Fergus Welsh, Acting Chief Government Accountant
The Financial Statements of the Government of New Zealand for the seven months ended 31 January 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.
The operating balance before gains and losses (OBEGAL) was in deficit by $1.1 billion, which was $637 million more than expected, mainly due to lower core Crown tax revenue across most tax types. This result was partially offset by lower core Crown expenses and higher returns from Crown Entities.
At this stage, it is difficult to determine how much of the lower than forecast tax is temporary versus permanent but we expect this to become clearer over the next few months. Timing issues are likely to see some of the current variance narrow by year end. Factors contributing to these timing issues include mismatching in the timing of GST refunds and receipts relating to both export products and the Canterbury rebuild, as well as tax revenue from some large corporate taxpayers not yet being visible to the IRD owing to their use of tax pooling schemes.
Following on the trend in recent months, continued strength in equity markets saw gains recorded on financial instruments of $2.8 billion, which was $1.3 billion ahead of forecast. As a result, the operating balance surplus was $629 million higher than forecasts at $3.4 billion.
Net debt was $631 million higher than forecast at $59.9 billion or 27.7% of GDP. This 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. Delays in insurance proceeds being returned to the core Crown also contributed to the higher than forecast residual cash deficit.
At 31 January, total Crown assets were $246.9 billion and liabilities were $171.8 billion and the Crown’s share of net worth strengthened to $70.6 billion.
| Year to date | Full Year | ||||
|---|---|---|---|---|---|
| $ million | January 2014 Actual1 |
January 2014 HYEFU Forecast1 |
Variance to HYEFU $m |
Variance to HYEFU % |
June 2014 HYEFU Forecast2 |
| Core Crown | |||||
| Core Crown tax revenue | 34,982 | 35,858 | (876) | (2.4) | 62,491 |
| Core Crown revenue | 38,277 | 39,169 | (892) | (2.3) | 68,493 |
| Core Crown expenses | 40,127 | 40,265 | 138 | 0.3 | 72,181 |
| Core Crown residual cash | (4,112) | (3,250) | (863) | (26.6) | (4,076) |
| Gross debt3 | 83,333 | 83,450 | 117 | 0.1 | 81,628 |
| as a percentage of GDP | 38.6% | 38.6% | 35.8% | ||
| Net debt4 | 59,897 | 59,266 | (631) | (1.1) | 59,983 |
| as a percentage of GDP | 27.7% | 27.4% | 26.3% | ||
| Total Crown | |||||
| Operating balance before gains and losses | (1,063) | (426) | (637) | (149.5) | (2,320) |
| Operating balance | 3,372 | 2,743 | 629 | 22.9 | 1,639 |
| Net worth attributable to the Crown | 70,627 | 70,242 | 385 | 0.5 | 69,165 |
1 Using GDP for the year ended 30 September 2013 of $216,134 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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Kamlesh Patel | Office of the Government AccountantTel: +64 4 917 6094
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