Formats and related files
Prepared and furnished to the House of Representatives in accordance with Part III of the Public Finance Act 1989.
Statement of Responsibility#
These financial statements have been prepared by the Treasury in accordance with the provisions of the Public Finance Act 1989. The financial statements comply with generally accepted accounting practice.
The Treasury is responsible for establishing and maintaining a system of internal control designed to provide reasonable assurance that the transactions recorded are within statutory authority and properly record the use of all public financial resources by the Crown. To the best of my knowledge, this system of internal control has operated adequately throughout the reporting period.
John Whitehead
Secretary to the Treasury
29 September 2006
I accept responsibility for the integrity of these financial statements, the information they contain and their compliance with the Public Finance Act 1989.
In my opinion, these financial statements fairly reflect the financial position of the Crown as at 30 June 2006 and its operations for the year ended on that date.
Hon Dr Michael Cullen
Minister of Finance
29 September 2006
Ministerial Statement#
The Government’s fiscal strategy is an integral part of our overall approach to economic management. Continued economic growth and rising employment provide the means for New Zealand’s society to create a higher standard of living and a better quality of life.
The Government’s fiscal position is strong. This is no accident. It reflects many years of sound and prudent economic and fiscal management and a period of strong, sustained economic growth. Probably for the first time in our history, the Crown has moved into a positive net financial asset position. This positive position is the result of the Government’s commitment over the last two terms to reduce debt and more recently build up financial assets.
The financial statements for the year ended 30 June 2006 show an Operating Balance excluding Revaluations and Accounting Changes (OBERAC) surplus of $8.6 billion (or 5.5 percent of gross domestic product (GDP)). This compares with $8.9 billion (5.9 percent) for the previous year. After allowing for capital investment the government recorded a cash surplus of $3.0 billion, down from $3.1 billion in the year ended 30 June 2005. Most of the cash surplus has already been built into spending and tax plans, and the remainder will be considered as part of the 2007 Budget.
Gross sovereign-issued debt (GSID) increased by $0.4 billion in 2005/06 to $35.5 billion, but fell as a percentage of GDP. At 22.6 percent of GDP, GSID is within sight of the Government’s long term debt objective of GSID broadly stable at 20 percent of GDP over the next 10 years.
Net core Crown debt was $7.7 billion (4.9 percent of GDP). Including the assets of the NZS Fund, the Crown was in a net financial asset position of $2.1 billion (1.3 percent of GDP). At 30 June 2006 the NZS Fund assets stand at $9.9 billion following the statutory contribution of $2.3 billion and investment returns of $1 billion.
The financial results show the Government is implementing fiscal policy in line with its stated fiscal strategy of strengthening the fiscal position so that it is well placed to respond to future challenges such as those associated with population ageing. Along with some unexpected delays in departmental spending, progress against the Government’s fiscal intentions was faster than expected as a result of stronger economic activity and inflation over the latter part of the fiscal year. Allowing revenue to increase is consistent with our policy of letting automatic stabilisers operate and looking through the temporary effects of the economic cycle.
Looking forward we will continue to strengthen our fiscal position to help meet future spending pressures, but at a much slower pace than experienced over recent years. We continue to expect the OBERAC surplus to fall and net cash flows to move from surplus to deficit over the forecast horizon reflecting a combination of policy intentions and slower economic growth.
Hon Dr Michael Cullen
Minister of Finance
29 September 2006
Commentary on the Financial Statements#
Introduction#
The Government’s fiscal strategy (outlined in more detail in The 2006 Fiscal Strategy Report) is to strengthen its fiscal position so that it is well placed to respond to future challenges such as those associated with population ageing. The strategy is summarised in Figure 1.
The Government intends to implement this strategy primarily by building up financial assets in the New Zealand Superannuation (NZS) Fund and maintaining gross debt at around 20% of GDP. In order to keep debt stable, the Government has said it intends to run its cash position so that borrowing tracks in line with GDP over time. In practice, this means running operating surpluses sufficient to cover the contributions to the NZS Fund and some other capital spending needs.
The Financial Statements of the Government provide a record of the Government’s financial performance over the 2005/06 financial year and its financial position as at 30 June 2006. They provide a comparison with the fiscal forecasts in the Budget Economic and Fiscal Update and with 2004/05. They also provide the public with a snapshot of the progress the Government has made in implementing its fiscal strategy as set out in its Short Term Fiscal Intentions and Long Term Fiscal Objectives.
Summary#
In 2005/06, the New Zealand Government recorded an Operating Balance excluding Revaluations and Accounting Changes (OBERAC) surplus of $8.6 billion, or 5.5 percent of gross domestic product (GDP). This was $1.7 billion higher than forecast at the time of the 2006 Budget. The 2005/06 cash balance was a surplus of $3.0 billion (1.9 percent of GDP), $1.2 billion higher than forecast at 2006 Budget.
30 June 2006 actual | Estimated actual | 30 June 2005 actual | ||||
---|---|---|---|---|---|---|
$million | % of GDP | $million | % of GDP | $million | % of GDP | |
Operating Balance | 11,473 | 7.3 | 8,486 | 5.4 | 6,247 | 4.1 |
OBERAC | 8,648 | 5.5 | 6,977 | 4.5 | 8,873 | 5.9 |
Gross Sovereign Issued Debt | 35,461 | 22.6 | 35,952 | 23.0 | 35,045 | 23.3 |
Net core Crown Debt | 7,745 | 4.9 | 9,016 | 5.8 | 10,771 | 7.2 |
Net core Crown debt with NZS Fund assets | (2,116) | (1.3) | (999) | (0.6) | 4,216 | 2.8 |
Net Worth | 71,403 | 45.5 | 58,485 | 37.4 | 49,983 | 33.2 |
Core Crown revenue was $2.5 billion higher than the 2006 Budget forecast. This largely reflects the change in the accounting treatment for the recognition of provisional tax that has resulted in a one-off, non-cash adjustment to tax revenue of $1.8 billion (refer Changes to the Calculation of Provisional Tax Revenue). Tax revenue from individuals was also higher than expected reflecting continuing strong labour income growth.
Core Crown expenses were $0.5 billion lower than expected at the 2006 Budget, with a range of areas contributing.
Capital spending was also $0.4 billion lower than expected. This underspend related to investments and advances to District Health Boards and Housing New Zealand Corporation and to purchases of physical assets in a number of departments.
New Zealand Government gross sovereign-issued debt (GSID) increased by $0.4 billion in 2005/06 to $35.5 billion, but fell as a percentage of GDP. At 22.6 percent of GDP this is within sight of the Government’s long term debt objective of GSID being broadly stable at 20 percent of GDP over the next 10 years.
Net core Crown debt was $7.7 billion (4.9 percent of GDP). Including the assets of the NZS Fund, the Crown was in a net financial asset position of $2.1 billion (1.3 percent of GDP). At 30 June 2006 the NZS Fund assets stood at $9.9 billion following the statutory contribution of $2.3 billion and investment returns of $1 billion.
Comparison with Estimated Actual#
This section compares the actual 2005/06 financial results with the 2006 estimated actual forecast released in the 2006 Budget Update.
The following table provides an outline on the composition of the key fiscal indicators.
$million | 30 June 2006 Actual | 30 June 2006 Estimated Actual | Variance | 30 June 2005 Actual | |
---|---|---|---|---|---|
$million | 30 June 2006 Actual | 30 June 2006 Estimated Actual | Variance | 30 June 2005 Actual | |
Core Crown revenue | 59,170 | 56,652 | 2,518 | 52,065 | |
Less | Core Cown expenses | 49,900 | 50,445 | 545 | 46,234 |
Plus | Net surpluses/(deficits) of SOEs and Crown entities | 2,203 | 2,279 | (76) | 416 |
Equals | Operating balance | 11,473 | 8,486 | 2,987 | 6,247 |
Less | OBERAC adjustments | ||||
Revaluation changes | 1,471 | 1,964 | (493) | (2,626) | |
Accounting changes | 1,354 | (455) | 1,809 | - | |
Equals | OBERAC | 8,648 | 6,977 | 1,671 | 8,873 |
Less | Net return on the NZS Fund (excluding revaluation changes) | 580 | 580 | - | 331 |
Equals | OBERAC less NZS Fund retained earnings | 8,068 | 6,397 | (1,671) | 8,542 |
Less | Net retained surpluses of SOEs and Crown entities | 1,179 | 1,105 | (74) | 1,833 |
Non-cash items and working capital movements | (1,970) | (2,777) | (807) | (1,851) | |
Contribution to NZS Fund | 2,337 | 2,337 | - | 2,107 | |
Purchase of physical assets | 1,826 | 1,988 | (162) | 1,372 | |
Advances and Capital injections | 1,711 | 1,989 | (278) | 1,977 | |
Equals | Residual Cash | 2,985 | 1,755 | 1,230 | 3,104 |
Indicators for fiscal objectives (% of GDP) | |||||
Core Crown revenue | 37.7 | 36.3 | 1.4 | 34.6 | |
Core Cown expenses | 31.8 | 32.3 | 0.5 | 30.7 | |
OBERAC | 5.5 | 4.5 | 1.0 | 5.9 | |
Gross sovereign-issued debt | 22.6 | 23.0 | 0.4 | 23.3 | |
Net core Crown debt | 4.9 | 5.8 | 0.8 | 7.2 | |
Net core Crown debt with NZS Fund assets | (1.3) | (0.6) | 0.7 | 2.8 | |
Net worth | 45.5 | 37.4 | 8.1 | 33.2 | |
New Zealand Superannuation Fund | |||||
Fund asset returns (pre-tax) | 1,434 | 1,529 | (95) | 726 | |
Fund assets | 9,861 | 10,015 | (154) | 6,555 | |
% of GDP | 6.3 | 6.4 | (0.1) | 4.4 |
Revenue and Expenses#
$ million | Actual | Estimated actual forecast | Variance against estimated actual ($m) | Variance against estimated actual (%) |
---|---|---|---|---|
Core Crown revenue | ||||
Taxation revenue | 52,444 | 50,102 | 2,342 | 4.7 |
Levies, fees, fines & penalties | 663 | 661 | 2 | 0.3 |
Investment income | 4,496 | 4,282 | 214 | 5.0 |
Other revenue | 1,567 | 1,607 | (40) | (2.5) |
Total core Crown revenue | 59,170 | 56,652 | 2,518 | 7.5 |
Core Crown expenses | ||||
Social security and welfare | 15,598 | 15,702 | 104 | 0.7 |
Health | 9,547 | 9,563 | 16 | 0.2 |
Education | 9,914 | 10,039 | 125 | 1.3 |
Transport and communications | 1,818 | 1,910 | 92 | 5.1 |
Economic and industrial services | 1,592 | 1,725 | 133 | 8.4 |
Other functional classifications | 9,091 | 8,991 | (100) | (1.1) |
Finance and FX movements | 2,061 | 2,106 | 45 | 2.2 |
GSF liability movement | 279 | 409 | 130 | 46.6 |
Total core Crown expenses | 49,900 | 50,445 | 545 | 63.2 |
Net surplus of SOE/CEs | 2,203 | 2,279 | 76 | 3.4 |
Operating Balance | 11,473 | 8,486 | 2,987 | 35.2 |
Revenue#
Tax revenue was higher than forecast by $2.3 billion. The increase against forecast can be broken down as follows:
- The change in the revenue recognition of provisional tax (refer Changes to the Calculation of Provisional Tax Revenue) added $1.8 billion to tax revenue, split between company tax ($1.2 billion) and other persons tax ($0.6 billion).
