Formats and related files
Accessible version
Only the Ministerial Statement and Financial Statements Summary has been prepared in HTML. If you require an accessible version, please contact [email protected] and cite Financial Statements of the Government of New Zealand for the Year Ended 30 June 2024 as a reference.
Ministerial Statement#
The 2023/24 financial year was a difficult one for many New Zealanders. Interest rates were high throughout this period as the Reserve Bank sought to drive down high inflation by constraining demand. Economic growth was low, or negative, in each quarter.
Low growth affects the Crown’s revenue; high inflation raises both its revenue and expenses. These Financial Statements show that Core Crown tax revenue of $120.6 billion was $8.2 billion higher than the 2022/23 financial year and core Crown expenses of $139.0 billion were $11.4 billion higher.
The Crown’s operating balance before gains and losses (OBEGAL) deficit widened by nearly $3.4 billion to reach $12.9 billion. OBEGAL has been in deficit since 2019/20, largely because core Crown expenses have increased faster than core Crown revenue. While some spending increases were temporary – for example, in response to the 2023 North Island weather events – there was a permanent increase in other areas. At Budget 2024, the Treasury estimated that a considerable portion of the 2023/24 OBEGAL deficit was structural and would not be eliminated as the economy, and therefore tax revenue, begins to grow again.
To bring revenue and expenses back into balance, the coalition Government – which came into office towards the middle of the 2023/24 financial year – is focussed squarely on controlling spending and restoring fiscal discipline. It is committed to reducing core Crown expenses as a proportion of GDP and returning to an OBEGAL surplus. With prudent control of spending, the Government does not see any need to seek major additional sources of revenue.
The Financial Statements also show that net core Crown debt reached $175.5 billion at 30 June 2024 (42.5 per cent of GDP) – an increase of around $20 billion over the previous year. The Government’s objective is to bring net core Crown debt below 40 per cent of GDP, and it will do that steadily over time.
The Crown’s assets grew in value to $570.9 billion in the year ended 30 June 2024. The Government’s strategy for managing Crown assets is to:
- strengthen investment disciplines
- improve project selection to deliver a more stable and sustainable investment pipeline that reflects the economy’s capacity to deliver
- improve the performance of the Crown’s existing assets in supporting service delivery, and
- use a broader range of funding and financing options, including the use of revenue tools and models that involve private capital.
These Financial Statements report what has already occurred. Government planning necessarily looks to the future. The next set of forecasts – which draw on these Statements – will be released alongside the Half Year Economic and Fiscal Update.
Sound financial accounts are at the heart of good government. The Government is committed to improving the books, which I am very confident will be reflected in Financial Statements to come.
Hon Nicola Willis
Minister of Finance
30 September 2024
Financial Statements Summary#
This commentary should be read in conjunction with the audited financial statements on pages 39 to 166. The Financial Statements of the Government received an unmodified auditor’s opinion for the year ended 30 June 2024.
The financial results of the Government in 2023/24 show that both total revenue and total expenses have grown since last year. The growth in total revenue was outpaced by the growth in total expenses, leading to the operating balance before gains and losses (OBEGAL) deficit of $12.9 billion being larger compared to the result last year. Favourable valuation movements on financial and non-financial instruments have narrowed the gap between total revenue and total expenses, resulting in an operating balance deficit of $8.4 billion. Overall net worth has remained broadly unchanged since last year at around $191.0 billion, with the 2023/24 operating balance deficit largely offset by revaluation gains on physical assets.
In summary:
- Total revenue at $167.3 billion in the 2023/24 year was $14.3 billion higher than in 2022/23 and $2.3 billion higher than expected at the 2024 Budget Economic and Fiscal Update (Budget 2024) Budget 2024 forecast. These variances were largely due to higher tax revenue (page 8).
- Total expenses at $180.1 billion in the 2023/24 year were $18.2 billion higher than in 2022/23 and $4.4 billion higher than expected at the Budget 2024 forecast. These variances were spread across several expenditure types (page 10).
- The operating balance was a deficit of $8.4 billion, largely a result of expenses exceeding revenue by $12.7 billion (page 13) partially offset by net gains on financial and non-financial instruments of $4.7 billion.
- The operating balance before gains and losses (OBEGAL) deficit of $12.9 billion was higher than the deficit reported in the 2022/23 year (page 15) and to what was expected in the Budget 2024 forecast (page 26).
- Net worth of $191.0 billion was close to the balance at 2022/23 year (page 25), but higher than the level forecast at Budget 2024.
- Net core Crown debt at $175.5 billion (42.5% of GDP), increased by $20.2 billion since last year, but was $2.6 billion lower than the expected in the Budget 2024 forecast (page 18).
