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Evolution of the Crown balance sheet

The Crown's balance sheet size and composition has evolved through time in response to changes in economic conditions and government objectives. Not only has the total value of assets and liabilities grown over time, the split between Social, Financial and Commercial portfolios has also changed.


The Crown's asset base has grown significantly since the first balance sheet was produced in 1992, both in value and as a percentage of GDP. This is largely as a result of increases in the carrying value of Crown-owned land and buildings, and growth in financial assets, such as marketable securities and share investments.

Figure 3.2 - Crown assets
Figure 3.2 - Crown assets   .
Source:  The Treasury

The Social asset portfolio has traditionally been the largest, and this remains the case. Social assets are predominantly the property, plant and equipment used to meet government objectives. The increase in the value of land and buildings held was due to acquisitions as well as changes in the valuation of existing assets. The effect of revaluations can be seen in the asset revaluation reserve held on the balance sheet, reflecting the impact of non-cash changes in asset values, which has increased by $41.4 billion since 2003.

The value of financial assets increased primarily driven by changes to the NZSF and Accident Compensation Corporation (ACC). Over the past decade there has been a significant increase in the value of financial assets due to the prefunding of future policy driven expenses through the CFIs. NZSF began investing in 2003, and the asset portfolio of ACC has increased as it focused on becoming fully funded. Financial assets are of a different nature to Social assets and expose the Crown to a different range of risks that it had previously not needed to consider or respond to.

The Crown's investment in Commercial assets is the smallest of the three functional classifications and consists largely of property, plant and equipment in the electricity sector, and financial assets held by Kiwibank. The value of property, plant and equipment has increased through acquisitions and revaluations, while Kiwibank assets have grown in line with their customer base. It is important to note that the Government Share Offer Programme has reduced the Crown's interest in the MOM companies.[12]


Crown liabilities consist of government borrowings, commercial borrowing by SOEs, insurance liabilities and contractual retirement obligations.

Government borrowings make up the greatest proportion of liabilities. Government borrowing is used for capital acquisition and financing operating deficits. The Crown uses a fiscal indicator, net core Crown debt, as a key measure of fiscal performance and resilience.[13] At 30 June 2013 net core Crown debt stood at $55.8 billion (26.3% of GDP).[14]

Figure 3.3 - Net core Crown debt
Figure  3.3 - Net core Crown debt  .

The Crown's debt position has changed significantly over time due to fiscal policy and economic conditions. There was a 20 year period of increasing debt (1972-1992) which was followed by a long period of debt reduction (1992-2008). Over the past five years the debt-to-GDP position of the Crown has been weakening following the global financial crisis (GFC) and Canterbury earthquakes, albeit from a strong position in 2008 (5.5% of GDP).

Insurance liabilities have increased as a result of growth in the ACC scheme and the Canterbury earthquakes. The Government Superannuation Fund (GSF) has remained relatively constant due to the scheme being closed to new members since the early 1990s. In aggregate, commercial entity borrowings make up a small proportion of Crown liabilities.

Net worth attributable to the Crown

Net worth attributable to the Crown (NWAC) is an alternative measure of the Crown's long-term solvency and financial sustainability. NWAC is calculated as being the Crown's total assets less its total liabilities and minority interests, and includes many assets and liabilities that are not considered as part of the net core Crown debt measure.

The Crown's NWAC turned around from a negative position in 1993, up until the impacts of the GFC started to be felt on the Crown's balance sheet from 2009. This was driven largely by the growth in core Crown debt to fund operating deficits. The 2013 financial year saw NWAC increase for the first time since 2008, primarily due to gains in financial assets.

