Ministerial Statement
While New Zealand has weathered the global financial crisis and emerged from the recession, the Financial Statements of the Government for the year ended 30 June 2010 demonstrate that the effects will be with us for some time.
The outturns in these financial statements are broadly consistent with the Treasury's forecasts in the 2010 Budget Economic and Fiscal Update.
Core Crown expenses for the year were flat, as one-off expenses from 2008/09 including the provision for deposit guarantee scheme losses and KiwiRail write-down were offset by increased spending on health, education and benefits.
At the same time core Crown tax revenue declined by $3.9 billion due to the October 2008 and April 2009 personal tax cuts, the one-off structured finance transactions recognised in 2008/09, and the impact of the recession.
As a result the operating balance before gains and losses deteriorated to a deficit of $6.3 billion.
The recovery in world financial markets enabled our large investment funds (the New Zealand Superannuation Fund, the Accident Compensation Corporation and the Earthquake Commission) to recoup some of the losses they sustained during the financial crisis. Once these gains are taken into account, the headline operating deficit improved markedly, from $10.5 billion last year to $4.5 billion this year.
As expected, core Crown net debt deteriorated to $26.7 billion or 14.1% of GDP, and total Crown net worth declined for a second consecutive year.
The Canterbury earthquake of 4 September has had a devastating impact on affected communities. While it is not reflected in these annual accounts, the quake is expected to have an effect on the government's books in the 2010/11 year. The next fiscal forecasts will be published in the Half Year Economic and Fiscal Update in December.
This underscores the importance of rebuilding a strong fiscal position so the government can continue to help protect New Zealanders from the impacts of shocks in the future.
Hon Bill English
Minister of Finance
30 September 2010