- Apart from the provisional tax change, corporate tax was $0.1 billion higher than forecast owing to slightly higher-than-expected terminal tax assessments, i.e. revenue in respect to prior years, in the June quarter.
- GST was $0.2 billion higher than forecast owing to higher-than-forecast price pressures in the June quarter, when annual inflation was 4.0% against a Budget Update forecast of 3.4%.
- Source deductions (mainly PAYE) was $0.1 billion higher than forecast owing to higher-than-expected aggregated salaries and wages in the June quarter. Although wage rate movement was in line with Budget Update forecast, employment expanded by 1.0% in the June quarter whereas the forecast was for a contraction of 0.2%.
Changes to the Calculation of Provisional Tax Revenue
Inland Revenue has developed a method of provisional tax revenue estimation that enables a reliable estimate of provisional tax due to be made each month, instead of three times a year. Provisional tax revenue reported in these financial statements is calculated in accordance with this new estimation method.
The new method better aligns tax revenue estimation with the accounting policy for tax revenue, which is to recognise tax revenue at the time the debt to the Crown arises i.e. when the taxable income is earned by the taxpayer. In the case of provisional tax, the Crown ‘earns’ income when the economic transaction that gives rise to the income tax occurs, e.g. when a company sells some goods or a plumber fixes a leaking tap.
The method provides a more reliable estimate of the taxes owed at balance date than the old method. It also avoids revenue fluctuations arising solely from changes to the payment due date, as occurred with the changes to provisional tax due dates announced in the 2005 Budget.
Implementing the new method in the 2005/06 Government Financial Statements has resulted in a $1.8 billion increase in tax receivables in the Statement of Financial Position and an equivalent one-off increase in tax revenue in the Statement of Financial Performance. These increases reflect tax revenue earned in April, May and June 2006 but not due for payment until after June 2006. In effect, tax revenue for this transition year captures more than just the normal 12 months of provisional tax revenue.
These changes to estimating provisional tax revenue for financial reporting do not impact on taxpayers’ obligations or tax receipts; hence there are no cash flow impacts for the Crown.
The diagram below illustrates the impact in the transition year of 2006 whereby accruals from both the June 2005 quarter and the June 2006 quarter are included in the 2006 results.
Expenses#
Core Crown expenses were $0.5 billion lower than forecast. Across the functional classifications the main variances were:
- Social security and welfare expenses were lower than forecast by $104 million, mainly due to changes in debt provisioning and lower uptake of Family Support.
- Education expenses were lower than forecast by $125 million, primarily in relation to student loans. Historical data on borrowings has been updated since the 2006 Budget forecast, resulting in an adjustment to the initial fair value write down on the student loans book since its initial calculation in November 2005.
- Economic and industrial expenses were lower than forecast by $133 million, made up of lower operating costs for the Whirinaki power station and also lower than expected spending on employment related programmes. Better than expected weather reduced the need for operating Whirinaki. The resultant under expenditure is partly offset by lower revenue.
- Transport and communication expenses were lower than forecast by $92 million, primarily due to lower than expected road user and petrol excise revenues being available for spending. This reduced revenue was caused by increases in fuel prices reducing demand.
Investment income, finance costs and foreign exchange gains/losses need to be considered together. In the aggregate they were $0.3 billion ahead of forecast, primarily due to movements in exchange rates since the time of finalising the 2006 Budget forecast.
The GSF unfunded liability valuation was lower than forecast by $130 million. The reduction in the valuation was largely due to changes in assumptions, in particular updating mortality assumptions.
Net Surpluses of State Owned Enterprises and Crown Entities#
The net operating balance of SOE/CEs was $2.2 billion, which was lower than forecast by $0.1 billion. There were a number of offsetting factors within the SOE/CE results, of particular note:
- the revaluation gain on Air New Zealand’s aircraft assets has increased the operating balance by $0.3 billion
- the valuation of the ACC unfunded liability has increased expenses by $0.1 billion
OBERAC#
The OBERAC was $8.6 billion, $1.7 billion higher than forecast in the 2006 Budget. This favourable outturn has largely been driven by the activity in the core Crown segment (namely higher tax revenue and lower expenses).
The reconciliation from the operating balance to the OBERAC is outlined in the below table. Also included is a brief explanation of variances in the OBERAC adjustments compared to the 2006 estimated actual forecast.
Actual $m | Estimated actual $m | Variance against estimated actual $m | Variance explanation | |
---|---|---|---|---|
Operating balance | 11,473 | 8,486 | 2,987 | |
Add back accounting changes and valuation items | ||||
Tax revenue due to change in provisional tax recognition | (1,809) | - | (1,809) | The method of estimating provisional tax revenue has changed resulting in a one-off, non cash adjustment in 2005/06. The change was not forecast at the time of the Budget update. |
Student Loan fair value change before policy decision | 455 | 455 | .. | Represents the difference between book value and fair value of the Student Loan portfolio prior to the Government’s interest free policy. |
Net GSF valuation movement | 7 | 159 | (152) | The liability movement was lower mainly due to a change to the financial assumptions and updating of the mortality assumptions. |
ACC valuation movement | 706 | 572 | 134 | The liability movement was higher mainly due to changes in claim experience. |
NPF guarantee | 54 | - | 54 | The NPF liability has increased, due to a deficit for the year in the NPF. |
Kyoto liability movement | 346 | - | 346 | The liability movement was higher due to an update in carbon price and the quantum of New Zealand’s net emission obligation at the end of the first commitment period. |
Gain on asset revaluations | (274) | - | (274) | Asset revaluation gains largely to aircraft related assets. |
Gain on sale of assets | (630) | (630) | .. | Proceeds from the sale of Southern Hydro by Meridian Energy. |
Other equity investment gains and currency exposure | (1,680) | (2,065) | 385 | Equity investment and associated currency exposure have shown a slight weakening since the Budget update. |
OBERAC | 8,648 | 6,977 | 1,671 |
Residual cash#
$ million | Actual | Estimated actual forecast | Variance | |
---|---|---|---|---|
$m | % | |||
Operating activities | 8,859 | 8,069 | 790 | 9.8 |
Investing activities (including NZS Fund purchases of MSDs & equities, and excluding other net purchases of MSDs) | (5,874) | (6,314) | 440 | (7.0) |
Residual cash | 2,985 | 1,755 | 1,230 | 70.1 |
Net core Crown cash flows from operations was $8.9 billion for the year ended 30 June 2006, which was higher than forecast by $0.8 billion. The variance was primarily due to the cash impact of the increase in tax revenue and lower department expenditure (as outlined in the revenue and expenses sections).
Cash flows from investing activities were $0.4 billion lower than forecast, primarily due to delays in capital spending spread over a number of departments.
These above variances have resulted in a $1.2 billion increase in the residual cash position compared to the 2006 Budget.
Debt indicators#
$ million | Actual | Estimated actual forecast | Variance against estimated actual | 2005 actual |
---|---|---|---|---|
Gross Sovereign-Issued Debt | 35,461 | 35,952 | 491 | 35,045 |
% of GDP | 22.6 | 23.0 | 0.4 | 23.3 |
Net Core Crown Debt | 7,745 | 9,016 | 1,271 | 10,771 |
% of GDP | 4.9 | 5.8 | 0.9 | 7.2 |
Net debt with NZS Fund assets | (2,116) | (999) | 1,117 | 4,216 |
% of GDP | (1.3) | (0.6) | 0.8 | 2.8 |
Gross sovereign-issued debt (GSID) as at 30 June 2006 was $35.5 billion or 22.6 percent of GDP. Compared to forecast GSID was $0.5 billion lower than forecast. The reduction was primarily due to lower issuance of Treasury Bills as there has been less demand for these instruments since the recent Reserve Bank reforms around the settlement cash level.
The increase in the current year residual cash position against forecast has not led to a change in the level of GSID at 30 June 2006, as this is generally set at the time of the Budget Update. Any change against forecast in residual cash will flow onto net core Crown debt, through the cash being held as marketable securities and deposits.
Net core Crown debt was $7.7 billion or 4.9 percent of GDP. Compared to forecast, net core Crown debt was $1.3 billion lower primarily due to the increase in the residual cash position.
The New Zealand Superannuation Fund#
The assets of NZS Fund is the Government’s means of building up assets to partially pre-fund future New Zealand superannuation expenses and may only be used for New Zealand Superannuation.
The Government’s contributions to the NZS Fund are calculated over a 40-year rolling horizon to ensure that superannuation entitlements over the next 40 years can be met.
The fund balance as at 30 June 2006 was $9.9 billion. Since the inception of the NZS Fund it has received Government contributions of $8.1 billion and has accumulated retained income of $1.8 billion. The investment income earned by the NZS Fund has averaged 14.89% per annum, which exceeds the average risk-free rate of return. In the current year the NZS Fund has had investment returns exceeding the risk-free rate of return by around 12%.
