The Treasury

Global Navigation

Personal tools

Treasury
Publication

Half Year Economic and Fiscal Update 2015

Capital Expenditure

The Government is forecast to spend a net total of $24.7 billion on capital items over the forecast period, which includes purchasing physical assets (eg, school buildings), advances (eg, student loans), providing capital to Crown entities (eg, New Zealand Transport Agency (NZTA)) and future new capital spending (Table 2.7). Figure 2.13 includes a breakdown of the most significant forecast capital expenditure.

Table 2.7 - Net capital expenditure activity 2015/16 to 2019/20
Year ending 30 June
$billions
2016
Forecast
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast
Cumulative
Forecast
Purchase of physical assets (3.2) (2.8) (1.9) (1.8) (1.8) (11.5)
Sale of physical assets 0.2 0.1 0.1 - - 0.4
Net purchase of physical assets (3.0) (2.7) (1.8) (1.8) (1.8) (11.1)
Advances made (2.2) (2.1) (2.5) (2.4) (2.2) (11.4)
Repayment of advances 1.6 1.5 2.0 2.0 2.0 9.1
Net advances (0.6) (0.6) (0.5) (0.4) (0.2) (2.3)
Investments (2.1) (2.0) (1.6) (1.5) (1.5) (8.7)
Return of investments 0.1 - 0.1 - - 0.2
Net investments (2.0) (2.0) (1.5) (1.5) (1.5) (8.5)
Top-down capital adjustment 0.6 0.1 (0.1) 0.1 0.1 0.8
Future new capital spending (0.5) (0.8) (0.7) (0.7) (0.9) (3.6)
Net capital spending (5.5) (6.0) (4.6) (4.3) (4.3) (24.7)

Source: The Treasury

Figure 2.13 - Forecast capital activity for 2015/16 to 2019/20 by significant spending
Figure 2.13 - Forecast capital activity for 2015/16 to 2019/20 by significant spending   .
Source:  The Treasury

Net purchases of physical assets represents forecast spending by core Crown agencies to maintain their existing asset base and includes spending on defence equipment and school property and also includes capital spending related to the Canterbury earthquakes (refer to the box on Canterbury earthquake costs on page 36).

Net investments largely represent capital injections to Crown entities, to expand their asset base, and are estimated to be between $1.5 billion and $2.0 billion a year. The largest capital injections across the forecast period are to NZTA for state highways (between $1.1 and $1.3 billion each year of the forecast).

Net advances largely relate to the issuance and repayment of student loans. Student loan issuances peak at $1.8 billion in 2020 with repayments of $1.6 billion forecast in the same year.

The capital allowance for Budget 2016 has been set at $1.7 billion which includes the $700 million previously set aside in the Future Investment Fund. Around $1.0 billion of the Budget 2016 allowance has already been allocated with $0.7 billion remaining to be allocated. Capital allowances of $0.9 billion are forecast in Budget 2017 before growing at a rate of 2.0% per year for subsequent budgets.

New capital spending is expected to be allocated in future Budgets. The new capital spending for each Budget is spread over four fiscal years reflecting the assumed profile of future spending. This profile is illustrated in Figure 2.14.

Figure 2.14 - New capital spending (capital allowances)
Figure 2.14 - New capital spending (capital allowances)   .
Source:  The Treasury

Figure 2.15 sets out a history of capital expenditure over the past 10 years and includes the forecast capital activity to 2019/20. The graph excludes contributions to the NZS Fund (2006-2010 years) and also excludes proceeds from the Government Share Offer programme in 2012-2014 (a total of $4.7 billion) which were used to fund capital expenditure.

Figure 2.15 - Net capital spending history
Figure 2.15 - Net capital spending history   .
Source:  The Treasury

Capital spending is expected to increase in 2016 (largely owing to delayed expenditure from 2014/15) and increase again in 2017 largely owing to a significant portion of the Budget 2016 spending expected to occur in that year (discussed above).

Page top