Ministerial Statement
Since 2000, New Zealand has enjoyed the longest uninterrupted period of economic expansion since World War II.
That growth, accompanied by a dramatic rise in employment, big fall in unemployment, strong increases in workers' wages and firms' profits, all assisted Crown revenue growth which in turn assisted the government to dramatically lift public investment in health, education, infrastructure and other public goods.
But just as important, the government has been utilising favourable economic conditions to position the Crown in a strong financial position to better withstand any future external shocks to our economy and society.
Since 1999, the government has driven gross sovereign-issued debt down, from over 35 percent of GDP to be nearer the government's long-term target of 20 percent of GDP, while simultaneously building up the financial assets of the New Zealand Superannuation Fund to part pre-fund future pension liabilities.
In 2006, the New Zealand Government's net financial asset position moved into positive territory for the first time in the nation's history, a position maintained in the 2007/08 financial statements for the year ended 30 June.
These statements are the first prepared under New Zealand International Financial Reporting Standards (NZ IFRS). The statements show an operating profit before gains and losses (OBEGAL) of $5,637 million, $410 million higher than forecast in the 2008 Budget Economic and Fiscal Update. The operating balance was on target at $2,384 million. This result compares with the previous year's operating balance of $8,022 million which included some large actuarial gains on the Government's long term liabilities while this year's result has been impacted by the decline in overseas equity markets.
Core Crown residual cash was $736 million less than in the previous year but $1,149 million higher than forecast. The delay in the $690 million KiwiRail purchase to 1 July drove most of this surplus with operating cash flows $274 million higher than forecast.
Gross sovereign-issued debt (excluding Reserve Bank settlement cash) continued to fall as a percentage of GDP at 17.4 percent in 2008 compared with 18.2 percent last year. This continues to be consistent with the Government's long term debt objective to keep gross sovereign-issued debt broadly stable at 20 percent of GDP over the next ten years.
As at 30 June 2008 the financial statements show that the Crown's net financial asset position inclusive of the assets of the New Zealand Superannuation Fund was equivalent to a positive 7.9 percent of GDP, compared with a positive 5.3 percent of GDP a year earlier.
The New Zealand Superannuation Fund grew by $1,239 million over the year to a net worth of $14,212 million. The Fund was adversely impacted by the downturn in overseas equity markets, making an $881 million operating loss for the year ended 30 June 2008. The Fund's annualised return since inception remains positive at 10.34% (over 3% above the risk free rate of return for the same period).
Hon Dr Michael Cullen
Minister of Finance
30 September 2008