2002 $m | 2003 $m | 2004 $m | 2005 $m | 2006 $m | |
---|---|---|---|---|---|
Opening balance | - | 615 | 1,884 | 3,956 | 6,555 |
Annual contributions | 600 | 1,200 | 1,879 | 2,107 | 2,337 |
Retained income (after tax) | 15 | 69 | 193 | 492 | 969 |
Closing balance | 615 | 1,884 | 3,956 | 6,555 | 9,861 |
Net Worth#
$ million | Actual | Estimated actual forecast | Variance against estimated actual | 2005 Actual |
---|---|---|---|---|
Financial assets | 56,446 | 54,265 | 2,181 | 45,308 |
Property, plant and equipment | 79,441 | 70,109 | 9,332 | 67,494 |
Other assets | 22,384 | 17,625 | 4,759 | 18,029 |
Total Assets | 158,271 | 141,999 | 16,272 | 130,831 |
Gross debt | 39,427 | 38,889 | (538) | 36,864 |
GSF pension liability | 15,231 | 15,361 | 130 | 14,952 |
ACC claims liability | 12,715 | 12,581 | (134) | 11,384 |
Other liabilities | 19,495 | 16,683 | (2,812) | 17,648 |
Total Liabilities | 86,868 | 83,514 | (3,354) | 80,848 |
Net Worth | 71,403 | 58,485 | 12,918 | 49,983 |
Net worth was $71.4 billion as at 30 June 2006, which was higher than forecast by $12.9 billion.
The increase against forecast of $9.9 billion was primarily due to the impact of revaluations of property, plant and equipment. These revaluations are not forecast beyond the base month used for deriving the estimated actual. The main factors that have for these increases in valuation are continuing appreciation of property prices, price increases and movement in foreign exchange rates.
The rest of the increase against forecast of $3.0 billion has resulted from the higher than expected operating balance. Within the individual components of the statement of financial position the variance from forecast can be seen in financial assets and accounts receivables.
Prior Year Comparison#
30 June 2006 actual $m | 30 June 2005 actual $m | Variance | ||
---|---|---|---|---|
$m | % | |||
30 June 2006 actual $m | 30 June 2005 actual $m | $m | % | |
Variance | ||||
Statement of Financial Performance | ||||
Core Crown revenue | ||||
Taxation revenue | 52,444 | 47,118 | 5,326 | 11.3 |
Other revenue | 6,726 | 4,947 | 1,779 | 36.0 |
Total core Crown revenue | 59,170 | 52,065 | 7,105 | 13.6 |
Core Crown expenses | ||||
Social security and welfare | 15,598 | 14,682 | (916) | (6.2) |
Health | 9,547 | 8,813 | (734) | (8.3) |
Education | 9,914 | 7,930 | (1,984) | (25.0) |
Other functional classifications | 12,780 | 12,570 | (210) | (1.7) |
Forecast for future new spending | - | - | - | - |
Finance costs and FX losses/(gains) | 2,061 | 2,239 | 178 | 7.9 |
Total core Crown expenses | 49,900 | 46,234 | (3,666) | (7.9) |
Net surplus of SOE/Ces | 2,203 | 416 | 1,787 | 429.6 |
Core Crown Operating Balance | 11,473 | 6,247 | 5,226 | 83.7 |
OBERAC | 8,648 | 6,977 | 1,671 | 24.0 |
Cash available | 2,985 | 3,104 | (119) | (3.8) |
Statement of Financial Position | ||||
Property, plant and equipment | 79,441 | 67,494 | 11,947 | 17.7 |
Financial assets | 56,446 | 45,308 | 11,138 | 24.6 |
Other assets | 22,384 | 18,029 | 4,355 | 24.2 |
Total Assets | 158,271 | 130,831 | 27,440 | 21.0 |
Total debt | 39,427 | 36,864 | (2,563) | (7.0) |
Other liabilities | 47,441 | 43,984 | (3,457) | (7.9) |
Total Liabilities | 86,868 | 80,848 | (6,020) | (7.4) |
Net Worth | 71,403 | 49,983 | 21,420 | 42.9 |
Debt indicators | ||||
Gross sovereign-issued debt | 35,461 | 35,045 | (416) | (1.2) |
Net core Crown debt | 7,745 | 10,771 | 3,026 | 28.1 |
Net debt with NZS Fund assets | (2,116) | 4,216 | 6,332 | 150.2 |
Prior Year Comparison (continued)#
The 2006 operating balance was higher than the 2005 operating balance by $5.2 billion. This was mainly due to:
- Tax revenue being higher than last year by $5.3 billion, with the main factors driving the increase being:
- The change in the revenue recognition of provisional tax has increased tax revenue by $1.8 billion
- Wage and employment growth led to an increase in source deductions of $1.6 billion, and
- Corporate profit growth, particularly in the Finance and Insurance sector and the Electricity, Gas and Water Supply sector, was largely responsible for an increase of $1.2 billion in corporate tax revenue.
- Other revenue being higher than last year by $1.8 billion. This was primarily due to increases in investment income, in particular the returns on NZS Fund and GSF assets.
Core Crown expenses were $3.7 billion higher than forecast. Significant movements within the core Crown functional expense classification were:
- Social security and welfare expenses increasing by $0.9 billion due to the annual indexation of welfare benefits and the first full year impact of the Working for Families Package
- Education expenses increasing by $2 billion, due to the initial write down of recording Student Loans at fair value ($1.4 billion) to better reflect the loan balance under the Government’s new interest free policy. The rest of the increase has resulted from roll growth and new policy initiatives
- Health expenses increasing by $0.7 billion, primarily due to increase funding to maintain and increase existing services levels and the impact of demographic changes
The net SOE/CE surpluses were $1.8 billion higher than last year. The key features of the increase were:
- The ACC unfunded liability expense was lower than last year by around $0.7 billion
- Investment returns in the Crown entity segment are up from last year by around $0.7 billion (namely ACC and EQC), due to stronger global equity markets
- Air New Zealand recording a gain of around $0.3 billion from its revaluation of aircraft assets compared to a loss of around $0.1 billion last year
Gross sovereign-issued debt was $0.4 billion higher than last year. The main impacts on debt during the year have been:
- An increase of around $2 billion due to the Reserve Bank raising the Settlement Cash Level, reflecting the Reserve Bank’s concern over liquidity pressures in the New Zealand money market; partially offset by
- A reduction in debt due to repayments made during the year, largely funded from the build-up of financial assets from recent outturns.
Net core Crown debt was $3 billion lower than last year due to the flow on impact of the residual cash available from the current year cash flows.
Net worth increased by $21.4 billion due to the revaluation of property, plant and equipment of $9.9 billion and the impact of the operating balance of $11.5 billion.
Indicators of the Government’s Fiscal Performance#
This section aims to help readers better understand the Government’s fiscal performance.
Each indicator gives valid insights into the government’s historical, current and forecast fiscal performance, but no one indicator gives a complete picture. Individual indicators do, however, come into greater or lesser focus as circumstances change.
When, for example, the New Zealand Government’s net worth was low and net and gross debt levels were high, much of the focus of government and public commentary at that time was on eliminating annual operating deficits and on the need to attain, and later to lock in, annual operating surpluses.
However, as net worth has risen, and gross and net debt levels have fallen, the Government in more recent years has increasingly focused on how to maintain debt levels around current levels and, accordingly, has given more focus to the Government’s annual cash balance.
Most of the indicators in this section may be useful regardless of the particular fiscal strategy being followed. In a few cases (such as the formulation of OBERAC excluding NZS Fund returns), the indicator is used to throw light on the impact of a particular fiscal strategy (in this case the build-up of financial assets in the NZS Fund).
Flow indicators
- Core Crown revenues – core crown expenses + net surplus of SOEs (i.e., after dividends) and Crown entities = Operating balance.
- Core Crown revenues are mainly taxes. Core Crown expenses represent most of the Government’s spending, but not all of it. They are the day-to-day spending (salaries, benefit payments, etc) that does not create Government assets. They also include the amount for new initiatives in forecast years.
- Operating balance – revaluation movements – accounting changes = OBERAC.
- The OBERAC is the residual from revenues and expenses less removal of valuation movements. The OBERAC and operating balance are the same in forecast years.
- OBERAC – retained items (e.g. net surplus of SOEs/CEs and net investment returns of the NZS Fund) – non-cash items (e.g. depreciation) = Core Crown net cash flow from operations.
- Retained items such as the net surplus of SOEs/Crown entities and the net investment returns of the NZS Fund are retained by these entities. The surpluses generated (unless withdrawn from the entities) cannot be used for other purposes so do not aid in funding other government spending.
- Depreciation expense is also removed as it is non-cash (it is captured in the actual purchase of assets below). Additionally, actual working capital movements such as payment of creditor impacts on the level of net cash flows from operations.
- Core Crown net cash flow from operations – net investing activities (e.g., contributions to NZS Fund, purchases of assets, loans to others) = Residual cash.
- Cash flows from core Crown operations (excluding the NZS Fund) are the cash equivalent of the operating surplus. They are available to assist funding the capital spending.
- Net investment activities include: Contributions to the NZS Fund – the Government’s annual contribution to the NZS Fund to build up assets to contribute to future NZS payments; Purchase of assets – departments buy assets including computer equipment, new buildings (eg, prisons) and defence equipment; Loans to others (advances) – these are mainly student loans (the Government is committed to help students access tertiary education by funding student loans) and refinancing private sector debt of DHBs and HNZC; Net capital injections – investments in Crown entities such as DHBs and Reserve Bank reserves.
- Cash available/(shortfall) is the amount that needs to be funded if there is a shortfall. Funding is provided by selling surplus financial assets (because of surplus cash from prior years) or borrowing more.
Stock indicators
- Gross sovereign-issued debt (GSID) = debt issued by the core Crown. (Residual cash available over time is the main factor affecting borrowing requirements and hence gross sovereign-issued debt.)
- Core Crown net debt = gross sovereign-issued debt – core Crown’s financial assets.
- Net worth (NW) = Crown’s total assets – Crown’s total liabilities. (Operating balance (OB) in any year largely drives the change in Net Worth.)
Ratio of core Crown revenue to GDP#
The revenue collected is used to meet the Government’s spending needs. It is important to look at this alongside expenses, operating balance and gross debt indicators for insights into the sustainability of current policy settings.

Ratio of core Crown expenses to GDP#
This shows the day-to-day spending of the core Crown – i.e., it excludes spending by SOEs and Crown entities – and highlights the size of government in the economy and potential scope for crowding out the private sector. This also excludes GSF valuation changes.
By reducing gross debt, the Government has also reduced finance costs.

Operating balance#
The operating balance shows whether the government sector has generated enough revenues to cover its expenses in any given year.
This measure can be volatile from year to year due to events outside of the Government’s direct control (such as changes in interest rates and revaluations etc); therefore, it is generally not used as a measure of the Government’s short-term fiscal stewardship.

OBERAC#
By excluding revaluations and accounting changes, or things that are outside of the Government’s direct control, the OBERAC gives a more direct indication of the underlying stewardship of the Government.
