Operating Balance
Return to an operating surplus sufficient to meet the Government's net capital requirements, including contributions to the New Zealand Superannuation Fund, and ensure consistency with the debt objective (Fiscal Strategy)
| Year ended 30 June $ million |
Actual 2005 |
Actual 2006 |
Actual 2007 |
Actual 2008 |
Actual 2009 |
Actual 2010 |
Forecast Original Budget |
Forecast Estimated Actuals |
|---|---|---|---|---|---|---|---|---|
| Total Crown Operating balance before gains and losses | 7,075 | 7,091 | 5,860 | 5,637 | (3,893) | (6,315) | (7,739) | (6,927) |
| Total Crown gains/(losses) | (1,144) | 2,451 | 2,162 | (3,253) | (6,612) | 1,806 | 2,010 | 3,748 |
| Total Crown Operating balance | 5,931 | 9,542 | 8,022 | 2,384 | (10,505) | (4,509) | (5,729) | (3,179) |
| % of GDP | ||||||||
| Total Crown Operating balance before gains and losses | 4.6% | 4.4% | 3.4% | 3.1% | (2.1)% | (3.3)% | (4.4)% | (3.7)% |
| Total Crown gains/(losses) | (0.7)% | 1.5% | 1.3% | (1.8)% | (3.6)% | 1.0% | 1.1% | 2.0% |
| Total Crown Operating balance | 3.8% | 5.9% | 4.7% | 1.3% | (5.7)% | (2.4)% | (3.3)% | (1.7)% |
This year's operating deficit of $4.5 billion compares to a deficit of $10.5 billion last year (figure 13). While the recovery of financial markets resulted in the Crown recording net gains for the year, the reduction in tax revenue meant that, excluding those gains, the Crown's deficit widened.
- Figure 13 - Operating balance
- Source: The Treasury
Operating Balance Before Gains and Losses
The operating deficit before gains and losses (OBEGAL) has increased by $2.4 billion to $6.3 billion. A reduction in revenue while maintaining the expense base at existing levels has resulted in this widening of the gap between revenue and expenses.
The OBEGAL deficit is $0.6 billion better than forecast. While revenue was as expected, expenses were less than forecast (primarily in relation to core Crown expenses).
Gains and Losses
The Crown recorded net gains of $1.8 billion this year (compared to net losses of $6.6 billion last year).
|
Year ended 30 June $ million |
Actual 2005 |
Actual 2006 |
Actual 2007 |
Actual 2008 |
Actual 2009 |
Actual 2010 |
Forecast Original Budget |
Forecast Estimated Actuals |
|---|---|---|---|---|---|---|---|---|
| ACC actuarial gain/(loss) | (1,432) | (706) | (481) | (1,709) | (4,491) | 410 | - | 219 |
| GSF actuarial gain/(loss) | (851) | 206 | 1,133 | (1,098) | (695) | (1,231) | (12) | (408) |
| Kyoto net position | - | (303) | 20 | (226) | 768 | (15) | - | - |
| Investment portfolios: | ||||||||
| NZS Fund | 557 | 1,130 | 1,313 | (995) | (3,495) | 1,750 | 1,129 | 2,317 |
| ACC | 439 | 681 | 419 | (543) | (181) | 745 | (27) | 974 |
| Earthquake Commission | 125 | 504 | (84) | (166) | (349) | 37 | 129 | 175 |
| Other gains/(losses) | 18 | 939 | (158) | 1,484 | 1,831 | 110 | 791 | 471 |
| Total | (1,144) | 2,451 | 2,162 | (3,253) | (6,612) | 1,806 | 2,010 | 3,748 |
Each year the Government Superannuation Fund (GSF) estimates the present value of pension commitments that exist in respect of its defined benefit beneficiaries. The GSF scheme recorded an actuarial loss of $1.2 billion in 2010 (compared to a loss of $0.7 billion last year). This loss represents an increase in the liability predominantly as a result of an increase in the long term inflation assumption (meaning that future benefit payments will be higher than previously estimated).
The ACC actuarial gain of $0.4 billion compares to an actuarial loss of $4.5 billion in the previous year. This improvement reflects both a reduction in the number of claims and the cost of those claims.
The NZS Fund recorded a gain of $1.8 billion this year contributing to an operating balance of $1.7 billion for the year (refer table 6 below). The investment return for the year was 15.45% (compared to -22.14% last year). Declines in equity markets in the last quarter of the year resulted in an operating balance that was $0.4 billion lower than forecast. Since inception the Fund has returned 5.49% (annualised). This annualised return is 0.51% less than the rolling yield on 90 day Treasury bills.
|
Year ended 30 June $ million |
Actual 2005 |
Actual 2006 |
Actual 2007 |
Actual 2008 |
Actual 2009 |
Actual 2010 |
Forecast Original Budget |
Forecast Estimated Actuals |
|---|---|---|---|---|---|---|---|---|
| Opening net worth | 3,956 | 6,555 | 9,855 | 12,973 | 14,212 | 13,688 | 13,275 | 13,688 |
| Revenue | 191 | 359 | 436 | 385 | 383 | 433 | 397 | 400 |
| Current tax expense | (234) | (468) | (707) | (237) | (4) | 27 | - | (141) |
| Inter-entity expenses | - | - | 171 | 63 | 400 | (421) | (350) | (360) |
| Other expenses | (22) | (52) | (119) | (97) | (77) | (81) | (111) | (97) |
| Gains/(losses) | 557 | 1,130 | 1,313 | (995) | (3,495) | 1,750 | 1,129 | 2,317 |
| Operating balance | 492 | 969 | 1,094 | (881) | (2,793) | 1,708 | 1,065 | 2,119 |
| Gross contribution from the Crown | 2,107 | 2,337 | 2,048 | 2,104 | 2,243 | 250 | 250 | 250 |
| Other movements in reserves | - | (6) | (24) | 16 | 26 | 10 | - | 9 |
| Closing net worth | 6,555 | 9,855 | 12,973 | 14,212 | 13,688 | 15,656 | 14,590 | 16,066 |
The total Crown gain of $1.8 billion was $1.9 billion lower than forecast. The Budget 2010 forecasts were produced based on the peak of investment markets in March and assumed markets would remain at those levels. Since then investment returns have fallen and some previous gains have been reversed. In addition, the GSF actuarial loss was $0.8 billion higher than forecast.
