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Media StatementFinancial Statements of the Government of New Zealand for the Eight Months Ended 28 February 2007

11 April 2007

Dr Peter Bushnell
Deputy Secretary to the Treasury

The Financial Statements of the Government of New Zealand for the eight months ended 28 February 2007 were released by the Treasury today.

The 28 February 2007 monthly financial statements are compared against updated monthly forecast tracks based on the 2006 Half Year Economic and Fiscal Update.

$ millionFebruary 2007
February 2007
Residual cash1,239(162)1,4011072,985
Operating balance6,5145,0901,4246,26011,473
Gross sovereign-issued debt36,59937,463(864)37,86735,461
% of GDP23.223.7(0.5)23.722.6
Net core Crown debt5,4177,064(1,647)6,3827,745
% of GDP3.44.5(1.1)4.04.9
Net core Crown debt with NZS Fund assets(6,463)(4,547)(1,916)(6,271)(2,116)
% of GDP(4.1)(2.9)(1.2)(3.9)(1.3)
Net worth88,29276,54811,74477,71871,403

The following table outlines the key variances for the year to 28 February 2007 and their likely impact on the year end result:

Item/indicator Variance Key drivers Impact on revised forecast for year end
Tax Revenue nil   Broadly in line with forecast
Net investment income (major contributor to the Operating Balance variance) +$1.0 billion
  • Largely unrealised gains on investments held by the:
    • NZSF ($0.4 billion)
    • ACC ($0.2 billion)
    • GSF ($0.1 billion), and
  • Higher than forecast foreign exchange gains ($0.3 billion)
Net investment returns are looking positive. However, in the short term they can be volatile It is policy that investment returns by NZSF, ACC, GSF are retained by these entities and are not available for redistribution
Core Crown expenditure - $0.4 billion
  • Delays in departmental spending
Departments expect that around half of the delays in spending will be permanent at year end
OBERAC + $0.5 billion Mainly due to delays in departmental spending above The depreciation on the revalued rail network (see Net Worth below) will reduce the operating balance by around $140 million per annum
GSID - $0.9 billion
  • Reductions in DMO foreign currency borrowings ($0.7 billion) and the Reserve Bank’s other lending facilities ($0.6 billion), offset by settlement cash levels being higher than forecast by $0.4 billion
Settlement cash levels have decreased from last month by $0.4 billion. Uncertainty remains over long term levels and volatility
Net Worth + $11.7 billion
  • Revaluation of the rail network ($10.3 billion), and
  • Operating balance impact of the higher than expected net investment returns and delays in departmental spending ($1.4 billion)
Residual cash + $1.4 billion Delays in departmental spending on operating ($0.6 billion in cash terms), capital ($0.4 billion) and extra tax receipts from Crown reporting entities ($0.4 billion) Unlikely the delays in departmental spending will impact on the year end position


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