The current Government wishes to retain the NZS Fund investment returns in the Fund. Therefore, to ensure the Government is meeting its fiscal objectives, the Government has stated that it will be focusing on the OBERAC excluding NZS Fund returns.

Residual cash available and domestic bond programme#
The residual cash measure includes capital investment and NZS Fund contributions; therefore, it is the flow contributing to the changes in debt (in the current year net core Crown debt).
The domestic bond programme raises term debt for the Government, the proceeds of which contribute to funding operating and investing activity, and the repayment of maturing debt. The programme tends to be different to the cash residual figure in any given year as financing activity, such as the repayment of debt, needs to be considered.

Gross debt#
Total gross debt and Gross sovereign-issued debt (GSID) are often expressed as a percentage of GDP to put the level of debt into perspective, in terms of a country’s ability to generate growth to repay the debt and/or income to service this debt.
Total gross debt represents the complete picture of whole-of-government obligations to external parties. However, debt issued by SOEs and Crown entities is not explicitly guaranteed by the Crown. The debt that is issued by the sovereign and guaranteed by the sovereign is in GSID. The Government’s long-term debt objective is formulated in terms of GSID.
A high ratio of debt to GDP can have an adverse impact on credit ratings and perceived sustainability of current policy settings. So as a general rule, a relatively low ratio is considered to be prudent. A low ratio of debt to GDP can also provide the Government with more flexibility in their accounts to respond to adverse shocks through increasing debt.

Core Crown financial assets#
These are either cash or shares (equity) or a right to receive a financial instrument, which can be converted to cash. The assets of the New Zealand Superannuation (NZS) Fund are becoming the dominant feature of the Crown’s financial assets. The NZS Fund is the Government’s means of building up assets to partially pre-fund future NZS expenses. The Government’s contributions to the NZS Fund are calculated over a 40-year rolling horizon to help ensure superannuation entitlements over the next 40 years can be met.

Established under the New Zealand Superannuation and Retirement Income Act 2001, the NZS Fund was created to partially provide for the future cost of NZS, which is expected to almost double in cost due to population ageing.
The Government plans to allocate around $2 billion a year to the NZS Fund over the next 20 years. The NZS Fund’s mandate is to invest money in a way that maximises its returns, without undue risks.
As the cost of providing NZS increases, future governments will draw on the NZS Fund to help smooth the impact of the cost of NZS on their finances.
Core Crown net debt#
By including financial assets, net debt can provide additional information about the sustainability of the Government’s accounts. Many international agencies believe the quantity of off-setting financial assets is important when determining the credit-worthiness of a country. That is, if a country has a high ratio of financial assets to GDP, they are better able to justify a high ratio of debt to GDP.
However, as some financial assets are not very liquefiable (or easily converted into cash), it is important to view net debt alongside GSID.

Net worth#
Total Crown net worth is one indicator of the degree to which current government activities are sustainable. This indicator should be considered alongside the Crown’s debt position, as relatively high debt to GDP ratios may still be considered sustainable if the Crown has relatively high ratios of saleable or commercial assets to GDP.
Building up net worth is also consistent with preparing for population ageing.

Historical Information#
2006 $m | 2005 $m | 2004 $m | 2003 $m | 2002 $m | 2001 $m | 2000 $m | 1999 $m | 1998 $m | 1997 $m | |
---|---|---|---|---|---|---|---|---|---|---|
2006 $m | 2005 $m | 2004 $m | 2003 $m | 2002 $m | 2001 $m | 2000 $m | 1999 $m | 1998 $m | 1997 $m | |
Statement of Financial Performance | ||||||||||
Tax revenue | 51,973 | 46,624 | 42,532 | 39,785 | 36,215 | 34,744 | 32,000 | 30,227 | 31,161 | 30,160 |
% of GDP | 33.1% | 31.0% | 30.0% | 30.1% | 28.8% | 29.3% | 28.8% | 28.9% | 30.7% | 30.5% |
Other revenue | 24,608 | 20,441 | 17,855 | 17,242 | 13,764 | 10,762 | 9,557 | 11,758 | 9,931 | 9,643 |
Total Revenue | 76,581 | 67,065 | 60,387 | 57,027 | 49,979 | 45,506 | 41,557 | 41,985 | 41,092 | 39,803 |
% of GDP | 48.8% | 44.5% | 42.6% | 43.1% | 39.7% | 38.4% | 37.4% | 40.1% | 40.5% | 40.2% |
Total Expenses | 65,084 | 60,910 | 53,057 | 55,224 | 47,653 | 44,213 | 40,128 | 40,280 | 39,044 | 37,940 |
% of GDP | 41.5% | 40.4% | 37.4% | 41.8% | 37.9% | 37.3% | 36.1% | 38.5% | 38.5% | 38.3% |
Net surplus of TEIs | 54 | 133 | 139 | 151 | 78 | 65 | 74 | 58 | 79 | 45 |
Minority interest | (78) | (41) | (45) | 12 | (13) | - | - | - | - | - |
Operating Balance | 11,473 | 6,247 | 7,424 | 1,966 | 2,391 | 1,358 | 1,503 | 1,763 | 2,127 | 1,908 |
% of GDP | 7.3% | 4.1% | 5.2% | 1.5% | 1.9% | 1.1% | 1.4% | 1.7% | 2.1% | 1.9% |
OBERAC | 8,648 | 8,873 | 6,629 | 5,580 | 2,751 | 2,115 | 884 | 246 | 2,191 | 1,904 |
% of GDP | 5.5% | 5.9% | 4.7% | 4.2% | 2.2% | 1.8% | 0.8% | 0.2% | 2.2% | 1.9% |
Core Crown Revenue | 59,170 | 52,065 | 46,932 | 43,624 | 39,907 | 38,005 | 34,891 | 34,899 | 34,222 | 33,533 |
Core Crown Expenses | ||||||||||
Social security and welfare | 15,598 | 14,682 | 14,252 | 13,907 | 13,485 | 13,207 | 12,883 | 12,889 | 12,497 | 11,865 |
GSF pension expenses | 1,671 | 2,442 | 660 | 2,625 | 1,409 | 1,112 | 736 | 1,372 | 735 | 994 |
Health | 9,547 | 8,813 | 8,111 | 7,501 | 7,032 | 6,660 | 6,146 | 5,875 | 5,361 | 5,029 |
Education | 9,914 | 7,930 | 7,585 | 7,016 | 6,473 | 6,136 | 5,712 | 5,337 | 5,162 | 4,817 |
Core government services | 2,169 | 2,217 | 1,741 | 1,780 | 1,540 | 1,798 | 1,642 | 1,634 | 1,508 | 1,606 |
Other | 8,940 | 7,911 | 7,000 | 6,442 | 5,838 | 5,529 | 5,274 | 4,940 | 4,903 | 4,440 |
Finance costs | 2,356 | 2,274 | 2,252 | 2,360 | 2,118 | 2,304 | 2,205 | 2,367 | 2,673 | 2,945 |
Net foreign exchange losses/ (gains) | (295) | (35) | 7 | 118 | 75 | (47) | (62) | (47) | 13 | 12 |
Total Core Crown Expenses | 49,900 | 46,234 | 41,608 | 41,749 | 37,970 | 36,699 | 34,536 | 34,367 | 32,852 | 31,708 |
Core Crown Cash Flows | ||||||||||
Net cash flow from core operating and investing activity | 2,985 | 3,104 | 520 | 1,217 | (111) | (652) | 1,597 | 864 | (554) | 5,151 |
Statement of Financial Position | ||||||||||
Property, plant and equipment | 79,441 | 67,494 | 57,940 | 52,667 | 50,536 | 45,954 | 43,609 | 42,102 | 40,877 | 40,841 |
Financial assets | 56,446 | 45,308 | 35,531 | 30,338 | 24,408 | 21,848 | 19,921 | 19,659 | 17,547 | 14,101 |
Other assets | 22,384 | 18,029 | 17,201 | 16,846 | 13,116 | 9,878 | 9,731 | 9,588 | 10,961 | 10,730 |
Total Assets | 158,271 | 130,831 | 110,672 | 99,851 | 88,060 | 77,680 | 73,261 | 71,349 | 69,385 | 65,672 |
Total debt | 39,427 | 36,864 | 36,825 | 38,285 | 36,564 | 34,760 | 34,759 | 35,833 | 38,125 | 36,999 |
% of GDP | 25.1% | 24.5% | 26.0% | 29.0% | 29.1% | 29.4% | 31.3% | 34.2% | 37.6% | 37.4% |
Other liabilities | 47,441 | 43,984 | 38,384 | 37,785 | 32,676 | 31,457 | 29,919 | 29,494 | 21,339 | 21,203 |
Total Liabilities | 86,868 | 80,848 | 75,209 | 76,070 | 69,240 | 66,217 | 64,678 | 65,327 | 59,464 | 58,202 |
Net Worth | 71,403 | 49,983 | 35,463 | 23,781 | 18,820 | 11,463 | 8,583 | 6,022 | 9,921 | 7,470 |
% of GDP | 45.5% | 33.2% | 25.0% | 18.0% | 15.0% | 9.7% | 7.7% | 5.8% | 9.8% | 7.5% |
Net Core Crown Debt | 7,745 | 10,771 | 15,204 | 17,577 | 19,250 | 19,971 | 21,396 | 21,701 | 24,069 | 25,324 |
% of GDP | 4.9% | 7.2% | 10.7% | 13.3% | 15.3% | 16.9% | 19.3% | 20.7% | 23.7% | 25.6% |
Gross Sovereign-Issued Debt | 35,461 | 35,045 | 35,527 | 36,086 | 36,202 | 36,761 | 36,041 | 36,712 | 37,892 | 35,972 |
% of GDP | 22.6% | 23.3% | 25.0% | 27.3% | 28.8% | 31.0% | 32.4% | 35.1% | 37.3% | 36.3% |
GDP [1] | 156,933 | 150,629 | 141,889 | 132,227 | 125,758 | 118,407 | 111,079 | 104,730 | 101,524 | 99,034 |
- [1]GDP for 2005/06 is actual data to 30 June 2006. Previous years’ GDP figures have been restated where appropriate with updated data.
Transition to New Zealand Equivalents to International Financial Reporting Standards#
This note outlines the process for adopting New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) for the Government reporting entity.
The Accounting Standards Review Board announced in December 2002 that reporting entities must adopt NZ IFRS for periods beginning after 1 January 2007, with earlier adoption optional. The Minister of Finance announced in 2003 that the Crown will first adopt NZ IFRS for its financial year beginning 1 July 2007.