Year ended 30 June |
Actual2 2024 $ millions |
Actual2 2023 $ millions |
Variance | Forecast | |||
---|---|---|---|---|---|---|---|
Budget 20243 2024 $ millions |
Variance | ||||||
$ millions | % | $ millions | % | ||||
Total revenue | 167,347 | 153,011 | 14,336 | 9.4 | 165,050 | 2,297 | 1.4 |
Total expenses | 180,061 | 161,822 | 18,239 | 11.3 | 175,651 | 4,410 | 2.5 |
Core Crown residual cash | (19,302) | (25,648) | 6,346 | (24.7) | (21,864) | 2,562 | (11.7) |
Operating balance1 | (8,365) | 5,321 | (13,686) | (257.2) | (2,988) | (5,377) | 180.0 |
Total net worth | 191,049 | 191,472 | (423) | (0.2) | 189,233 | 1,816 | 1.0 |
OBEGAL1 | (12,854) | (9,446) | (3,408) | 36.1 | (11,074) | (1,780) | 16.1 |
Net core Crown debt | 175,464 | 155,273 | 20,191 | 13.0 | 178,094 | (2,630) | (1.5) |
% of GDP | |||||||
Total revenue | 40.5 | 38.7 | 1.8 | 40.0 | 0.5 | ||
Total expenses | 43.6 | 41.0 | 2.6 | 42.5 | 1.1 | ||
Core Crown residual cash | (4.7) | (6.5) | 1.8 | (5.3) | 0.6 | ||
Operating balance | (2.0) | 1.3 | (3.3) | (0.7) | (1.3) | ||
Total net worth | 46.2 | 48.5 | (2.3) | 45.8 | 0.4 | ||
OBEGAL | (3.1) | (2.4) | (0.7) | (2.7) | (0.4) | ||
Net core Crown debt | 42.5 | 39.3 | 3.2 | 43.1 | (0.6) | ||
Source: The Treasury |
Overall, most key fiscal indicators have deteriorated since last year…#
The 2023/24 year has been marked by a softening in economic activity, with high interest rates to reduce inflation constraining demand. The Reserve Bank kept the official cash rate (OCR) at 5.5% throughout the 2023/24 year to ensure inflation returns to target within a reasonable timeframe. In comparison to the 2022/23 year, the OCR was on an upward trajectory from 2.0% to 5.5% by the end of the year. The impact of the higher OCR throughout the 2023/24 year resulted in higher interest rates and an easing in the annual percentage change in the Consumers Price Index (CPI) through the year.
Despite a softer economy, total revenue at $167.3 billion have increased by $14.3 billion compared to last year. Just over half of the increase has come from tax revenue underpinned by a strong labour market and the high interest rates that prevailed through the year. The overall growth in tax revenue has been somewhat offset by weaker business profits. The remainer of the increase in total revenue came from higher interest revenue, driven by high interest rates, and sales of goods and services.
Total expenses at $180.1 billion were $18.2 billion more than last year. A number of factors have contributed to the lift in expenses. Overall, decisions from Budget 2023, the mini-Budget in late 2023 and Budget 2024 have contributed to approximately a quarter of the net increase in total expenses. A large share of the additional spending reflected the impact of increased costs (including wages) for providing services given the high inflationary environment and support to ease the cost of living pressures for New Zealanders. Some of the other drivers in the increase in total expenses included the impact from the indexation of most main benefit payments, the increase in the number of New Zealand Superannuation recipients, the settlement of some pay equity claims, higher interest rates and costs from an increased level of borrowings to fund the Government’s activities.
With the growth in total revenue being smaller than the growth in total expenses, the OBEGAL deficit of $12.9 billion has widened by $3.4 billion compared to last year. In addition, the net gains from the valuation on financial and non financial instruments were $10.0 billion less than last year. While returns on the Government’s investment portfolio were stronger on the back of favourable market conditions, this was more than offset by unfavourable valuation movements in the ACC outstanding claims liability and New Zealand Emissions Trading Scheme (NZ ETS) liability. Combining the widening in the gap between total revenue and total expense and lower net gains, this has led to the operating balance deficit of $8.4 billion being $13.7 billion weaker than the result last year.
The Government’s net worth at $191.0 billion remained broadly in line with the prior year balance, as the operating balance deficit reported in the 2023/24 year was offset by net revaluation gains on physical assets. The revaluation gains were largely due to upward valuations of state highways and electricity generation assets.
Net core Crown debt at $175.5 billion rose by $20.2 billion through the year. The increase predominantly reflects the additional funding requirement to cover the cash shortfall in the year, which is illustrated by the residual cash deficit of $19.3 billion. As a share of the economy, net core Crown debt increased to 42.5% of GDP from 39.3% of GDP last year.
…in contrast the results were more mixed compared against the forecasts at Budget 2024#
Total revenue was higher than forecast by $2.3 billion, largely owing to tax revenue, which came in $1.6 billion higher than expected. This was mostly due to stronger than expected corporate tax from Portfolio Investment Entities (PIE) on the back of strong investment returns and other direct taxes revenue from additional dividend distributions. In contrast, total expenses were higher than forecast by $4.4 billion spread across several areas (discussed further on page 10) and net gains on financial and non-financial instruments were $3.4 billion less than expected, primarily owing to an increase in the valuation of the ACC outstanding claims liability. As a result, this has led to both the OBEGAL deficit and the operating balance deficit being weaker than expected at Budget 2024, by $1.8 billion and $5.4 billion respectively.
A large part of the higher-than-expected expenditure does not flow through to residual cash as they are non-cash in nature (eg, impairments) or sit outside the core Crown (eg, insurance expense). As a result, the residual cash deficit was $2.6 billion smaller than expected, which also flows through to net core Crown debt being lower by a similar amount.
The results are compared against the 2022/23 year and the forecasts for the 2023/24 year at the Budget 2024 published in May 2024. A comparison of the results against the forecasts for the 2023/24 year at the 2023 Budget Economic and Fiscal Update are discussed in Note 3: Explanation of Major Variances against Budget 2023 Forecasts.