Media statement

Interim Financial Statements of the Government of New Zealand for the Four Months Ended 31 October 2019

The interim Financial Statements of the Government of New Zealand for the four months ended 31 October 2019 (the financial statements) were released by the Treasury today. The financial statements are compared against forecasts based on the Budget Economic and Fiscal Update 2019 (BEFU 2019) published on 30 May 2019.

The key variances to forecast were driven by volatility around tax revenue recognition and discount rates. These drivers have had an adverse impact on the operating balance before gains and losses (OBEGAL), the operating balance and residual cash. 

Core Crown tax revenue of $27.7 billion was $1.4 billion (4.9%) below forecast. Corporate tax revenue is the main driver of this variance, mainly due to the phasing method for monthly corporate tax, and is expected to reverse out during the year. The Treasury and Inland Revenue are working closely together to understand this variance with a view to improving the forecasting in the up-coming Half Year Economic and Fiscal Update (HYEFU 2019).

Core Crown expenses of $30.4 billion were close to forecast.

The operating balance before gains and losses (OBEGAL) was in deficit by $1.1 billion and was $1.9 billion below forecast, primarily due to lower tax revenue.

When total gains and losses are added to the OBEGAL result, the operating balance was a $1.5 billion deficit and was $3.4 billion weaker than forecast. This variance was primarily driven by changes to discount rates used to calculate the ACC outstanding claims liability, which resulted in losses of $2.3 billion.

Core Crown residual cash was a deficit of $3.5 billion, $1.4 billion higher than the deficit forecast. This was mainly due to tax receipts being $0.3 billion lower than forecast and operating payments being $1.5 billion higher than forecast. The variance in operating payments is largely timing in nature, with payments expected to occur in the 2019 year moving into the current fiscal year and payments for this fiscal year occurring earlier than expected.

Net core Crown debt was $60.6 billion (20.2 % of GDP) at the end of October 2019, $1.8 billion less than forecast. The lower than expected net debt is largely due to a stronger opening position, from the 30 June 2019 result (which was $2.6 billion less than forecast). This net debt position was partially offset by the increased residual cash deficit of $1.4 billion discussed above.

Gross debt at $89.5 billion (29.8% of GDP) was $4.1 billion higher than forecast. Government stock was around $2.2 billion higher than forecast due to lower repurchasing activity occurring. In addition, derivatives in loss were higher by around $1.4 billion, which mostly reflects changes in the market since the monthly forecasts were completed.

Total borrowings at 31 October 2019 were $117.3 billion, $2.2 billion higher than forecast, primarily due to derivatives in loss increasing from forecast by $2.7 billion due to market conditions changing since the forecast was prepared.

Net worth attributable to the Crown (NWAC) was $137.6 billion, $5.6 billion higher than forecast.  The majority of this variance relates to property, plant and equipment (PPE) revaluations that were higher than expected by $11.8 billion at 30 June 2019, partially offset by the operating balance deficit for the first four months of the year.

Key indicators for the four months ended 31 October 2019 compared to BEFU 2019
$ million Year to date Full Year
October 2019
October 2019
BEFU 2019
BEFU 2019
BEFU 2019
June 2020
BEFU 2019
Core Crown          
Core Crown tax revenue 27,704 29,135 (1,431) (4.9) 89,245
Core Crown revenue 30,316 31,675 (1,359) (4.3) 96,427
Core Crown expenses 30,399 30,218 (181) (0.6) 93,401
Core Crown residual cash (3,459) (2,064) (1,395) (67.6) (4,191)
Net core Crown debt4 60,616 62,418 1,802 2.9 64,695
as a percentage of GDP 20.2% 20.8%     20.4%
Gross debt5 89,471 85,412 (4,059) (4.8) 86,845
as a percentage of GDP 29.8% 28.5%     27.4%
Total Crown          
Operating balance before gains and losses (1,079) 843 (1,922) (228.0) 1,174
Operating balance (excluding minority interests) (1,472) 1,974 (3,446) (174.6) 4,541
Total borrowings 117,297 115,137 (2,160) (1.9) 118,125
Net worth attributable to the Crown 137,642 131,999 5,643 4.3 134,730
as a percentage of GDP 45.9% 44.0%     42.5%
  1. Using the most recently published GDP (for the year ended 30 June 2019) of $300,032 million (Source: StatsNZ).
  2. Favourable variances against forecast have a positive sign and unfavourable variances against forecast have a negative sign.
  3. Using BEFU 2019 forecast GDP for the year ending 30 June 2020 of $316,957 million (Source: The Treasury).
  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.
  5. Gross sovereign-issued debt excluding settlement cash and Reserve Bank bills.



Treasury Communications Team
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