Media statement

Interim Financial Statements of the Government of New Zealand for the three months ended 30 September 2020

The interim Financial Statements of the Government of New Zealand for the three months ended 30 September 2020 (the financial statements) were released by the Treasury today.

The financial statements are the first for the new financial year and are compared against forecasts included in the 2020 Pre-election Economic and Fiscal Update (PREFU 2020) published on 16 September 2020.

The unaudited numbers for the Financial Statements of the Government for the year ended 30 June 2020 have formed the starting position for the financial statements. The 30 June 2020 unaudited numbers in the financial statements are subject to change.

The September results show the on-going impacts of the COVID-19 pandemic with an operating balance deficit of $6.8 billion and an increase in net core Crown debt to $94.0 billion. However, both the operating balance deficit and net core Crown debt are better than forecast by $1.3 billion and $3.6 billion respectively.

Core Crown tax revenue was $22.0 billion, $2.1 billion above the PREFU 2020 forecast. GST revenue was $6.2 billion, $1.2 billion above forecast and was driven from stronger domestic spending. In addition, source deduction revenue was $9.3 billion, $0.6 billion above forecast, as salary and wage income for the period has held up better-than-expected, assisted by the extension of the Government’s Wage Subsidy Scheme.

Core Crown expenses were $27.0 billion, $1.1 billion below forecast mainly owing to the Wage Subsidy Scheme which was below forecast by $1.0 billion.

The operating balance before gains and losses (OBEGAL) was a deficit of $3.2 billion and $3.3 billion less than the deficit forecast, primarily owing to the core Crown results.

When total gains and losses are added to the OBEGAL result, the operating balance (excluding minority interests) was a $6.8 billion deficit, and $1.3 billion less than the deficit forecast. 

Losses on non-financial instruments were $4.5 billion above forecast mainly owing to losses on the ACC claims liability as a result of a drop in discount rates. This variance was partly offset by lower than forecast losses on financial instruments of $2.7 billion, mainly driven by favourable changes in market prices.

Core Crown residual cash was a deficit of $7.9 billion, $3.6 billion lower than the deficit forecast. This was mainly due to the cashflow impacts of the core Crown operating results.

Net core Crown debt was $94.0 billion (30.5% of GDP), $3.6 billion less than forecast mainly owing to the core Crown residual cash variance discussed above.

Total borrowings at $154.6 billion were $27.8 billion below forecast, primary owing to decreased bank settlement deposits held with the Reserve Bank ($31.6 billion below forecast), slightly offset by above forecast Government bonds ($2.2 billion).

As market liquidity is being managed through different measures such as large scale asset purchase programme, the Reserve Bank has not invested in marketable securities or used other instruments to the level forecast and as a result has not drawn on settlement deposits as expected. Therefore assets and liabilities are lower than forecast.

Net worth attributable to the Crown at $103.3 billion, was $1.3 billion higher than forecast. Most of this variance relates to the operating balance variance as discussed above.

Key indicators for the three months ended 30 September 2020 compared to PREFU 2020.

Key indicators for the eleven months ended 30 September 2020 compared to PREFU 2020
  Year to date Full Year
September 2020
Actual1
$m
September 2020
PREFU 2020
Forecast1
$m
Variance2
PREFU 2020
$m
Variance
PREFU 2020
%
June 2021
PREFU 2020
Forecast3
$m
Core Crown          
Core Crown tax revenue 22,048 19,993 2,055 10.3 84,660
Core Crown revenue 23,734 21,622 2,112 9.8 91,300
Core Crown expenses 26,983 28,107 1,124 4.0 119,458
Core Crown residual cash (7,943) (11,578) 3,635 31.4 (40,971)
Net core Crown debt4 94,037 97,631 3,594 3.7 130,195
as a percentage of GDP 30.5% 31.7%     43.0%
Gross debt5 107,647 108,771 1,124 1.0 93,791
as a percentage of GDP 34.9% 35.3%     31.0%
Total Crown          
Operating balance before gains and losses (3,168) (6,451) 3,283 50.9 (31,695)
Operating balance (excluding minority interests) (6,776) (8,088) 1,312 16.2 (35,260)
Total borrowings 154,556 182,350 27,794 15.2 210,268
Net worth attributable to the Crown 103,329 102,064 1,265 1.2 75,038
as a percentage of GDP 33.5% 33.1%     24.8%
  1. Using the most recently published GDP (for the year ended 30 June 2020) of $308,276 million (Source: Stats NZ).
  2. Favourable variances against forecast have a positive sign and unfavourable variances against forecast have a negative sign.
  3. Using PREFU 2020 forecast GDP for the year ending 30 June 2021 of $302,875 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.

ENDS

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