Treasury is managing the adoption of NZ IFRS for the consolidated financial statements of the Government reporting entity. Individual entities included within the consolidated financial statements of the Government reporting entity are responsible for ensuring their own NZ IFRS preparedness. Treasury provides guidance to these entities and facilitates implementation on common issues.
The NZ IFRS adoption timetable requires collecting comparative NZ IFRS financial information throughout 2006/07. Forecasts in the 2007 Budget for 2007/08 and beyond will be prepared on an NZ IFRS basis as will interim financial statements prepared in the 2007/08 financial year. The first set of audited financial statements prepared under NZ IFRS will be for the year ending 30 June 2008.
Entities will start providing NZ IFRS information to Treasury from October 2006 onwards. The initial streams of information will relate to the opening balance sheet only, subsequent information will capture monthly flows and, leading up to the 2007 Budget, forecast information on an NZ IFRS basis.
At this time, it is expected that impacts on reported results will arise from applying the insurance standard (NZ IFRS 4) to the ACC claims liability and recognition and measurement changes arising from the new financial instrument standards. These latter changes include recognising all financial derivatives in the financial statements and greater use of fair values.
Presentation changes are likely to include presenting the GSF liability net of related assets, as is required under NZ IAS 19. The components of financial income and financial expense will also be affected by NZ IFRS requirements, notably reporting of movements in derivatives and differing rules for disclosing foreign exchange gains/losses.
Draft NZ IFRS accounting policies for the Government reporting entity are available at www.treasury.govt.nz/nzifrs/. Noticeable changes to existing policies include those for financial instruments, with all financial instruments being reported initially at fair value, and impairment for goodwill.
The potential areas of impact from adoption of NZ IFRS may change materially as implementation unfolds.
Report of the Auditor-General#
To the Readers of the Financial Statements of the Government of New Zealand for the year ended 30 June 2006#
I have audited the financial statements of the Government of New Zealand for the year ended 30 June 2006, using my staff, resources and appointed auditors and their staff.
Unqualified opinion#
In our opinion the following financial statements of the Government of New Zealand:
- comply with generally accepted accounting practice in New Zealand; and
- fairly reflect:
- the Government of New Zealand’s financial position as at 30 June 2006; and
- the results of its operations and cash flows for the year ended on that date.
The audit was completed on 29 September 2006, and is the date at which our opinion is expressed.
The basis of the opinion is explained below. In addition, we outline the responsibilities of the Government and the Auditor, and explain our independence.
Basis of opinion#
We conducted our audit in accordance with the Auditing Standards published by the Auditor-General, which incorporate the Auditing Standards issued by the Institute of Chartered Accountants of New Zealand.
We planned and performed our audit to obtain all the information and explanations we considered necessary in order to obtain reasonable assurance that the financial statements did not have material misstatements, whether caused by fraud or error.
Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the financial statements. If we had found material misstatements that were not corrected, we would have referred to them in the opinion.
The audit involved performing procedures to test the information presented in the financial statements. We assessed the results of those procedures in forming our opinion.
Audit procedures generally include:
- determining whether significant financial and management controls are working and can be relied on to produce complete and accurate data;
- verifying samples of transactions and account balances;
- performing analysis to identify anomalies in the reported data;
- reviewing significant estimates and judgements made;
- confirming year-end balances;
- determining whether accounting policies are appropriate and consistently applied; and
- determining whether all financial statement disclosures are adequate.
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements.
We evaluated the overall adequacy of the presentation of information in the financial statements. We obtained all the information and explanations we required to support our opinion above.
Responsibilities of the Government and the Auditor#
The Treasury is responsible for preparing financial statements for the Government in accordance with generally accepted accounting practice in New Zealand. Those financial statements must fairly reflect the financial position of the Government as at 30 June 2006. They must also fairly reflect the results of its operations and cash flows for the year ended on that date. The Minister of Finance is responsible for forming an opinion that those financial statements fairly reflect the financial position and operations of the Government for that year. The responsibilities of the Treasury and the Minister of Finance arise from the Public Finance Act 1989.
We are responsible for expressing an independent opinion on the financial statements and reporting that opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001 and section 30 of the Public Finance Act 1989.
Independence#
The Auditor-General, as an Officer of Parliament, is constitutionally and operationally independent of the Government. Other than in exercising functions and powers under the Public Audit Act 2001 as the auditor of public entities, the Auditor-General has no relationship with or interest in the Government.
K B Brady
Controller and Auditor-General
Wellington
New Zealand
Financial Statements#
Forecast | Actual | ||||
---|---|---|---|---|---|
Original Budget[1] $m | Estimated Actual $m | Note | 30 June 2006 $m | 30 June 2005 $m | |
Revenue | |||||
Levied through the Crown’s Sovereign Power | |||||
48,102 | 49,607 | Taxation revenue | 1 | 51,973 | 46,624 |
3,206 | 3,128 | Levies, fees, fines and penalties | 1 | 3,411 | 3,115 |
51,308 | 52,735 | Total Revenue Levied through the Crown’s Sovereign Power | 1 | 55,384 | 49,739 |
Earned through the Crown’s operations | |||||
11,850 | 12,585 | Sales of goods and services | 2 | 13,337 | 11,331 |
3,322 | 6,190 | Investment income | 3 | 5,828 | 3,814 |
2,290 | 2,577 | Other revenue | 4 | 2,032 | 2,181 |
17,462 | 21,352 | Total Revenue Earned through the Crown’s Operations | 21,197 | 17,326 | |
68,770 | 74,087 | Total Crown Revenue | 76,581 | 67,065 | |
Expenses | |||||
By Input Type | |||||
17,002 | 17,047 | Subsidies and transfer payments | 5 | 16,850 | 15,844 |
14,483 | 14,846 | Personnel expenses | 6 | 15,116 | 13,562 |
27,123 | 29,644 | Operating expenses | 7 | 29,277 | 25,314 |
271 | 7 | Forecast for future new spending | - | - | |
2,792 | 2,792 | Finance costs | 2,652 | 2,760 | |
- | (198) | Net foreign-exchange (gains)/losses | (411) | (17) | |
(24) | 409 | Movement in total GSF liability | 16 | 279 | 1,410 |
597 | 1,187 | Movement in total ACC liability | 17 | 1,321 | 2,037 |
62,244 | 65,734 | Total Crown Expenses | 65,084 | 60,910 | |
6,526 | 8,353 | Revenue less Expenses | 11,497 | 6,155 | |
139 | 133 | Net surplus of TEIs | 13 | 54 | 133 |
6,665 | 8,486 | Operating Balance (including minority interest) | 11,551 | 6,288 | |
- | - | Minority interest | (78) | (41) | |
6,665 | 8,486 | Operating Balance | 11,473 | 6,247 |
- [1]The original Budget is the forecast for the 2006 financial year, as presented in the 2005 Budget on 19 May 2005.
The accompanying notes and accounting policies are an integral part of these statements.
Financial Statements (continued)#
Below is an analysis of total Crown expenses and core Crown expenses by functional classification. This information reconciles with the segment information within the Statement of Segments.
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Forecast | Actual | |||
Total Crown Expenses By Functional Classification | ||||
18,173 | 18,744 | Social security and welfare | 18,969 | 18,522 |
1,019 | 1,710 | GSF pension expenses | 1,671 | 2,442 |
9,330 | 9,284 | Health | 9,262 | 8,444 |
9,163 | 10,852 | Education | 10,430 | 8,619 |
2,009 | 2,011 | Core government services | 2,046 | 2,085 |
2,364 | 2,418 | Law and order | 2,420 | 2,131 |
1,290 | 1,317 | Defence | 1,339 | 1,229 |
6,520 | 6,201 | Transport and communications | 5,986 | 5,948 |
5,411 | 6,340 | Economic and industrial services | 6,334 | 4,859 |
1,236 | 1,190 | Primary services | 1,219 | 1,128 |
1,810 | 2,253 | Heritage, culture and recreation | 2,361 | 2,032 |
739 | 761 | Housing and community development | 758 | 697 |
117 | 52 | Other | 48 | 31 |
2,792 | 2,792 | Finance costs | 2,652 | 2,760 |
- | (198) | Net foreign-exchange (gains)/losses | (411) | (17) |
271 | 7 | Forecast for future new spending | - | - |
62,244 | 65,734 | Total Crown Expenses | 65,084 | 60,910 |
Core Crown Expenses By Functional Classification | ||||
15,611 | 15,702 | Social security and welfare | 15,598 | 14,682 |
1,019 | 1,710 | GSF pension expenses | 1,671 | 2,442 |
9,666 | 9,563 | Health | 9,547 | 8,813 |
8,681 | 10,039 | Education | 9,914 | 7,930 |
2,098 | 2,198 | Core government services | 2,169 | 2,217 |
2,177 | 2,233 | Law and order | 2,235 | 1,977 |
1,341 | 1,378 | Defence | 1,383 | 1,275 |
1,895 | 1,910 | Transport and communications | 1,818 | 1,635 |
1,679 | 1,725 | Economic and industrial services | 1,592 | 1,444 |
445 | 446 | Primary services | 467 | 394 |
786 | 1,162 | Heritage, culture and recreation | 1,194 | 991 |
214 | 214 | Housing and community development | 202 | 163 |
117 | 52 | Other | 49 | 32 |
2,245 | 2,156 | Finance costs | 2,356 | 2,274 |
- | (50) | Net foreign-exchange (gains)/losses | (295) | (35) |
271 | 7 | Forecast for future new spending | - | - |
48,245 | 50,445 | Total Core Crown Expenses | 49,900 | 46,234 |
The accompanying notes and accounting policies are an integral part of these statements.
