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Half Year Economic and Fiscal Update 2015

Residual Cash and Net Core Crown Debt

Operating cash flows steadily improve...

Net operating cash flows are forecast to be in surplus across the forecast period with a small surplus in the 2015/16 year increasing to an operating cash surpluses of $6.2 billion by 2019/20. Over the forecast period, the Government is expected to generate cash flows from core Crown operations of $14.3 billion.

The growth in operating cashflows largely mirrors the trend shown in OBEGAL and strengthens each year of the forecast period. The strength in operating cashflows largely represents growth in tax receipts exceeding growth in operating payments.

...outpacing capital spending near the end of the forecast period

Net capital spending is forecast to exceed operating cash flows until 2018/19, when core Crown residual cash[18] returns to surplus (Figure 2.10). The increase between 2014/15 actual net capital spending and 2015/16 forecast is partly owing to 2014/15 including $0.6 billion of proceeds from the Government Share Offer programme (2014/15 being the last year to include proceeds). In addition, expenditure previously expected to be spent in 2014/15 has been delayed until 2015/16 (eg, Canterbury Earthquake Recovery Authority's (CERA's) rebuild projects, defence and schools capital expenditure). These two factors result in an increased residual cash deficit in 2015/16 when compared to 2014/15.

Figure 2.10 - Core Crown residual cash
Figure 2.10 - Core Crown residual cash   .
Source:  The Treasury

Over the entire forecast period a cash shortfall of $10.4 billion is expected. This cash shortfall is funded largely through additional bond issuances (Table 2.6).

Net core Crown debt peaks as a share of GDP in 2016/17...

Net core Crown debt as a share of nominal GDP is forecast to peak at 27.7% in 2016/17 (Figure 2.11) before reducing to 24.0% by 2019/20 and continuing to decline thereafter.

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

Net core Crown debt on a nominal basis increases for the first three years as a result of cashflows from operating activities not being sufficient to meet capital spending (as discussed above) before starting to decline once residual cash returns to surplus in 2018/19, to stand at $71.1 billion at the end of the forecast period.

...and gross debt begins to decline after 2016/17

Gross debt is expected to peak at $95.7 billion in 2016/17. Forecast maturities are then expected to exceed new debt being issued, and gross debt begins to decline. Gross debt is forecast to be $91.3 billion in 2019/20 which is equivalent to 30.8% of nominal GDP (Figure 2.12).

Figure 2.12 - Gross debt
Figure 2.12 - Gross debt   .
Source:  The Treasury

The bond programme is expected to raise funds of $43.6 billion over the forecast period, while $33.0 billion of existing debt will be repaid, providing net cash proceeds of $10.6 billion (Table 2.6). Any excess cash proceeds raised from the bond programme are expected to be invested in financial assets and used to meet future debt maturities.

The issuance profile is relatively flat in order to reduce year-to-year volatility of bond programmes and ensure consistency of supply over this time.

Table 2.6 - Net increase in government bonds
Year ending 30 June
Face value of government bonds issued (market) 8.0 9.0 9.0 9.0 9.0 44.0
Cash proceeds from government bond issue  
Cash proceeds from issue of market bonds 8.4 9.3 8.7 8.6 8.6 43.6
Repayment of market bonds (1.8) - (11.3) (11.5) (7.4) (32.0)
Net proceeds from market bonds 6.6 9.3 (2.6) (2.9) 1.2 11.6
Repayment of non-market bonds (0.6) (0.4) - - - (1.0)
Net repayment of non-market bonds (0.6) (0.4) - - - (1.0)
Net cash proceeds from bond issuance 6.0 8.9 (2.6) (2.9) 1.2 10.6

Source: The Treasury


  • [18] Net core Crown 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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