Figure 3.4 - Net worth attributable to the Crown
Figure 3.4 - Net worth attributable to the Crown   .
Source:  The Treasury

The balance sheet in the future

Over the next five years, the total net worth of the Crown is expected to grow by $28.2 billion driven by operating surpluses and financial asset revaluations. By 2018, assets are forecast to grow by $35.5 billion and liabilities $7.3 billion.[15]

Figure 3.5 - Crown total net worth: 2013-2018
Figure 3.5 - Crown total net worth: 2013-2018   .
Source:  The Treasury

Social assets are expected to grow by $10.7 billion which can be attributed largely to an increase in the value of the state highway network and Inland Revenue Department (IRD) receivables. Generally, social assets are largely funded through tax revenues or Crown borrowing, however state highway related expenditure is also funded through levies and road user charges. Recently there has been a focus on recycling capital from the balance sheet. The Future Investment Fund will be used to fund capital spending on social assets through to Budget 2016.[16]

Financial assets are expected to grow by $17.5 billion reflecting investment growth in CFIs - mainly the NZSF and ACC. Expected returns on investment will support NZSF and ACC growth. In the case of ACC, levy revenue will also fund asset purchases.

Within the Commercial portfolio there is expected to be an increase in both assets and liabilities that largely offset each other. These primarily relate to the continued growth in Kiwibank mortgages funded through increases in third party funding such as customer deposits.

The Crown's financial liabilities are also expected to increase, as borrowing increases to meet the Crown's cash deficits over this period. These are partially offset by a reduction in EQC liabilities as the claims resulting from the Canterbury earthquakes are expected to be settled by 2018.

Future investment

The majority of Crown capital (and operating) spending is funded from the general pool of Crown revenue, including tax income and the proceeds of Crown borrowing. This makes it difficult to directly apportion specific funding sources towards specific projects. In certain circumstances, money collected will be allocated directly to certain expenditure areas - this can be most clearly seen with transport and ACC funding.

Table 3.2 outlines forecast investment expenditure by type and the manner in which the Crown is expected to accumulate the funding required.

Table 3.2 - Capital expenditure funding
Opening cash balance 14.9 10.2 9.5 9.2 9.1
Foreign exchange losses on opening cash (0.3)    -    -    -    -
Cash flows from operations 1.1 4.1 7.7 9.9 11.7
Cash flows from financing activities 7.1 1.4 6.5 7.1 (4.7)
Government share offer programme 2.5 0.6    -     -     - 
Cash available for investment 25.3 16.3 23.7 26.2 16.1
Net purchase of physical assets (7.4) (6.5) (6.1) (5.5) (5.1)
Net purchase of intangible assets (0.6) (0.5) (0.4) (0.4) (0.4)
Net purchase of shares and securities (5.3) 2.4 (5.8) (9.0) 0.8
Net issues of advances (2.1) (1.9) (1.6) (1.5) (1.4)
Other investing activities 0.3 (0.3) (0.6) (0.7) (0.7)
Net cash flows from investing activities (15.1) (6.8) (14.5) (17.1) (6.8)
Closing cash balance 10.2 9.5 9.2 9.1 9.3

Table 3.3 provides a breakdown of the forecast gross additions to physical assets by their respective sectors.

Table 3.3 - Property, plant and equipment additions - by sector
Transport 2.6 2.5 2.5 2.5 2.6
Economic 1.3 0.7 0.8 0.9 0.8
Education 0.7 0.8 0.7 0.7 0.7
Health 0.7 0.6 0.5 0.5 0.4
Defence 0.5 0.6 0.4 0.5 0.5
Other 2.1 1.8 2.0 1.5 1.4
Total forecast additions 7.9 7.0 6.9 6.6 6.4

Further information on asset movements can be found in the following chapter.


  • [12]Reflected in the growth in net worth attributable to minority interests.
  • [13]This is calculated by taking the net position of gross Sovereign-issued debt and the core Crown's financial assets excluding advances and the NZSF's financial assets.
  • [14]The government has stated its objective is to lower net debt to no higher than 20% of GDP by 2020.
  • [15]Over the forecast period, assets are expected to decrease from 115% to 104% of GDP and liabilities are expected to decrease from 82% to 67% of GDP. However, EFU forecasts do not include the impact of revaluations on PP&E which in the past have been significant. See HYEFU 2013 for the Treasury's forecasting assumptions.
  • [16]Funded from the proceeds from the Government Share Offer Programme.
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