Financial Statements (continued)#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Forecast | Actual | |||
Cash Flows from Operations | ||||
Cash was provided from | ||||
48,106 | 49,460 | Total tax receipts (refer Note 1) | 49,706 | 46,867 |
2,995 | 3,136 | Total other sovereign receipts (refer Note 1) | 3,246 | 2,974 |
1,346 | 1,546 | Interest | 1,622 | 1,642 |
73 | 84 | Dividends | 117 | 66 |
12,118 | 12,884 | Sales of goods and services | 13,457 | 11,517 |
2,194 | 2,767 | Other operating receipts | 1,919 | 2,186 |
66,832 | 69,877 | Total Cash Provided from Operations | 70,067 | 65,252 |
Cash was disbursed to | ||||
17,236 | 17,167 | Subsidies and transfer payments | 16,944 | 15,717 |
37,911 | 39,594 | Personnel and operating payments | 38,964 | 35,052 |
2,471 | 2,477 | Finance costs | 2,047 | 2,294 |
271 | 7 | Forecast for future new spending | - | - |
57,889 | 59,245 | Total Cash Disbursed to Operations | 57,955 | 53,063 |
8,943 | 10,632 | Net Cash Flows from Operations | 12,112 | 12,189 |
Cash Flows From Investing Activities | ||||
Cash was provided from | ||||
- | 1,824 | Sale of physical assets | 1,865 | 316 |
- | 1,824 | Total Cash Provided from Investing Activities | 1,865 | 316 |
Cash was disbursed to | ||||
6,553 | 6,359 | Purchase of physical assets | 5,909 | 4,862 |
1,943 | 1,764 | Net increase in advances | 1,637 | 1,061 |
2,086 | 6,024 | Net purchase of marketable securities, deposits and equity investments | 5,859 | 6,677 |
100 | - | Forecast for future new capital spending | - | - |
10,682 | 14,147 | Total Cash Disbursed to Investing Activities | 13,405 | 12,600 |
(10,682) | (12,323) | Net Cash Flows from Investing Activities | (11,540) | (12,284) |
(1,739) | (1,691) | Net Cash Flows from Operating and Investing Activities | 572 | (95) |
Cash Flows from Financing Activities | ||||
Cash was provided from | ||||
- | 211 | Issues of circulating currency | 165 | 188 |
1,518 | (415) | Net issue of foreign-currency borrowing | (2,300) | 1,913 |
1,518 | (204) | Total Cash Provided from Financing Activities | (2,135) | 2,101 |
Cash was disbursed to | ||||
(497) | (1,483) | Net repayment/(issue) of other New Zealand-dollar borrowing | (1,856) | 829 |
647 | (17) | Net repayments of Government stock [1] | (151) | 951 |
150 | (1,500) | Total Cash Disbursed to Financing Activities | (2,007) | 1,780 |
1,368 | 1,296 | Net Cash Flows from Financing Activities | (128) | 321 |
(371) | (395) | Net Movement in Cash | 444 | 226 |
2,817 | 3,710 | Opening Cash Balance | 3,710 | 3,450 |
- | 4 | Foreign-exchange gains/(losses) on opening cash | 14 | 34 |
2,446 | 3,319 | Closing Cash Balance | 4,168 | 3,710 |
- [1]Net (repayments)/issues of Government stock is after elimination of Government stock holdings of entities such as NZS Fund, GSF, ACC and EQC. The bonds reconciliation reconciles core Crown activity to New Zealand Debt Management Office (NZDMO) bond issues (refer Core Crown Cash Flow Reconciliation to Government Stock Issues).
The accompanying notes and accounting policies are an integral part of these statements.
Financial Statements (continued)#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Reconciliation Between the Net Cash Flows from Operations and the Operating Balance | ||||
8,943 | 10,632 | Net Cash Flows from Operations | 12,112 | 12,189 |
Items included in the operating balance but not in net cash flows from operations | ||||
Valuation Changes | ||||
24 | (409) | (Increase)/decrease in pension liabilities | (279) | (1,410) |
(597) | (1,187) | (Increase)/decrease in ACC liabilities | (1,321) | (2,037) |
- | - | (Increase)/decrease NPF guarantee | (54) | (53) |
- | - | Increase/(decrease) in commercial forests | 15 | (23) |
- | 42 | Unrealised net foreign-exchange gains/(losses) | 502 | 4 |
500 | 1,352 | Other valuation changes | 1,242 | 1,020 |
(73) | (202) | Total Valuation Changes | 105 | (2,499) |
Property, Plant and Equipment Asset Movements | ||||
(2,744) | (2,715) | Depreciation | (2,708) | (2,528) |
- | 630 | Gains/(losses) on sale of physical assets | 811 | (2) |
(2,744) | (2,085) | Total Property, Plant and Equipment Movements | (1,897) | (2,530) |
Other Non-Cash Items | ||||
(45) | (1,740) | Student loans | (1,671) | (188) |
(94) | (89) | Amortisation of goodwill | (75) | (97) |
606 | 1,256 | Other | 945 | 133 |
467 | (573) | Total Other Non-Cash Items | (801) | (152) |
Movements in Working Capital | ||||
(82) | 50 | Increase/(decrease) in taxes receivable | 3,225 | (202) |
149 | (500) | Increase/(decrease) in other receivables | 366 | 498 |
82 | 76 | (Decrease)/increase in inventories | (39) | 58 |
(77) | 1,088 | (Increase)/decrease in payables | (1,598) | (1,115) |
72 | 714 | Total Movements in Working Capital | 1,954 | (761) |
6,665 | 8,486 | Operating Balance | 11,473 | 6,247 |
The accompanying notes and accounting policies are an integral part of these statements.
Financial Statements (continued)#
Forecast | Actual | ||||
---|---|---|---|---|---|
Original Budget $m | Estimated Actual $m | Note | 30 June 2006 $m | 30 June 2005 $m | |
Assets | |||||
2,446 | 3,319 | Cash and bank | 8 | 4,168 | 3,710 |
32,730 | 42,016 | Marketable securities, deposits & equity investments | 8 | 43,520 | 33,062 |
10,453 | 8,930 | Advances | 9 | 8,758 | 8,536 |
10,205 | 10,433 | Receivables | 10 | 14,474 | 10,883 |
1,021 | 1,022 | Inventories | 907 | 946 | |
234 | 267 | Other investments | 11 | 323 | 221 |
65,092 | 70,109 | Property, plant and equipment | 12 | 79,441 | 67,494 |
251 | 232 | Commercial forests | 575 | 232 | |
4,657 | 5,150 | Investment in TEIs | 13 | 5,475 | 5,010 |
633 | 521 | Intangible assets (including goodwill) | 14 | 630 | 737 |
100 | - | Forecast for new capital spending | - | - | |
127,822 | 141,999 | Total Assets | 158,271 | 130,831 | |
Liabilities | |||||
13,986 | 13,275 | Payables and provisions | 15 | 16,133 | 14,451 |
3,214 | 3,408 | Currency issued | 3,362 | 3,197 | |
26,179 | 30,025 | Borrowings - sovereign guaranteed | 29,879 | 28,645 | |
9,976 | 8,864 | Borrowing - non-sovereign guaranteed | 9,548 | 8,219 | |
14,079 | 15,361 | GSF Pension liability | 16 | 15,231 | 14,952 |
11,751 | 12,581 | ACC claims liability | 17 | 12,715 | 11,384 |
79,185 | 83,514 | Total Liabilities | 86,868 | 80,848 | |
48,637 | 58,485 | Total Assets less Total Liabilities | 71,403 | 49,983 | |
Net Worth | |||||
28,179 | 30,281 | Taxpayer funds | 33,477 | 21,780 | |
20,458 | 27,989 | Revaluation reserve | 18 | 37,633 | 27,988 |
- | 215 | Minority interest | 293 | 215 | |
48,637 | 58,485 | Net Worth | 71,403 | 49,983 |
The accompanying notes and accounting policies are an integral part of these statements.
Financial Statements (continued)#
Analysis of Key Components of the Statement of Financial Position (as at 30 June 2006)#
Following is an analysis of the New Zealand Superannuation (NZS) Fund and Gross and Net Debt information. The notes to the financial statements provide a breakdown of other key balance sheet items.
New Zealand Superannuation Fund (NZS Fund)
Within marketable securities, deposits and equity investments is the NZS Fund (except for cross holdings of investments with other parts of the Crown, for example the NZS Fund may hold NZ Government Stock). The following information includes all investments and income, including cross-holdings of NZ Government Stock and accrued interest on such stock.
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
6,474 | 6,555 | Opening balance | 6,555 | 3,956 |
2,337 | 2,337 | Gross contribution | 2,337 | 2,107 |
467 | 1,123 | Income after tax | 969 | 492 |
9,278 | 10,015 | NZS Fund Balance | 9,861 | 6,555 |
Gross and Net Debt information
Definitions of debt:
Total Crown gross debt is the total borrowings (both sovereign guaranteed and non-sovereign guaranteed) of the total Crown. This equates to the amount in the total Crown balance sheet and represents the complete picture of whole-of-Crown debt obligations to external parties (ie, after eliminations of internal cross-holdings). The balance sheet splits total Crown debt into sovereign-guaranteed and non-sovereign-guaranteed debt. This split reflects the fact that debt held by SOEs and Crown entities is not explicitly guaranteed by the Crown. Any such debt that may be guaranteed is included in the sovereign-guaranteed total. No debt of SOEs and Crown entities is currently guaranteed by the Crown. Gross sovereign-issued debt is debt issued by the sovereign (ie, core Crown) and includes Government stock held by the NZS Fund, GSF, ACC or EQC for example. In other words, the gross sovereign-issued debt does not eliminate any internal cross-holdings of entities listed above. The Government's debt objective uses this measure of debt. Net core Crown debt is borrowings (financial liabilities) less cash and bank balances, marketable securities and deposits, and advances (financial assets). Net core Crown debt excludes the assets of the NZS Fund and GSF. It is a measure of the core Crown.
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
36,155 | 38,889 | Total Crown Gross Debt | 39,427 | 36,864 |
32,000 | 34,576 | Core Crown sovereign guaranteed borrowings | 34,477 | 33,777 |
1,284 | 1,376 | Add back cross holdings of NZS Fund and GSF | 984 | 1,268 |
33,284 | 35,952 | Gross Sovereign-Issued Debt | 35,461 | 35,045 |
34,564 | 39,556 | Core Crown financial assets | 40,599 | 33,078 |
11,537 | 12,620 | Excluding NZS Fund and GSF financial assets | 12,883 | 8,804 |
23,027 | 26,936 | Financial assets excluding NZS Fund and GSF | 27,716 | 24,274 |
33,284 | 35,952 | Gross Sovereign-Issued Debt | 35,461 | 35,045 |
23,027 | 26,936 | Financial assets excluding NZS Fund and GSF | 27,716 | 24,274 |
10,257 | 9,016 | Net core Crown Debt | 7,745 | 10,771 |
The accompanying notes and accounting policies are an integral part of these statements.
Financial Statements (continued)#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
41,972 | 49,983 | Opening Net Worth | 49,983 | 35,463 |
6,665 | 8,486 | Operating balance (excl. minority interest) | 11,473 | 6,247 |
- | - | Minority interest in operating balance | 78 | 41 |
- | - | Increase in minority interest | - | 35 |
- | 16 | Net revaluations | 9,869 | 8,197 |
6,665 | 8,502 | Total Recognised Revenues and Expenses | 21,420 | 14,520 |
48,637 | 58,485 | Closing Net Worth | 71,403 | 49,983 |
The accompanying notes and accounting policies are an integral part of these statements.
