeds of $11.0 billion (Table 2.10). Any excess cash proceeds raised from the bond programme will be invested in financial assets and used to meet future debt maturities.

Table 2.10 - Net increase in government bonds
Year ending 30 June
Face value of government bonds issued (market) 8.0 8.0 7.0 7.0 7.0 37.0
Cash proceeds from government bond issue            
Cash proceeds from issue of market bonds 7.8 8.0 6.9 6.8 6.8 36.3
Repayment of market bonds (2.0) (8.8) (1.8) (11.3) (23.9)
Net proceeds from market bonds 5.8 (0.8) 5.1 6.8 (4.5) 12.4
Repayment of non-market bonds - (1.4) (1.4)
Net repayment of non-market bonds - (1.4) (1.4)
Net cash proceeds from bond issuance 5.8 (2.2) 5.1 6.8 (4.5) 11.0

Source: The Treasury


  • [4]Net core Crown debt and residual cash indicators are measured on a core Crown basis. Residual cash includes both operating and capital activity. This differs from OBEGAL, which is measured at a total Crown level and includes operating activity only.
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