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Debt

Table 8 - Gross sovereign-issued debt (GSID) and net core Crown debt
Year ended 30 June
$ million 		Actual
2003 		Actual
2004 		Actual
2005 		Actual
2006 		Actual
2007 		Forecast
Original
Budget 		Forecast
Est
Actuals 		Actual
2008
Gross sovereign-issued debt 36,617 36,017 35,478 35,867 36,805 40,400 37,673 37,745
Less Reserve Bank settlement cash
 (incl. Kiwibank)		 -  -  -  (1,964) (7,758) (7,523) (7,510) (7,955)
Add back changes to DMO borrowing due to settlement cash -  -  -  -  1,600 1,600 1,600 1,600
Gross sovereign-issued debt excluding settlement cash 36,617 36,017 35,478 33,903 30,647 34,477 31,763 31,390
Gross sovereign-issued debt 36,617 36,017 35,478 35,867 36,805 40,400 37,673 37,745
Less core Crown financial assets (20,524) (24,404) (30,940) (37,684) (44,272) (51,184) (48,927) (50,698)
Net core Crown debt (incl NZS Fund) 16,093 11,613 4,538 (1,817) (7,467) (10,784) (11,254) (12,953)
Add back NZS Fund holdings of core Crown financial assets and NZS Fund financial assets 1,884 3,956 6,555 9,861 11,576 15,439 13,100 12,934
Net core Crown debt 17,977 15,569 11,093 8,044 4,109 4,655 1,846 (19)

Gross Sovereign-issued Debt (GSID)

GSID (excluding settlement cash) represents the debt issued by the sovereign (ie, core Crown) and includes Government stock held by the NZS Fund, ACC and EQC but excludes money deposited with the Reserve Bank by banks (settlement cash).

GSID (excluding settlement cash) was lower than forecast by $373 million (1.2%) at $31,390 million (17.4% of GDP). This result reflected lower than forecast levels of domestic bonds issuance (refer table 9) partially offset by higher than forecast derivative liabilities.

Figure 12 - GSID (excluding settlement cash)
Figure 12 - GSID (excluding settlement cash).
Source: The Treasury

One of the key components of GSID is the domestic bond programme. Table 9 sets out the historical net issuances and repayments.

Table 9 - Net bond issuance
Year ended 30 June
$ million		 Actual
2003 		Actual
2004 		Actual
2005 		Actual
2006 		Actual
2007 		Forecast
Original
Budget 		Forecast
Est
Actuals 		Actual
2008
Domestic bonds (market) 2,551 2,212 2,146 2,375 2,294 2,520 2,415 1,757
Repayment of domestic bonds (market) (2,823) (3,044) (2,797) (2,574) (2,777) -  -  - 
Net increase/(decrease) in market domestic bonds (272) (832) (651) (199) (483) 2,520 2,415 1,757
Domestic bonds (non-market) 279 478 459 740 570 208 189 130
Repayment of domestic bonds (non-market) (737) (357) (338) (375) (421) -  -  - 
Net increase/(decrease) in non-market domestic bonds (458) 121 121 365 149 208 189 130
Net total bond issuance/(repayment) (730) (711) (530) 166 (334) 2,728 2,604 1,887

Net Core Crown Debt

Figure 13 - Net core Crown debt
Figure 13 - Net core Crown debt.
Source: The Treasury
Figure 14 - Core Crown financial assets (excluding NZS Fund)
Figure 14 - Core Crown financial assets (excluding NZS Fund).
Source: The Treasury

Net core Crown debt equates to core Crown borrowings (gross sovereign-issued debt) less core Crown financial assets (excluding the financial assets of the NZS Fund).

By deducting financial assets (excluding the NZS Fund), net debt can provide additional information about the sustainability of the Government's accounts. However, it is important to view net debt alongside GSID (excluding settlement cash) as some financial assets are not very easily converted to cash (eg, student loans) in the short term.

Net core Crown debt was lower than forecast by $1,865 million (101%) which resulted in a net asset position of $19 million at 30 June 2008. This position is a result of the higher than forecast residual cash surplus in addition to net valuation gains on financial assets and financial liabilities.

Net core Crown debt has decreased by $4,128 million since 30 June 2007. Table 10 provides a breakdown of core Crown net debt by portfolio.

The majority of the decrease in net core Crown debt was in the financial instruments administered by the New Zealand Debt Management Office (NZDMO) ($2,776 million).

NZDMO financial assets have increased by $3,594 million which has been primarily financed by:

  • the current year's residual cash surplus of $2,057 million, and
  • additional borrowings as NZDMO has continued its recent practice of maintaining a smooth bond issuance program year to year.

NZDMO borrowings have increased by around $818 million. As mentioned above the majority of the additional borrowings have been invested in financial assets, so are net debt neutral.

Table 10 - Net core Crown debt by portfolio
Year ended 30 June 2008 Year ended 30 June 2007
$ million NZDMO Reserve
Bank 		Student
loans 		Other Total NZDMO Reserve
Bank 		Student
loans 		Other Total
Core Crown borrowings 28,861 8,689 -  195 37,745 28,043 8,508 -  254 36,805
Core Crown financial assets 17,001 13,735 6,741 287 37,764 13,407 13,023 6,011 255 32,696
Net core Crown debt 11,860 (5,046) (6,741) (92) (19) 14,636 (4,515) (6,011) (1) 4,109
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