Financial Statements (continued)#
Forecast | Total Sovereign-Guaranteed Debt | Actual | ||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Original Budget $m | Estimated Actual $m | Total Sovereign-Guaranteed Debt | 30 June 2006 $m | 30 June 2005 $m |
Forecast | Actual | |||
Sovereign Guaranteed Debt | ||||
New Zealand-Dollar Debt | ||||
14,858 | 16,814 | Government stock | 17,002 | 16,058 |
4,364 | 5,262 | Treasury bills | 4,860 | 5,245 |
1,427 | (9,030) | Foreign-exchange contracts and loans | (11,247) | (6,123) |
674 | 513 | Retail stock | 532 | 583 |
21,323 | 13,559 | Total New Zealand-Dollar Debt | 11,147 | 15,763 |
Foreign-Currency Debt | ||||
84 | 8,808 | United States dollars | 14,430 | 7,906 |
382 | 508 | Japanese yen | 404 | 252 |
4,390 | 7,150 | European and other currencies | 3,898 | 4,724 |
4,856 | 16,466 | Total Foreign-Currency Debt | 18,732 | 12,882 |
26,179 | 30,025 | Total Sovereign-Guaranteed Debt | 29,879 | 28,645 |
Non-Sovereign-Guaranteed Debt[1] | ||||
7,259 | 6,762 | New Zealand dollars | 7,198 | 5,601 |
2,221 | 1,962 | United States dollars | 1,794 | 1,541 |
- | - | Japanese yen | 279 | 324 |
496 | 140 | European and other currencies | 277 | 753 |
9,976 | 8,864 | Total Non-Sovereign Guaranteed Debt | 9,548 | 8,219 |
36,155 | 38,889 | Total Borrowings | 39,427 | 36,864 |
Less | ||||
Financial Assets (including restricted assets) | ||||
Marketable Securities, Deposits and Equity Investments | ||||
11,774 | 7,402 | New Zealand dollars | 8,003 | 6,487 |
3,633 | 11,019 | United States dollars | 11,080 | 9,733 |
417 | 1,037 | Japanese yen | 615 | 789 |
3,202 | 7,010 | European and other currencies | 7,970 | 4,455 |
662 | 281 | Reserve position at International Monetary Fund (IMF) | 458 | 702 |
2,698 | 3,160 | New Zealand equity investments | 2,721 | 2,385 |
10,344 | 12,107 | Foreign equity investments | 12,673 | 8,511 |
32,730 | 42,016 | Total Marketable Securities, Deposits and Equity Investments | 43,520 | 33,062 |
Advances and Cash and Bank | ||||
7,195 | 5,472 | Student loans | 5,569 | 6,465 |
3,258 | 3,458 | Other advances | 3,189 | 2,071 |
2,446 | 3,319 | Cash | 4,168 | 3,710 |
12,899 | 12,249 | Total Advances and Cash | 12,926 | 12,246 |
45,629 | 54,265 | Total Financial Assets | 56,446 | 45,308 |
(9,474) | (15,376) | Borrowings less Financial Assets | (17,019) | (8,444) |
1,252 | (3,432) | Net New Zealand-dollar (assets)/debt | (5,569) | (13) |
(10,726) | (11,944) | Net foreign-currency (assets)/debt | (11,450) | (8,431) |
(9,474) | (15,376) | Borrowings less Financial Assets | (17,019) | (8,444) |
- [1] Non-sovereign guaranteed debt is a mixture of secured and non-secured debt. Where debt is secured it is over assets of the particular entity or by way of a negative pledge that while any of the stock issued under the relevant deed remains outstanding the entity will not, subject to certain exceptions, create or permit to exist any charge or lien over any of their respective assets.
The accompanying notes and accounting policies are an integral part of these statements.
Financial Statements (continued)#
As at 30 June 2006 $m | As at 30 June 2005 $m | |
---|---|---|
As at 30 June 2006 $m | As at 30 June 2005 $m | |
Capital Commitments | ||
Specialist military equipment | 535 | 825 |
Land and buildings (including electricity assets) | 945 | 1,440 |
Other property, plant and equipment | 2,530 | 2,432 |
Investments | 818 | 69 |
TEIs | 124 | 125 |
Total Capital Commitments | 4,952 | 4,891 |
Operating Commitments | ||
Non-cancellable accommodation leases | 1,940 | 1,972 |
Other non-cancellable leases | 2,466 | 2,606 |
Non-cancellable contracts for the supply of goods and services | 1,908 | 1,721 |
Other operating commitments | 6,462 | 4,054 |
TEIs | 303 | 1,052 |
Total Operating Commitments | 13,079 | 11,405 |
Total Commitments | 18,031 | 16,296 |
Total Commitments by Institutional Segment | ||
Core Crown | 4,824 | 2,627 |
Crown entities | 9,627 | 10,061 |
SOEs | 3,580 | 3,608 |
Total Commitments | 18,031 | 16,296 |
By Term | ||
Capital Commitments | ||
One year or less | 3,140 | 3,251 |
From one year to two years | 651 | 967 |
From two to five years | 1,152 | 515 |
Over five years | 9 | 158 |
Capital Commitments | 4,952 | 4,891 |
Operating Commitments | ||
One year or less | 5,856 | 3,534 |
From one year to two years | 2,348 | 2,577 |
From two to five years | 2,861 | 3,320 |
Over five years | 2,014 | 1,974 |
Operating Commitments | 13,079 | 11,405 |
Total Commitments | 18,031 | 16,296 |
The accompanying notes and accounting policies are an integral part of these statements.
Financial Statements (continued)#
As at 30 June 2006 $m | As at 30 June 2005 $m | |
---|---|---|
Guarantees and indemnities | 405 | 149 |
Uncalled capital | 2,592 | 2,233 |
Legal proceedings and disputes | 1,032 | 586 |
Other contingent liabilities | 2,073 | 1,502 |
Total Quantifiable Contingent Liabilities | 6,102 | 4,470 |
Total Quantifiable Contingent Liabilities by Institutional Segment | ||
Core Crown | 5,921 | 4,330 |
Crown entities | 63 | 36 |
SOEs | 118 | 104 |
Total Quantifiable Contingent Liabilities | 6,102 | 4,470 |
Quantifiable Contingent Assets | ||
Total Crown | 106 | 107 |
Total Quantifiable Contingent Assets | 106 | 107 |
Note 21 contains a breakdown of the material contingent liabilities and a description of non-quantified contingent liabilities and contingent assets.
The accompanying notes and accounting policies are an integral part of these statements.
Financial Statements (continued)#
Statement of Segments#
Current Year Actual vs Forecast | ||||
---|---|---|---|---|
Core Crown | Crown entities | |||
Actual 2006 $m | Estimated Actual $m | Actual 2006 $m | Estimated Actual $m | |
Revenue | ||||
Taxation revenue | 52,444 | 50,102 | - | - |
Other sovereign-levied income | 663 | 661 | 2,811 | 2,602 |
Sales of goods and services | 884 | 846 | 1,865 | 1,700 |
Investment income | 4,496 | 4,282 | 1,962 | 2,074 |
Other revenues | 683 | 761 | 18,677 | 18,896 |
Total Revenue | 59,170 | 56,652 | 25,315 | 25,272 |
Expenses by Input Type | ||||
Subsidies and transfer payments | 15,243 | 15,348 | 1,708 | 1,699 |
Personnel expenses | 5,656 | 5,536 | 7,591 | 7,483 |
Operating expenses | 26,661 | 27,046 | 12,967 | 13,135 |
Finance costs | 2,356 | 2,156 | 302 | 298 |
FX losses/(gains) | (295) | (50) | (113) | (99) |
GSF and ACC liability revaluation movements | 279 | 409 | 1,321 | 1,187 |
Total Expenses | 49,900 | 50,445 | 23,776 | 23,703 |
Expenses by Functional Classification | ||||
Social security and welfare | 15,598 | 15,702 | 3,740 | 3,623 |
Health | 9,547 | 9,563 | 8,227 | 8,124 |
Education | 9,914 | 10,039 | 6,539 | 6,654 |
Other functional classifications | 12,780 | 13,028 | 5,081 | 5,103 |
Forecast for future new spending | - | 7 | - | - |
Finance costs and FX losses/(gains) | 2,061 | 2,106 | 189 | 199 |
Total expenses | 49,900 | 50,445 | 23,776 | 23,703 |
Net surplus of TEIs | - | - | 54 | 133 |
Minority interest | - | - | - | - |
Operating balance | 9,270 | 6,207 | 1,593 | 1,702 |
Core Crown | Crown entities | |||
---|---|---|---|---|
Actual 2006 $m | Estimated Actual $m | Actual 2006 $m | Estimated Actual $m | |
Assets | ||||
Financial assets | 40,599 | 39,556 | 17,554 | 16,990 |
Physical assets | 25,223 | 22,876 | 37,987 | 33,265 |
Investment in SOEs & Crown entities (including TEIs) | 24,169 | 24,311 | 5,475 | 5,150 |
Other assets | 12,293 | 8,444 | 2,433 | 2,177 |
Total Assets | 102,284 | 95,187 | 63,449 | 57,582 |
Liabilities | ||||
Borrowings | 34,477 | 34,576 | 4,124 | 4,067 |
Other liabilities | 27,730 | 26,084 | 17,503 | 16,693 |
Total Liabilities | 62,207 | 60,660 | 21,627 | 20,760 |
Net Worth | 40,077 | 34,527 | 41,822 | 36,822 |
Taxpayer funds | 28,929 | 25,714 | 21,086 | 21,286 |
Revaluation reserves | 11,148 | 8,813 | 20,736 | 15,536 |
Minority interest | - | - | - | - |
Net Worth | 40,077 | 34,527 | 41,822 | 36,822 |
Analysis of Financial Assets and Borrowings | ||||
Advances and cash | 8,797 | 8,233 | 2,308 | 2,129 |
MSDs and equity investments | 31,802 | 31,323 | 15,246 | 14,861 |
Total Financial Assets | 40,599 | 39,556 | 17,554 | 16,990 |
