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Debt indicators

Table 6– Comparison of debt indicators
$ million Actual Estimated actual forecast Variance against estimated actual 2005 actual
Gross Sovereign-Issued Debt 35,461 35,952 491 35,045
% of GDP 22.6 23.0 0.4 23.3
Net Core Crown Debt 7,745 9,016 1,271 10,771
% of GDP 4.9 5.8 0.9 7.2
Net debt with NZS Fund assets (2,116) (999) 1,117 4,216
% of GDP (1.3) (0.6) 0.8 2.8

Gross sovereign-issued debt (GSID) as at 30 June 2006 was $35.5 billion or 22.6 percent of GDP. Compared to forecast GSID was $0.5 billion lower than forecast. The reduction was primarily due to lower issuance of Treasury Bills as there has been less demand for these instruments since the recent Reserve Bank reforms around the settlement cash level.

The increase in the current year residual cash position against forecast has not led to a change in the level of GSID at 30 June 2006, as this is generally set at the time of the Budget Update. Any change against forecast in residual cash will flow onto net core Crown debt, through the cash being held as marketable securities and deposits.

Net core Crown debt was $7.7 billion or 4.9 percent of GDP. Compared to forecast, net core Crown debt was $1.3 billion lower primarily due to the increase in the residual cash position.

The New Zealand Superannuation Fund

The assets of NZS Fund is the Government’s means of building up assets to partially pre-fund future New Zealand superannuation expenses and may only be used for New Zealand Superannuation.

The Government’s contributions to the NZS Fund are calculated over a 40-year rolling horizon to ensure that superannuation entitlements over the next 40 years can be met.

The fund balance as at 30 June 2006 was $9.9 billion. Since the inception of the NZS Fund it has received Government contributions of $8.1 billion and has accumulated retained income of $1.8 billion. The investment income earned by the NZS Fund has averaged 14.89% per annum, which exceeds the average risk-free rate of return. In the current year the NZS Fund has had investment returns exceeding the risk-free rate of return by around 12%.

2002 $m 2003 $m 2004 $m 2005 $m 2006 $m
Opening balance - 615 1,884 3,956 6,555
Annual contributions 600 1,200 1,879 2,107 2,337
Retained income (after tax) 15 69 193 492 969
Closing balance 615 1,884 3,956 6,555 9,861

Net Worth

Table 7 – Comparison of net worth
$ million Actual Estimated actual forecast Variance against estimated actual 2005 Actual
Financial assets 56,446 54,265 2,181 45,308
Property, plant and equipment 79,441 70,109 9,332 67,494
Other assets 22,384 17,625 4,759 18,029
Total Assets 158,271 141,999 16,272 130,831
Gross debt 39,427 38,889 (538) 36,864
GSF pension liability 15,231 15,361 130 14,952
ACC claims liability 12,715 12,581 (134) 11,384
Other liabilities 19,495 16,683 (2,812) 17,648
Total Liabilities 86,868 83,514 (3,354) 80,848
Net Worth 71,403 58,485 12,918 49,983

Net worth was $71.4 billion as at 30 June 2006, which was higher than forecast by $12.9 billion.

The increase against forecast of $9.9 billion was primarily due to the impact of revaluations of property, plant and equipment. These revaluations are not forecast beyond the base month used for deriving the estimated actual. The main factors that have for these increases in valuation are continuing appreciation of property prices, price increases and movement in foreign exchange rates.

The rest of the increase against forecast of $3.0 billion has resulted from the higher than expected operating balance. Within the individual components of the statement of financial position the variance from forecast can be seen in financial assets and accounts receivables.

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