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Half Year Economic and Fiscal Update 2016

Residual Cash and Net Core Crown Debt[7]

Operating cash flows improve over time...

Net operating cash flows are forecast to be in surplus across the forecast period with a moderate cash surplus in 2016/17 year increasing to $10.6 billion in 2020/21. Over the forecast period the Government is expected to generate cash flows from core Crown operations of $34.9 billion.

Figure 2.13 - Core Crown residual cash
Figure 2.13 - Core Crown residual cash   .
Source: The Treasury

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

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

The residual cash deficit is forecast to increase in 2016/17 mainly owing to the increased capital spending forecast in 2016/17. Net capital spending is forecast to exceed operating cash flows until 2018/19, when core Crown residual cash returns to surplus (Figure 2.13).

Over the entire forecast period a cash surplus of $2.8 billion is expected. This cash surplus is expected to help fund future government bond repayments (Table 2.7).

Net core Crown debt declines over the forecast period...

Net core Crown debt as a share of nominal GDP is forecast to decrease over the forecast period, from 24.6% in 2015/16 (Figure 2.14) to 18.8% by 2020/21.

Figure 2.14 - Net core Crown debt
Figure 2.14 - Net core Crown debt    .
Source: The Treasury

In dollar terms, net core Crown debt is forecast to increase for the first two years as cash flows from operating activities are not expected to be sufficient to meet capital spending (as discussed above) before starting to decline once residual cash returns to surplus. Net debt is forecast to be $59.6 billion in 2020/21.

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

Gross debt is expected to peak at $92.0 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 $76.7 billion in 2020/21 which is equivalent to 24.2% of nominal GDP (Figure 2.15).

Figure 2.15 - Gross debt
Figure 2.15 - Gross debt   .
Source: The Treasury

Gross debt falls faster in nominal terms than net debt as bond repayments are met with a mixture of new bond issuances and a reduction in financial assets.

The bond programme is expected to raise funds of $31.9 billion over the forecast period, while $42.2 billion of existing debt will be repaid, providing net repayments of $10.3 billion (Table 2.7). 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 2.7 - 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 8.3 6.7 6.3 5.3 5.3 31.9
Repayment of market bonds (2.4) (9.1) (11.5) (7.3) (11.1) (41.4)
Net proceeds from market bonds 5.9 (2.4) (5.2) (2.0) (5.8) (9.5) 
Repayment of non-market bonds (0.8) - (0.8)
Net repayment of non-market bonds (0.8) - (0.8)
Net cash proceeds from bond issuance 5.1 (2.4) (5.2) (2.0) (5.8) (10.3)

Source: The Treasury


  • [7]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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