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Liquidity Risk

Liquidity risk is defined as not being able to meet expected and unexpected cash flow needs. The objective of NZDMO's liquidity policy is to ensure that NZDMO can meet all cash obligations as they fall due. To manage liquidity risk in its foreign currency portfolios, liquid assets are required to be held in each currency to cover cash flow obligations over one-day, two-day and six-week intervals. For New Zealand-dollar liquidity risk, NZDMO has established cash management arrangements with the RBNZ to support effective management of overall Crown cash flows.

Liquidity Management

Liquidity Risk
As at 30 June 2011 Contractual
Cash Flows
$m
0-12
Months
$m
1-2 Years
$m
2-5 Years
$m
5-10 Years
$m
> 10 Years
$m

Overdrafts and Payables

           
Crown disbursement account 3,823 3,823 - - - -
Creditors and payables 127 127 - - - -

Financial Liabilities

           
Treasury bills - market 7,276 7,276 - - - -
Treasury bills - non-market 50 50 - - - -
Government bonds - market 64,577 10,323 11,825 13,019 28,962 448
Government bonds - non-market 7,965 1,510 1,739 1,765 2,951 -
Inflation-indexed bonds - market 2,112 78 78 1,956 - -
Inflation-indexed bonds - non-market 645 24 24 597 - -
Kiwi bonds 267 204 61 2 - -
Euro-commercial paper 181 181 - - - -
Foreign currency debt 599 306 168 90 35 -
Collateral 1,417 1,417 - - - -
Departmental deposits 210 210 - - - -
IMF allocation 1,648 1,648 - - - -
Immigration investor policy bonds 89 34 45 10 - -
Other - - - - - -
Total Non-derivative Liabilities 90,986 27,211 13,940 17,439 31,948 448

Derivative Inflows[15]

           
FX contracts 19,622 19,549 67 6 - -
Cross-currency swaps 10,614 1,193 1,146 6,361 1,914 -
Interest-rate swaps 1,784 387 328 729 340 -
Total Derivative Inflows 32,020 21,129 1,541 7,096 2,254 -

Derivative Outflows[15]

           
FX contracts 19,484 19,413 65 6 - -
Cross-currency swaps 9,691 980 951 6,008 1,752 -
Interest-rate swaps 1,275 189 198 575 313 -
Total Derivative Outflows 30,450 20,582 1,214 6,589 2,065 -

Notes

  • [15]Derivative flows include both derivatives in gain and derivatives in loss.
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