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Budget 2005 Home Page Half-Year Economic & Fiscal Update 2005

State-Owned Enterprises (SOEs) – Revenue and Expenses

SOE revenue and expenses to GDP follow a similar trend over the forecast horizon.

The initial increase in both revenue and expenses is largely driven by the electricity sector, reflecting forecasts based on the initial use of short-term assumptions around electricity spot prices, before moving to medium-term assumptions beyond the current year.

Figure 2.11 – SOE revenue and expenses to GDP
Figure 2.11 - SOE revenue and expenses to GDP.
Source: The Treasury

Over the rest of the forecast period, both revenue and expenses are expected to remain relatively flat, reflecting the fact that growth in SOEs is consistent with overall growth in the economy.

SOEs are forecast to run total operating surpluses of $4.7 billion over the forecast period. Around $2.1 billion of the operating surpluses will be returned as dividends. The remainder of the operating surpluses will be retained by individual entities for investment according to individual asset strategies.

Crown Entities – Revenue and Expenses

Both revenue and expenses to GDP are expected to remain flat initially, before decreasing from 2008/09.

The primary source of revenue for Crown entities is funding from core Crown departments. Since spending for future Budgets has yet to be allocated and therefore passed on to delivery agents (such as district health boards and schools) this leads to revenue and expenses to GDP falling near the end of the forecast period. Future allocations to delivery agents would lead to revenue and expenses rising back to similar levels.

Figure 2.12 – Crown entities’ revenue and expenses to GDP
Figure 2.12 - Crown entities’ revenue and expenses to GDP.
Source: The Treasury

Crown entities are also forecast to generate operating surpluses over the forecast period, which total around $6.5 billion. There are only a few Crown entities expected to generate significant operating surpluses. These entities will retain their surpluses for long-term purposes. For example, the Accident Compensation Corporation (ACC) will retain its surplus in order to build up its asset portfolio to help meet its outstanding claims liability, while the Earthquake Commission (EQC) will use its operating surplus to build up assets to cover claims in the event of any future natural disasters.


Net Worth

Table 2.9 –Net worth comparison with Pre-election Update

Net Worth Year ended 30 June
($ billion) 2005 Actual 2006 Forecast 2007 Forecast 2008 Forecast 2009 Forecast 2010 Forecast
Total Crown Net Worth            
Half Year Update 50.0 55.6 61.4 65.6 68.9 74.0
Pre-election Update   49.2 55.5 59.7 65.2 65.2
Core Crown Net Worth            
Half Year Update 28.3 32.0 36.2 38.5 39.9 43.2
Pre-election Update   30.7 35.2 37.6 41.1 41.1
SOE Net Worth            
Half Year Update 10.1 10.6 11.1 11.6 12.3 13.0
Pre-election Update   9.1 9.7 10.2 10.8 10.8
Crown Entities' Net Worth            
Half Year Update 34.8 36.8 38.4 39.9 41.3 42.4
Pre-election Update   33.1 34.6 36.0 37.6 37.6

Source:The Treasury

The change since the Pre-election Update reflects revaluations of property, plant and equipment at June 2005 partially offset by lower operating balances over the forecast period. Net worth is forecast to increase from $50 billion in 2004/05 to $74 billion by 2009/10. The growth in net worth reflects the Government’s strategy to run operating surpluses to strengthen its fiscal position. This strategy is evident across the whole of the Crown. The following section discusses the net worth of the Crown by segments of reported government activity.

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