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Budget 2015 Home Page Budget Economic and Fiscal Update 2015

Total Crown Balance Sheet

Operating balance surpluses result in a stronger balance sheet...

Net worth attributable to the Crown is forecast to grow steadily in nominal terms across the forecast period largely owing to forecast operating balance surpluses. Beyond 2015, net worth attributable to the Crown is expected to grow by $18.1 billion to stand at $93.6 billion by 2018/19, increasing as a share of nominal GDP to reach 32.8% by 2018/19 (Figure 2.15).

Figure 2.15 - Net worth attributable to the Crown
Figure 2.15 - Net worth attributable to the Crown.
Source: The Treasury

...with assets increasing by $40.2 billion over the forecast period...

Total assets are forecast to grow by $40.2 billion over the forecast period to $296.3 billion in 2018/19, made up of additional investments in assets (both physical and financial) of $65.5 billion, partially offset by reductions (largely depreciation) of $25.3 billion.

The largest asset growth over the forecast period is in the social assets portfolio which is expected to increase by $17.8 billion to be $149.4 billion in 2018/19 (Figure 2.16) over the forecast period. This growth reflects increases in student loans and property, plant and equipment, (including Canterbury rebuild assets, school property, hospitals and increases in the social housing portfolio value). See page 50 for social housing assumptions.

Figure 2.16 - Total Crown assets
Figure 2.16 - Total Crown assets.
Source: The Treasury

The financial asset portfolio is expected to increase by $12.9 billion to be $87.9 billion in 2018/19, reflecting the Treasury's New Zealand Debt Management Office (NZDMO) and Reserve Bank activities, and investment growth in the investment portfolios such as those managed by NZS Fund and ACC.

The commercial asset portfolio is expected to increase by $9.5 billion over the forecast period to be $59.0 billion in 2018/19, with growth coming from SOEs' investment in physical assets and growth in Kiwibank mortgages.

...while liabilities are expected to fall by the end of the forecast period

The Crown's liabilities begin to fall in 2017/18, from a peak of $199.7 billion in 2016/17 (Figure 2.17). The increases in the first three years of the forecast are largely increased borrowing.

Figure 2.17 - Total Crown liabilities
Figure 2.17 - Total Crown liabilities.
Source: The Treasury

Borrowings are mostly conducted by NZDMO, which manages the Crown's bond programme, the Reserve Bank and Kiwibank, and are forecast to peak at $121.7 billion in 2016/17 before decreasing slightly to stand at $115.6 billion by 2018/19.

Insurance liabilities are mostly held by ACC, EQC and Southern Response and are expected to increase over the forecast period from $38.5 billion in 2014/15 to reach $42.1 billion in 2018/19. The increases primarily relate to the ACC claims liability, as EQC and Southern Response insurance liabilities are expected to fall as earthquake insurance settlements continue to progress.

Retirement plan liabilities, primarily the GSF, are $12.6 billion in 2014/15 and fall to $10.9 billion by 2018/19.

The Crown's balance sheet remains sensitive to market movements...

Many of the assets and liabilities on the Crown's balance sheet are measured at “fair value” in order to disclose current estimates of what the Crown owns and owes. While the measurement at fair value is seen as the most appropriate value of these items, it can be volatile, resulting in fluctuations in the value of the assets and liabilities reflecting changes in the market and underlying assumptions.

Refer to the Risks and Scenarios chapter page 65 for more details.

...and judgements and estimates will also impact on the balance sheet...

Apart from market factors, valuations are subject to a number of judgements and estimates. In general, as time goes on, better information becomes available and initial estimates are updated to reflect current information. Some examples of this include: ACC rehabilitation costs; earthquake-related liabilities; and future wage growth of students, which directly impacts the value of the student loan book.

...while other risks remain

In addition to those items on the balance sheet there are a number of liabilities (and assets) that may arise in the future but are not yet included in our forecasts, either because they are contingent on an uncertain future event occurring (eg, outcome of litigation) or the liability cannot be measured reliably. If these liabilities crystallise, there will be associated costs with a negative impact (or positive in the case of contingent assets) on the operating balance or net debt. Refer to page 82 for a list of the contingent liabilities at 31 March 2015.

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