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Media Statement
Financial Statements of the Government of New Zealand for the Eight Months Ended 29 February 2012

4 Apr 2012

Fergus Welsh
Chief Financial Officer
The Treasury

The Financial Statements of the Government of New Zealand for the Eight Months Ended 29 February 2012 were released by the Treasury today.

The monthly financial statements are compared against monthly forecast tracks based on the 2011 Pre-election Economic and Fiscal Update (PREFU) published on 25 October 2011.

For the first eight months of the year the operating balance before gains and losses (OBEGAL) deficit was $395 million higher than forecast at $5.5 billion.  Core Crown expenditure was $1.4 billion below forecast, offset by core Crown revenue which was $1.2 billion below forecast.  In addition, since the PREFU there has been an increase in EQC’s expenses, net of reinsurance, of $500 million following a revision of its estimated liability in relation to the Canterbury earthquakes.  Most of the increase ($450 million) related to the 23 December 2011 earthquake - $290 million of this was first booked in the 31 January Financial Statements published last month.

The lower-than-expected core Crown revenue was primarily due to core Crown tax revenue ($35.4 billion) which was $825 million lower-than-forecast, an improvement from the $946 million variance last month.  However, the three main tax-types continued to be below forecast.  The specific drivers were:

  • Source deductions - $200 million below forecast as the labour market and employment and wage growth have been weaker than expected.
  • GST - $369 million below forecast because earthquake-related insurance refunds continued to be above forecast.  However, the GST base (excluding these refunds) was close to forecast.
  • Corporate tax - $193 million below forecast as business profitability was weaker than expected.

February’s year-to-date tax revenue result is consistent with expectations that full-year tax revenue will be below PREFU forecasts, as indicated in the Budget Policy Statement released on 16 February 2012.

Core Crown expenses of $45.2 billion were 3.0% below forecast.  The lower than forecast expenditure was either offset by similar reductions in revenue, or a result of delays in expenditure. 

While the OBEGAL deficit was $395 million higher than forecast, the operating balance deficit at $8.8 billion was $1.3 billion (16.5%) higher than forecast.  In addition to the OBEGAL result, higher than forecast actuarial losses on the GSF ($1.0 billion) and ACC liabilities ($329 million) contributed to the variance.  The actuarial losses were partially offset by losses on investment portfolios across the Crown being $629 million lower than forecast due to a rebound in global equities in February.



Year to date Full Year
$ million February 2012
Actual1
February 2012
PREFU
Forecast1
Variance
to PREFU
$m
Variance
to PREFU
%
June
2012
PREFU
Forecast2
Core Crown




Core Crown tax revenue 35,352 36,177 (825) (2.3) 55,451
Core Crown revenue
38,420 39,587 (1,167) (2.9) 61,165
Core Crown expenses 45,150 46,549 1,399 3.0 74,460
Core Crown residual cash (8,322) (8,695) 373 4.3 (13,638)
Gross debt3 75,984 76,312 329 0.4 79,779
as a percentage of GDP 37.2% 37.3%     37.7%
Net debt4 48,991 49,394 403 0.8 53,823
as a percentage of GDP 24.0% 24.2%     25.4%
Total Crown          
Operating balance before gains and losses (5,532) (5,137) (395) (7.7) (10,809)
Operating balance (8,840) (7,589) (1,251) (16.5) (12,601)
Net worth 72,183 73,213 (1,030) (1.4) 68,282

1 Using GDP for the year ended 31 December 2011 of $204,503 million (Source: Statistics New Zealand)
2 Using forecast GDP for the year ended 30 June 2012 of $211,773 million (Source: Treasury)
3 Gross sovereign-issued debt excluding settlement cash and Reserve Bank bills
4 Net core Crown debt excluding student loans and other advances

ENDS

Officer for Enquiries

Kamlesh Patel | Office of the Chief Financial Officer and Chief Accountant Portfolio
Tel: +64 4 917 6094
Email: kamlesh.patel@treasury.govt.nz
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