Operating Balance

Table 13 - Total Crown operating balance
Year ended 30 June $ million	Actual 2008	Actual 2009	Actual 2010	Actual 2011	Actual 2012	Forecast 30 June 2012
						Budget 11	Budget 12
Total Crown Operating balance before gains and losses	5,637	(3,893)	(6,315)	(18,396)	(9,240)	(9,741)	(8,441)
Total Crown gains/(losses)	(3,253)	(6,612)	1,806	5,036	(5,657)	2,448	(2,201)
Total Crown Operating balance	2,384	(10,505)	(4,509)	(13,360)	(14,897)	(7,293)	(10,642)
% of GDP
Total Crown Operating balance before gains and losses	3.1%	(2.1)%	(3.3)%	(9.3)%	(4.5)%	(4.9)%	(4.1)%
Total Crown gains/(losses)	(1.8)%	(3.6)%	1.0%	2.5%	(2.8)%	1.2%	(1.1)%
Total Crown Operating balance	1.3%	(5.7)%	(2.4)%	(6.8)%	(7.3)%	(3.6)%	(5.1)%

OBEGAL

The OBEGAL deficit halved from $18.4 billion in 2011 to $9.2 billion for the year to 30 June 2012 as a result of the favourable changes in both revenue and expenses from last year ($1.9 billion and $7.2 billion respectively) as discussed in the earlier sections.

When the net earthquake costs are excluded, the OBEGAL deficit was $7.3 billion this year compared to $9.3 billion last year.

In comparison with Budget forecasts, the OBEGAL deficit was $0.8 billion larger than expected due to:

Increases in tax revenue and other revenues which contributed to total revenue being $0.9 billion higher than forecast, and
total Crown expenses exceeding forecast by $1.7 billion, primarily due to the $1.4 billion impairment expense of rail-related assets.

Operating Balance

Adding the Crown's gains and losses to the OBEGAL deficit, the operating balance deficit was $14.9 billion this year (figure 10).

Figure 10 - Operating balance: Source: The Treasury

The primary contributor to the increase in the deficit was that the Crown made net losses of $5.7 billion this year compared with net gains of $5.0 billion in 2011 (a $10.7 billion change). The drivers of this change are discussed on the next page.

Gains and Losses

This year the Crown recorded net losses on assets and liabilities of $5.7 billion contrasting the net gains recorded last year of $5.0 billion. The contributors to the difference are highlighted in table 14 and discussed in detail below.

Table 14 - Gains and losses
Year ended 30 June $ million	Actual 2008	Actual 2009	Actual 2010	Actual 2011	Actual 2012	Forecast 30 June 2012
Year ended 30 June $ million	Actual 2008	Actual 2009	Actual 2010	Actual 2011	Actual 2012	Budget 11	Budget 12
ACC actuarial gain/(loss)	(1,709)	(4,491)	410	996	(2,942)	-	(1,671)
GSF actuarial gain/(loss)	(1,098)	(695)	(1,231)	(574)	(3,896)	-	(2,212)
ETS/Kyotot net position	(226)	768	(15)	47	350	-	102
Investment portfolios:
NZS Fund	(995)	(3,495)	1,750	3,518	(204)	1,215	(100)
ACC	(543)	(181)	745	961	944	554	740
Earthquake Commission	(166)	(349)	37	109	(53)	120	(67)
Other gains/(losses)	1,484	1,831	110	(21)	144	559	1,007
Total Crown gains/(losses)	(3,253)	(6,612)	1,806	5,036	(5,657)	2,448	(2,201)

¹Other gains and losses includes the net surplus from associates and joint ventures and operating balances from minority interests

Actuarial losses: The key driver of the actuarial losses recognised this year was that reductions in interest rates over the year led to the discount rate (applied to actuarially assessed liabilities) falling. The total changes in actuarial assumptions had the impact of increasing the present value of the future cash flows by $6.8 billion, most of which was due to the change in the discount rate. Further information about these liabilities, and the changes this year, is presented on page 26.

Investment portfolios: A recovering global equity market and significant uplifts in the value of key private market investments (Kaingaroa Forest and Z Energy) saw the NZS Fund record $3.5 billion of gains in 2011 (table 15). This year, in volatile markets, the asset values of the Fund made in 2010/11 were sustained but not extended. Overall, the Fund recorded losses of $0.2 billion resulting in the NZS Fund's operating balance being just above break-even for the year. Since inception the Fund has returned 7.05% (annualised) or 1.82% more than the rolling yield on 90 day Treasury bills.

Table 15 - NZS Fund results
Year ended 30 June $ million	Actual 2008	Actual 2009	Actual 2010	Actual 2011	Actual 2012	Forecast 30 June 2012
Year ended 30 June $ million	Actual 2008	Actual 2009	Actual 2010	Actual 2011	Actual 2012	Budget 11	Budget 12
Opening net worth	12,973	14,212	13,688	15,656	18,652	18,661	18,648
Revenue	385	383	433	518	539	551	516
Current tax expense	(237)	(4)	27	(872)	(160)	(367)	(175)
Inter-entity expenses	63	400	(421)	(58)	(55)	(49)	(38)
Other expenses	(97)	(77)	(81)	(111)	(77)	(123)	(94)
Gains/(losses)	(995)	(3,495)	1,750	3,518	(204)	1,215	(100)
Operating balance	(881)	(2,793)	1,708	2,995	43	1,227	109
Gross contribution from the Crown	2,104	2,243	250	-	-	-	-
Other movements in reserves	16	26	10	1	8	13	20
Closing net worth	14,212	13,688	15,656	18,652	18,703	19,901	18,777

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Operating Balance

OBEGAL

Operating Balance

Gains and Losses