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Half Year Economic & Fiscal Update 2009

Contingent Liabilities

Contingent liabilities are costs that the Government will have to face if a particular event occurs. Typically, contingent liabilities consist of guarantees and indemnities, legal disputes and claims, and uncalled capital. The contingent liabilities facing the Government are a mixture of operating and balance sheet risks, and they can vary greatly in magnitude and likelihood of realisation.

In general, if a contingent liability were realised it would reduce the operating balance and increase net debt. However, in the case of contingencies for uncalled capital, the negative impact would be restricted to net debt.

Where contingent liabilities have arisen as a consequence of legal action being taken against the Crown, the amount shown is the amount claimed and thus the maximum potential cost. It does not represent either an admission that the claim is valid or an estimation of the amount of any award against the Crown.

Only contingent liabilities involving amounts of over $10 million are separately disclosed. Contingent liabilities below $10 million are included in the “other quantifiable contingent liabilities” total.

Contingent liabilities have been stated as at 31 October 2009, being the latest set of contingent liabilities received.

Quantifiable Contingent Liabilities

Quantifiable Contingent Liabilities
Guarantees and indemnities Status [8] ($ million)
Air New Zealand - letters of credit and performance bonds Changed 32
Cook Islands – Asian Development Bank loans Changed 15
Indemnification of receivers and managers - Terralink Limited Unchanged 10
Ministry of Transport - funding guarantee Unchanged 10

Guarantees and indemnities of SOEs and Crown entities

Changed 21
Other guarantees and indemnities Changed 12
    100

Uncalled capital

   
Asian Development Bank Changed 1,070
Bank for International Settlements Changed 27
European Bank for Reconstruction and Development Changed 16
International Bank for Reconstruction and Development Changed 1,121
Other Changed 4
    2,238

Legal proceedings and disputes

   
Health - legal claims Unchanged 15
Kapiti West Link Road Unchanged 25
Tax in dispute Changed 1,655
Other legal claims Changed 51
    1,746

Other quantifiable contingent liabilities

   
Air New Zealand partnership Unchanged 68
Crown Health Financing Agency Unchanged 28
Inland Revenue - unclaimed monies Unchanged 46
International finance organisations Changed 1,561
Kyoto Protocol Units Changed 1,871
New Zealand Export Credit Office - export guarantees Changed 175
Reserve Bank - demonetised currency Unchanged 23
Other quantifiable contingent liabilities of SOEs and Crown entities Changed 80
Other quantifiable contingent liabilities Changed 24
    3,876
Total quantifiable contingent liabilities   7,960

Notes

  • [8]Relative to reporting in the 30 June 2009 Financial Statements of the Government of New Zealand.
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