The devastating earthquakes in Canterbury have had a significant impact on the Government's fiscal position.
The Financial Statements of the Government for the year ended 30 June 2011 include net costs to the Crown of around $9.1 billion in relation to these tragic events.
In 2010/11, there was modest growth in tax revenue reflecting the economic recovery during the period, while core Crown expenses rose sharply due to large one-off factors (such as the Emissions Trading Scheme and the Weathertight homes financial assistance package), together with the impact of higher debt-financing costs due to rising Crown debt.
The net result of these factors is that the operating deficit before gains and losses weakened markedly to $18.4 billion at 30 June 2011. However, the Government has taken a series of decisions that will significantly reduce the deficit in the current year and set the Crown on a path back to surplus.
The recovery in world markets during the year helped produce gains for Crown investment funds (the New Zealand Superannuation Fund, the Accident Compensation Corporation and the Earthquake Commission). Including these gains, the headline operating deficit was $13.4 billion (compared with $4.5 billion a year earlier).
At 30 June 2011, core Crown net debt stood at $40.1 billion or 20.0% of GDP and the Crown's net worth stood at $80.9 billion, or 40.4% of GDP.
The global financial crisis and the Canterbury earthquakes have demonstrated to New Zealanders and to the Government the importance of the Crown maintaining a strong fiscal position.
Looking forward, the Government is committed to rebuilding the Crown's fiscal position to ensure that New Zealand is well placed to deal with any future unexpected shocks.
Hon Bill English
Minister of Finance
30 September 2011