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Overall the Crown's operating performance continued to improve...

The operating balance before gains and losses (OBEGAL) deficit decreased from $4.4 billion, to $2.9 billion.

The continued narrowing of the OBEGAL deficit was a result of further growth in the nominal economy (leading to a higher tax take).

Excluding the impact of the Canterbury rebuild, the adjusted OBEGAL deficit was $2.6 billion this year; which was around half the comparative figure for the previous year.

Figure 1 - OBEGAL (excluding minority interests)
Figure 1 - OBEGAL (excluding minority interests).
Source:  The Treasury

... as the New Zealand economy continued to grow leading to an increase in the tax take...

Real gross domestic product expanded at an annual average rate of 3.5% in the June 2014 year, with strong growth in construction, primary industries and some services. In current dollar or nominal terms, the value of output increased 7.8%, largely as a result of a 15.8% increase in the goods terms of trade. Weekly paid hours were up 3.2% from the previous year and average hourly wages were up 2.6%, giving an increase in total weekly gross earnings of 5.8%.

The increase in economic activity and growth in employment led to core Crown tax revenue being $2.8 billion higher than a year earlier, with all major tax types improving to reach $61.5 billion. As a share of the economy, core Crown tax revenue was 26.8% of GDP - that compares, for example, with a peak in the past decade of 31.2% of GDP in the year to June 2006.

Figure 2 - Core Crown revenue and expenses
Figure 2 - Core Crown revenue and expenses.
Source:  The Treasury

...while core Crown expenses remained relatively flat... 

In nominal terms, core Crown expenses increased $1.2 billion (1.7%) to $71.5 billion for the year to 30 June. As a share of the nominal economy, core Crown expenses were equal in value to 31.2% of GDP (33.1% of GDP in 2013).

The largest drivers of growth in nominal core Crown expenditure were New Zealand Superannuation expenditure as a result of indexation and an increase in the number of recipients, along with spending decisions in Budget 2013, primarily relating to health and education.

...and investment gains led to an operating balance surplus... 

The total Crown operating balance, inclusive of gains and losses, was a surplus of $2.8 billion, as net gains of $5.4 billion more than offset the OBEGAL deficit.

Figure 3 - Operating balance (excluding minority interests)
Figure 3 - Operating balance (excluding minority interests).
Source:  The Treasury

...strengthening the Crown's net worth

With an operating surplus, the Crown's net worth increased for the second consecutive year. Total assets increased by $11.7 billion, while liabilities increased by $0.9 billion.

The higher asset values were largely the result of revaluations to Crown assets contributing to the increase in value of property, plant and equipment ($6.5 billion) and strong equity markets which contributed to an uplift in financial assets ($4.4 billion).

The increase in liabilities was due mainly to an increase in borrowings, partly offset by lower earthquake liabilities as claims were settled.

Figure 4 - Net worth attributable to the Crown
Figure 4 - Net worth attributable to the Crown.
Source:  The Treasury

...however cash deficits continued, causing net debt to rise

With the Crown recording an OBEGAL deficit, and maintaining capital spending, the resulting residual cash deficit meant that net debt continued to rise in nominal terms. Net debt reached $59.9 billion (26.2% of GDP) at 30 June 2014, up from $55.8 billion (26.3% of GDP) a year earlier. The rate of growth, however, has slowed in recent years as cash deficits have become smaller. At $4.1 billion, the residual cash deficit was $1.6 billion less than the year before as tax receipts grew faster than operating payments. In addition, this year included proceeds of $2.3 billion from the Government share offer programme ($0.7 billion higher than last year).

Figure 5 - Net debt
Figure 5 - Net debt.
Source:  The Treasury

Year end results compared to Pre-election Update forecast

The Pre-election Update was published on 19 August 2014.  While the financial statements focus on results compared to Budget 2014 forecasts, this section compares outcomes against the recent Pre-election Update.

Table 2 - 2014 results compared to the Pre-election Update
Year ended 30 June
$ million
Variance to
Update 2014
Core Crown tax revenue 61,474 61,516 (42)
Core Crown expenses 71,467 71,291 (176)
OBEGAL (excluding minority interests) (2,933) (2,595) (338)
Operating balance (excluding minority interests) 2,808 2,826 (18)
Residual cash (4,109) (4,191) 82
Gross debt 81,956 82,820 864
   as a percentage of GDP 35.8% 35.8%
Net debt 59,931 59,941 10
   as a percentage of GDP 26.2% 25.9%
Net worth attributable to the Crown 75,568 74,401 1,167

Overall, the results were broadly similar to the Pre-election Update.  This is not unexpected, as the Pre-election Update incorporated unaudited interim 2014 year-end results as a base for the forecast.  However, there have been some changes as the year-end results were finalised.

Core Crown tax revenue

Core Crown tax revenue was close to the Pre-election Update, with variances in GST ($87 million lower) and corporate tax ($44 million higher) partly offsetting each other.  The negative variance on GST can be attributed to continued weakness in nominal domestic consumption. In contrast, weakness in corporate tax was not as great as expected.

Core Crown expenses

Core Crown expenses were $176 million higher than the Pre-election Update.  Costs of $75 million associated with the Canterbury rebuild were reclassified as expenses (previously losses).  In addition Treaty of Waitangi-related expenses were $52 million higher than expected, with the remaining variances spread across a number of entities and expense types.


The OBEGAL deficit was $338 million greater than in the Pre-election Update at $2.9 billion.

  • When the tax results of SOE's and Crown Entities are included, tax revenue was $122 million under forecast, due to the finalisation of their year-end results.
  • Core Crown expenses contributed to $176 million of this result (as discussed above).

Net worth attributable to the Crown

Net worth attributable to the Crown was $1.2 billion higher than forecast in the Pre-election Update.  Net property, plant and equipment revaluations account for the majority of this change, as valuations were not finalised at the time the forecast was released.


While gross debt was lower than expected (with the core Crown holding less debt instruments than forecast), financial assets were also lower, meaning net debt was close to forecast.

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