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Pre-election Economic and Fiscal Update 2014

Net Core Crown Debt

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

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

Net core Crown debt as a share of GDP is expected to peak in 2014/15 at 26.8% (Figure 2.11). By 2017/18 net core Crown debt is expected to have fallen to 25.0% of GDP.

While operating cash flows are expected to return to surplus in 2014/15, net capital spending is expected to exceed operating cash flows resulting in core Crown residual cash[4] deficits across the forecast period. Cash deficits are funded by increases in net core Crown debt4 (either through additional borrowing or a reduction in financial assets).

Over the forecast period, the Crown is expected to generate cash flows from core Crown operations of $8.6 billion and will receive the last of the proceeds from the Meridian share offer ($0.6 billion)[5]. The core Crown is forecast to spend $24.0 billion on capital items such as purchasing of physical assets (eg, school buildings), advances (eg, student loans) and future new capital spending. Overall, this results in a cash shortfall across the forecast of $12.4 billion. As a result of this cash shortfall, net core Crown debt is expected to increase in nominal terms and to peak on an annual basis in 2017/18 at $67.9 billion (one year later than previously forecast), and then fall after residual cash surpluses are achieved.

Figure 2.12 - Core Crown residual cash
Figure 2.12 - Core Crown residual cash   .
Source:  The Treasury

...but is higher than the Budget Update...

Core Crown residual cash is expected to remain in deficit across the forecast period and is higher than the Budget Update largely owing to lower tax receipts than previously forecast (Figure 2.12). As a result, net core Crown debt (in both nominal terms and as a share of GDP) is forecast to be higher in each of the forecast years when compared to the Budget Update.

...with the bond maturities funding residual cash deficits

Figure 2.13 - Gross debt vs net debt
Figure 2.13 - Gross debt vs net debt   .
Source:  The Treasury

There has been no change in the bond programme to 2017/18 from the Budget Update. The bond programme is expected to raise funds of $36.6 billion over the forecast period, while $25.4 billion of existing debt will be repaid, providing net cash proceeds of $11.2 billion (Table 2.10). While there is a greater cash shortfall over the forecast period ($12.4 billion compared to $9.4 billion forecast at the Budget Update), this additional shortfall is expected to be managed through reductions in financial assets.

The movement in gross debt generally reflects the timing of the bond programme and maturities. As a percentage of GDP it is forecast to decrease from 36.6% in 2012/13 to 32.5% in 2017/18 (Figure 2.13) consistent with the decrease in net debt as a share of national income.

Table 2.10 - Net increase in government bonds
Year ended 30 June
Face value of government bonds issued (market) 8.0 8.0 7.0 7.0 7.0 37.0
Cash proceeds from government bond issue            
Cash proceeds from issue of market bonds 7.7 8.1 7.0 6.9 6.9 36.6
Repayment of market bonds (2.2) (8.7) (1.8) (11.3) (24.0)
Net proceeds from market bonds 5.5 (0.6) 5.2 6.9 (4.4) 12.6
Repayment of non-market bonds - (1.4) (1.4)
Net repayment of non-market bonds - (1.4) (1.4)
Net cash proceeds from bond issuance 5.5 (2.0) 5.2 6.9 (4.4) 11.2

Source: The Treasury


  • [4]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.
  • [5]Although the Government's Share Offer programme has now been completed, owing to the use of instalment receipts for the Meridian Energy share offer some proceeds (approximately $0.6 billion) are expected to be received in the 2014/15 year. Refer to page 40 of the 2014 Budget Update for further detailed information regarding the final proceeds of the programme.
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