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Pre-election Economic and Fiscal Update 2017

Core Crown Capital Spending

While capital spending is expected to be similar in 2016/17 to the previous year at $4.3 billion, the Government is forecast to spend around $6.0 billion a year (excluding contributions to the NZS Fund) over the next four years. Recommencing contributions to the NZS Fund in 2020/21 will add a further $2.2 billion in 2020/21. Including the current year's spending of $4.3 billion raises the total spend on capital items over the forecast period to $30.5 billion (Table 2.6).

Table 2.6 - Net capital expenditure activity 2016/17 to 2020/21
Year ending 30 June
$billions
2016
Actual
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast
2021
Forecast
5-year
Total
Education 0.6 0.9 0.9 1.0 0.8 0.6 4.2
Defence 0.4 0.4 0.7 0.5 0.5 0.3 2.5
City Rail Link - - 0.3 0.2 0.3 0.4 1.2
Corrections 0.1 0.1 0.2 0.2 0.1 0.1 0.7
IRD - 0.1 0.2 0.2 0.1 0.1 0.7
Other 0.9 0.9 1.4 0.5 0.5 0.5 3.7
Net purchase of physical assets 2.0 2.4 3.7 2.6 2.3 2.0 13.0
Student loans 0.2 0.2 0.2 0.2 - - 0.6
Housing Infrastructure Fund - - 0.1 0.2 0.2 0.2 0.7
Other 0.3 (0.2) 0.1 (0.1) (0.1) (0.1) (0.4)
Net advances 0.5 - 0.4 0.3 0.1 0.1 0.9
NZTA 1.1 1.2 1.4 1.4 1.5 1.1 6.6
Crown Infrastructure Partners - - - 0.1 0.2 0.3 0.6
Southern Response 0.3 0.3 0.4 0.1 - - 0.8
DHBs - 0.2 0.1 0.2 0.1 0.1 0.7
KiwiRail 0.2 0.2 0.2 0.2 - - 0.6
Other 0.5 - 0.6 0.4 0.3 0.1 1.5
Net investments 2.1 1.9 2.8 2.4 2.1 1.6 10.8
Future new capital spending - - 0.3 1.4 1.5 1.7 5.5
Top-down capital adjustment - - (1.0) (0.2) (0.2) - (1.3)
Contribution to NZS Fund - - - - - 2.2 2.2
Net capital spending 4.6 4.3 6.2 6.6 5.8 7.6 30.5

Source: The Treasury

Net capital spending is expected to increase significantly in 2017/18 and 2018/19, with the largest capital spend in a number of years. The size of the forecast spend increases the risk that spending may be pushed into future periods as capacity constraints are tested.

Some capital payments in relation to City Rail Link and the Housing Infrastructure Fund are expected to fall outside the forecast period.

Table 2.6 outlines the capital spending by the core Crown that impacts cash flows. It excludes capital spending undertaken by CEs and SOEs directly that is funded from their own resources. As such, they will differ from the total Crown infrastructure spending announced by the Government, which focuses on this broader (and therefore larger) investment by the Crown[6].

In addition to the capital spending in Table 2.6 above, a number of capital projects have been undertaken through Public Private Partnerships (PPPs) (eg, Transmission Gully).

Unlike capital spending where cash payments are made as the asset is being constructed, cash flows in relation to PPPs do not typically commence until the completion of the project. Instead, borrowings are accumulated across the period reflecting the progress towards completion. Payments are then spread over a number of subsequent years as the assets become operational. Table 2.7 below summarises the expected amount of borrowings accrued over the forecast period in relation to PPPs.

Table 2.7 - Public Private Partnerships (cumulative)
Year ending 30 June
$billions
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast
2021
Forecast
Correctional facilities and prisons 0.6 0.6 0.6 0.6 0.6
Transport projects 0.5 1.0 1.5 1.8 1.9
Educational facilities 0.3 0.3 0.5 0.5 0.5
Public Private Partnerships 1.4 1.9 2.6 2.9 3.0

Source: The Treasury

PPPs managed by the Department of Corrections and the Ministry of Education will be included in the net core Crown debt calculation. However the transport projects managed by the New Zealand Transport Agency (NZTA) are not included in net core Crown debt to the extent that funding will be obtained from existing sources (eg, the National Land Transport Fund in the case of Transmission Gully).

Notes

  • [6] Further detail on the Government's planned infrastructure spending can be found in the Capital at a Glance document published in the Budget Update.
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