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Net Debt

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

When compared to the Budget Update, net debt levels have reduced to be on average 2.4 percentage points of GDP lower than previously forecast. This reduction in net debt is owing to a stronger starting position at 30 June 2013 and an improved cash flow over the forecast period.

Similar to the operating surplus, core Crown operating cash flows[5] also return to surplus in 2014/15. However, once capital cash flows are included, residual cash remains in deficit two further years, reaching surplus of $1.2 billion in 2016/17, one year earlier than forecast in the Budget Update. By 2017/18, core Crown residual cash is expected to increase to a cash surplus of $3.1 billion.

Deficits are funded by an increase in net debt (through additional borrowing or a reduction in financial assets) while surpluses reduce net debt. In nominal terms, net debt is expected to peak on an annual basis in 2015/16 at $64.5 billion, but once residual cash surpluses are forecast, debt is expected to reduce.

Net debt as a share of GDP peaks in 2014/15 at 26.5% (a year earlier than in nominal terms). By 2017/18 net debt is expected to be 22.3% of GDP (Figure 2.11) in line with the Government's medium-term target of net debt brought back to a level no higher than 20% of GDP by 2020.

Figure 2.11 - Net debt
Figure 2.11 - Net debt   .
Source:  The Treasury

...with residual cash deficits mostly funded by issuing government bonds

Residual cash surpluses are reached earlier than previously forecast, largely owing to stronger tax receipts and a decline in cash payments. The lower proceeds from the Government Share Offer programme partially offset this increase.

Over the forecast period there is a cash shortfall of $4.4 billion. In order to fund this shortfall along with bond maturities, the bond programme is expected to raise funds of $33.6 billion over the forecast period. Over the forecast period, $26.1 billion of existing debt will be repaid, providing net cash proceeds of $7.5 billion (Table 2.6). The excess cash proceeds raised from the bond programme will be invested in financial assets and used to meet future debt maturities.

As the Crown's fiscal position is stronger at the start of the forecast period than was previously forecast, the bond programme to 2016/17 is $4.0 billion lower than forecast in Budget 2013. The higher-than-forecast starting cash position has allowed for a $2.0 billion reduction in the current year’s bond programme as well as the beginning of a buy-back programme to help manage cash flows around the record-large bond maturity in April 2015. A buy-back programme of the April 2015 bond is scheduled to commence in the second half of the 2013/14 fiscal year. Up to $3.0 billion is forecast to be repurchased by 30 June 2014, subject to market conditions.

Table 2.6 - Net increase in government bonds
Year ending 30 June
Face value of government bonds issued (market) 8.0 7.0 7.0 6.0 6.0 34.0
Cash proceeds from government bond issue            
Cash proceeds from issue of market bonds 8.0 7.1 6.7 5.9 5.9 33.6
Repayment of market bonds (3.1) (7.8) (1.8) (11.9) (24.6)
Net proceeds from market bonds 4.9 (0.7) 4.9 5.9 (6.0) 9.0
Repayment of non-market bonds (0.8) (0.7) (1.5)
Net repayment of non-market bonds (0.8) (0.7) (1.5)
Net cash proceeds from bond issuance 4.1 (1.4) 4.9 5.9 (6.0) 7.5

Source: The Treasury


  • [5]Net 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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