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Budget 2006 Home Page Half Year Economic & Fiscal Update 2006

State-Owned Enterprises and Crown Entities

SOEs and Crown entities (CEs) are forecast to run total operating surpluses of $10.1 billion over the forecast period. Around $2.2 billion of the operating surpluses is forecast to be returned as dividends and is available to fund spending elsewhere in the Crown.

Figure 2.12 – SOE and CE operating balance
Figure 2.12 - SOE and CE operating balance.
Source: The Treasury

The SOE/CE net surpluses are not expected to be at the same level as the 2005/06 outturn, as the actual outturn included some large investment gains, resulting from strong global equity markets and one-off gains on sale of physical assets.

In 2006/07 SOE/CE net surpluses are forecast to be $1.2 billion, which is lower than what is expected over the rest of the forecast horizon. The lower 2006/07 result relative to future years is primarily due to:

  • higher expenses due to an increase in the ACC unfunded liability of around $0.2 billion, and
  • the impact of foreign exchange losses of around $0.2 billion (foreign exchange losses are not forecast beyond the current year).

From 2007/08 onwards, SOE/CE net surpluses are forecast to remain relatively flat at around $1.7 billion per annum.

The SOE/CE net surpluses (after payment of dividends) total $7.9 billion over the forecast period. This residual is maintained within the entities that have generated the net surpluses. In broad terms the majority of the accumulated net surpluses are forecast to be applied to build up assets.

Figure 2.13 – SOE and CE assets
Figure 2.13 - SOE and CE assets.
Source: The Treasury

Financial assets are forecast to increase by around $9.5 billion. The majority of the increase is within the Crown Financial Institutes, which are accumulating financial assets for the purpose of meeting future obligations.

Physical assets are forecast to increase by around $11.5 billion. The majority of the increase is over the SOE segment and Transit NZ, which are investing in physical assets to maintain and expand their current asset base.

The expansion in assets mentioned above that is not funded by net surpluses are forecast to be met by entities raising debt and capital contributions provided by the Government.

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