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Media Statement Financial Statements of the Government of New Zealand for the year ended 30 June 2011

11 Oct 2011

Fergus Welsh
Chief Financial Officer

The Financial Statements of the Government of New Zealand for the year ended 30 June 2011 were released by the Treasury today.

Key features of the results were:

Total Crown revenue for the year was $81.6 billion, an increase of $6.8 billion on the previous year.

Most of this increase related to insurance claims and reinsurance recoveries from the Canterbury earthquakes ($4.5 billion).

Tax revenue also increased ($0.8 billion), for the first time in three years due to growth in income, private consumption and business profits.

Total Crown expenses have risen sharply during the year to nearly $100 billion, an increase of $18.9 billion from last year.  Of this increase, $13.6 billion was from expenses relating to the Canterbury earthquakes.  The majority of the remaining increase was due to:

  • new funding introduced in Budget 2010, which was primarily spent in the health and education sectors
  • new initiatives that have had large one-off impacts (eg, the Emissions  Trading Scheme, Weathertight homes financial assistance package)
  • an increase in the number of recipients and indexation of New Zealand Superannuation, and
  • an increase in debt financing costs due to the higher level of borrowings.

As a result of these factors the operating balance before gains and losses deficit increased considerably from $6.3 billion in 2009/10 to $18.4 billion in the latest financial year.

The net impact of the earthquakes on the operating balance before gains and losses was $9.1 billion as follows:

Table 1 - Impact of the earthquakes on the operating balance before gains and losses
Year ended 30 June
$ million
Revenue
2011
Expenses
2011
Net Costs
2011
Local infrastructure - 160 160
State-owned assets - 46 46
Welfare support and emergency responses - 363 363
AMI support package - 335 335
Red zone properties - 653 653
EQC 4,185 11,656 7,471
Other 329 388 59
Total Crown 4,514 13,601 9,087

More earthquake expenses will be recorded over the next few years as cost estimates are revised and future decisions are made on the rebuild.  The full extent of the cost to the Crown is not expected to be fully determined for some time.

Recovery in investment markets has contributed to the Crown making net gains of $5.0 billion in 2010/11.  Including these gains the operating balance deficit was $13.4 billion.

The operating balance deficit translated through to a core Crown operating cash deficit of $9.3 billion.  When capital expenditure is added, the residual cash deficit for the year was $13.3 billion.

The cash shortfall was funded through additional borrowing which has resulted in net debt increasing from $26.7 billion to $40.1 billion (or 20% of GDP), a little lower than forecast in Budget 2011.

Table 2 – Results at a glance
 Year ended 30 June Actual
2010
Actual
2011
Year on Year
Change
Forecast
30 June 2011
Budget 11
$ million
Total Crown revenue 74,725 81,563 6,838 80,169
Total Crown expenses 81,040 99,959 18,919 96,897
Operating balance before gains and losses (6,315) (18,396) (12,081) (16,728)
Operating balance (4,509) (13,360) (8,851) (9,437)
Gross debt 53,591 72,420 18,829 71,578
Net debt 26,738 40,128 13,390 41,502
Total Crown net worth 94,988 80,887 (14,101) 85,519

ENDS

 

Officer for Enquiries

Kamlesh Patel | portfolio of the Chief Financial Officer and Chief Accountant
Tel: +64 4 917 6094
Fax: +64 4 471 5956
Email: kamlesh.patel@treasury.govt.nz
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