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Financial Statements of the Government of New Zealand for the Eight Months Ended 28 February 2014

8 Apr 2014

Fergus Welsh, Acting Chief Government Accountant

The Financial Statements of the Government of New Zealand for the eight months ended 28 February 2014 were released by the Treasury today.  These statements are compared against forecasts based on the Half Year Economic and Fiscal Update (HYEFU), released on 17 December 2013.  

Core Crown tax revenue has increased by $1.9 billion (or 5.0%) compared to the same time last year.  However this was $1.1 billion less than expected and is reflected across most tax types, continuing the pattern of recent months.  While some weakness is expected to persist as a result of some assumptions made at HYEFU for GST, other individuals’ tax and customs and excise duties in the current year not eventuating, the lower than forecast tax relating to corporate tax ($372 million) and source deductions ($136 million) are thought to be mostly timing in nature.

Overall, it is expected that slightly over half of the $1.1 billion weaker year to date outturn will remain at year end once the elements that appear timing-related reverse.  There are risks associated with this view and, owing to the timing of tax assessments, much of the expected narrowing may not be apparent until June data is received.  

Updated tax revenue forecasts will be released as part of the Budget Economic and Fiscal Update in May.  At this stage, it is anticipated that a stronger outlook for the economy will further boost tax revenues from their current position, largely offsetting the current weakness in revenue outturns, resulting in an outlook for tax revenue for 2014/15 that is broadly similar to that presented in the HYEFU.  As a result tax revenue developments are not likely to impact on the forecast surplus for 2014/15.

The operating balance before gains and losses (OBEGAL) was in deficit by $1.4 billion, which was $884 million more than expected, mainly due to the lower core Crown tax revenue.  This result was partially offset by higher returns from Crown Entities largely due to an updated EQC valuation.

Continued strength in equity markets saw gains recorded on financial instruments of $3.5 billion, which was $1.9 billion ahead of forecast.  As a result, the operating balance surplus was $891 million higher than forecasts at $3.7 billion.

Net debt was $435 million higher than forecast at $60.0 billion or 27.1% of GDP.  This variance was primarily due to a higher than forecast residual cash deficit driven by lower than expected core Crown tax receipts and higher than expected operating payments.  

At 28 February, total Crown assets were $246.8 billion and liabilities were $171.4 billion and the Crown’s share of net worth strengthened to $70.9 billion.


Year to date Full Year
$ million February
2014
Actual1
February
2014
HYEFU
Forecast1
Variance
to HYEFU
$m
Variance
to HYEFU
%
June
2014
HYEFU
Forecast2
Core Crown




Core Crown tax revenue 39,471 40,609 (1,138) (2.8) 62,491
Core Crown revenue
43,176 44,382 (1,206) (2.7) 68,493
Core Crown expenses 45,856 45,924 68 0.1 72,181
Core Crown residual cash (3,951) (3,279) (672) (20.5) (4,076)
Gross debt3 83,328 83,313 (15) (0.0) 81,628
as a percentage of GDP 37.6% 37.6%     35.8%
Net debt4 60,038 59,603 (435) (0.7) 59,983
as a percentage of GDP 27.1% 26.9%     26.3%
Total Crown          
Operating balance before gains and losses (1,393) (509) (884) (173.7) (2,320)
Operating balance 3,721 2,830 891 31.5 1,639
Net worth attributable to the Crown
70,923 70,332 591 0.8 69,165

1    Using GDP for the year ended 31 December 2013 of $221,417 million (Source: Statistics New Zealand).
2    Using forecast GDP for the year ended 30 June 2014 of $227,793 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. Net debt may fluctuate during the year largely reflecting the timing of tax receipts.

ENDS

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