Borrowings - sovereign guaranteed | 34,477 | 34,576 | - | - |
Borrowings - non-sovereign guaranteed | - | - | 4,124 | 4,067 |
Total Borrowings | 34,477 | 34,576 | 4,124 | 4,067 |
Borrowings less Financial Assets | (6,122) | (4,980) | (13,430) | (12,923) |
Net core Crown Debt | 7,745 | 9,016 | Net core Crown debt and gross sovereign-issued debt differ from the analysis above due to elimination of cross-holdings of Govt stock and adding back the NZS Fund and GSF assets. | |
Gross Sovereign-Issued Debt | 35,461 | 35,952 |
Statement of Segments (continued)#
Current Year Actual vs Forecast | ||||||
---|---|---|---|---|---|---|
SOEs | Inter-segment elimins | Total Crown | ||||
Actual 2006 $m | Estimated Actual $m | Actual 2006 $m | Estimated Actual $m | Actual 2006 $m | Estimated Actual $m | |
Revenue | ||||||
Taxation revenue | - | - | (471) | (495) | 51,973 | 49,607 |
Other sovereign-levied income | - | - | (63) | (135) | 3,411 | 3,128 |
Sales of goods and services | 11,206 | 10,501 | (618) | (462) | 13,337 | 12,585 |
Investment income | 1,008 | 1,008 | (1,638) | (1,174) | 5,828 | 6,190 |
Other revenues | 537 | 965 | (17,865) | (18,045) | 2,032 | 2,577 |
Total Revenue | 12,751 | 12,474 | (20,655) | (20,311) | 76,581 | 74,087 |
Expenses by Input Type | ||||||
Subsidies and transfer payments | - | - | (101) | - | 16,850 | 17,047 |
Personnel expenses | 1,876 | 1,832 | (7) | (5) | 15,116 | 14,846 |
Operating expenses | 8,558 | 8,601 | (18,909) | (19,131) | 29,277 | 29,651 |
Finance costs | 443 | 472 | (449) | (134) | 2,652 | 2,792 |
FX losses/(gains) | (3) | (49) | - | - | (411) | (198) |
GSF and ACC liability revaluation movements | - | - | - | - | 1,600 | 1,596 |
Total Expenses | 10,874 | 10,856 | (19,466) | (19,270) | 65,084 | 65,734 |
Expenses by Functional Classification | ||||||
Social security and welfare | - | - | (369) | (581) | 18,969 | 18,744 |
Health | - | - | (8,512) | (8,403) | 9,262 | 9,284 |
Education | 22 | 15 | (6,045) | (5,856) | 10,430 | 10,852 |
Other functional classifications | 10,412 | 10,418 | (4,091) | (4,296) | 24,182 | 24,253 |
Forecast for future new spending | - | - | - | - | - | 7 |
Finance costs and FX losses/(gains) | 440 | 423 | (449) | (134) | 2,241 | 2,594 |
Total expenses | 10,874 | 10,856 | (19,466) | (19,270) | 65,084 | 65,734 |
Net surplus of TEIs | - | - | - | - | 54 | 133 |
Minority interest | (78) | - | - | - | (78) | - |
Operating balance | 1,799 | 1,618 | (1,189) | (1,041) | 11,473 | 8,486 |
SOEs | Inter-segment elimins | Total Crown | ||||
---|---|---|---|---|---|---|
Actual 2006 $m | Estimated Actual $m | Actual 2006 $m | Estimated Actual $m | Actual 2006 $m | Estimated Actual $m | |
Assets | ||||||
Financial assets | 5,368 | 4,835 | (7,075) | (7,116) | 56,446 | 54,265 |
Physical assets | 16,231 | 13,968 | - | - | 79,441 | 70,109 |
Investment in SOEs & Crown entities (including TEIs) | - | - | (24,169) | (24,311) | 5,475 | 5,150 |
Other assets | 2,421 | 2,441 | (238) | (587) | 16,909 | 12,475 |
Total Assets | 24,020 | 21,244 | (31,482) | (32,014) | 158,271 | 141,999 |
Liabilities | ||||||
Borrowings | 7,901 | 7,362 | (7,075) | (7,116) | 39,427 | 38,889 |
Other liabilities | 3,004 | 3,155 | (796) | (1,307) | 47,441 | 44,625 |
Total Liabilities | 10,905 | 10,517 | (7,871) | (8,423) | 86,868 | 83,514 |
Net Worth | 13,115 | 10,727 | (23,611) | (23,591) | 71,403 | 58,485 |
Taxpayer funds | 7,073 | 6,872 | (23,611) | (23,591) | 33,477 | 30,281 |
Revaluation reserves | 5,749 | 3,640 | - | - | 37,633 | 27,989 |
Minority interest | 293 | 215 | - | - | 293 | 215 |
Net Worth | 13,115 | 10,727 | (23,611) | (23,591) | 71,403 | 58,485 |
Analysis of Financial Assets and Borrowings | ||||||
Advances and cash | 4,148 | 4,310 | (2,327) | (2,423) | 12,926 | 12,249 |
MSDs and equity investments | 1,220 | 525 | (4,748) | (4,693) | 43,520 | 42,016 |
Total Financial Assets | 5,368 | 4,835 | (7,075) | (7,116) | 56,446 | 54,265 |
Borrowings - sovereign guaranteed | - | - | (4,598) | (4,551) | 29,879 | 30,025 |
Borrowings - non-sovereign guaranteed | 7,901 | 7,362 | (2,477) | (2,565) | 9,548 | 8,864 |
Total Borrowings | 7,901 | 7,362 | (7,075) | (7,116) | 39,427 | 38,889 |
Borrowings less Financial Assets | 2,533 | 2,527 | - | - | (17,019) | (15,376) |
Statement of Segments (continued)#
Current Year Actual vs Prior Year Actual | ||||
---|---|---|---|---|
Core Crown | Crown entities | |||
Actual 2006 $m | Actual 2005 $m | Actual 2006 $m | Actual 2005 $m | |
Revenue | ||||
Taxation revenue | 52,444 | 47,118 | - | - |
Other sovereign levied-income | 663 | 647 | 2,811 | 2,561 |
Sales of goods and services | 884 | 790 | 1,865 | 1,706 |
Investment income | 4,496 | 2,811 | 1,962 | 1,297 |
Other revenues | 683 | 699 | 18,677 | 17,247 |
Total Revenue | 59,170 | 52,065 | 25,315 | 22,811 |
Expenses by Input Type | ||||
Subsidies and transfer payments | 15,243 | 14,295 | 1,708 | 1,549 |
Personnel expenses | 5,656 | 4,738 | 7,591 | 7,075 |
Operating expenses | 26,661 | 23,553 | 12,967 | 12,033 |
Finance costs | 2,356 | 2,273 | 302 | 288 |
FX losses/(gains) | (295) | (35) | (113) | 63 |
GSF and ACC liability revaluation movements | 279 | 1,410 | 1,321 | 2,037 |
Total Expenses | 49,900 | 46,234 | 23,776 | 23,045 |
Expenses by Functional Classification | ||||
Social security and welfare | 15,598 | 14,682 | 3,740 | 4,274 |
Health | 9,547 | 8,813 | 8,227 | 7,478 |
Education | 9,914 | 7,930 | 6,539 | 6,161 |
Other functional classifications | 12,780 | 12,570 | 5,081 | 4,781 |
Forecast for future new spending | - | - | - | - |
Finance costs and FX losses/(gains) | 2,061 | 2,239 | 189 | 351 |
Total expenses | 49,900 | 46,234 | 23,776 | 23,045 |
Net surplus of TEIs | - | - | 54 | 133 |
Minority interest | - | - | - | - |
Operating balance | 9,270 | 5,831 | 1,593 | (101) |
Core Crown | Crown entities | |||
---|---|---|---|---|
Actual 2006 $m | Actual 2005 $m | Actual 2006 $m | Actual 2005 $m | |
Assets | ||||
Financial assets | 40,599 | 33,078 | 17,554 | 15,637 |
Physical assets | 25,223 | 21,987 | 37,987 | 32,252 |
Investment in SOEs & Crown entities (including TEIs) | 24,169 | 23,823 | 5,475 | 5,010 |
Other assets | 12,293 | 8,637 | 2,433 | 2,533 |
Total Assets | 102,284 | 87,525 | 63,449 | 55,432 |
Liabilities | ||||
Borrowings | 34,477 | 33,777 | 4,124 | 3,867 |
Other liabilities | 27,730 | 25,442 | 17,503 | 16,745 |
Total Liabilities | 62,207 | 59,219 | 21,627 | 20,612 |
Net Worth | 40,077 | 28,306 | 41,822 | 34,820 |
Taxpayer funds | 28,929 | 19,504 | 21,086 | 19,288 |
Revaluation reserves | 11,148 | 8,802 | 20,736 | 15,532 |
Minority interest | - | - | - | - |
Net Worth | 40,077 | 28,306 | 41,822 | 34,820 |
Analysis of Financial Assets and Borrowings | ||||
Advances and cash | 8,797 | 9,373 | 2,308 | 2,098 |
MSDs and equity investments | 31,802 | 23,705 | 15,246 | 13,539 |
Total Financial Assets | 40,599 | 33,078 | 17,554 | 15,637 |
Borrowings - Sovereign guaranteed | 34,477 | 33,777 | - | - |
Borrowings - Non-sovereign guaranteed | - | - | 4,124 | 3,867 |
Total Borrowings | 34,477 | 33,777 | 4,124 | 3,867 |
Borrowings less Financial Assets | (6,122) | 699 | (13,430) | (11,770) |
Net core Crown Debt | 7,745 | 10,771 | Net core Crown debt and gross sovereign-issued debt differ from the analysis above due to elimination of cross-holdings of Govt stock and adding back the NZS Fund and GSF assets. | |
Gross Sovereign-Issued Debt | 35,461 | 35,045 |
Statement of Segments (continued)#
Current Year Actual vs Prior Year Actual | ||||||
---|---|---|---|---|---|---|
State-owned enterprises | Inter-segment elimins | Total Crown | ||||
Actual 2006 $m | Actual 2005 $m | Actual 2006 $m | Actual 2005 $m | Actual 2006 $m | Actual 2005 $m | |
Revenue | ||||||
Taxation revenue | - | - | (471) | (494) | 51,973 | 46,624 |
Other sovereign levied-income | - | - | (63) | (93) | 3,411 | 3,115 |
Sales of goods and services | 11,206 | 9,275 | (618) | (440) | 13,337 | 11,331 |
Investment income | 1,008 | 332 | (1,638) | (626) | 5,828 | 3,814 |
Other revenues | 537 | 658 | (17,865) | (16,423) | 2,032 | 2,181 |
Total Revenue | 12,751 | 10,265 | (20,655) | (18,076) | 76,581 | 67,065 |
Expenses by Input Type | ||||||
Subsidies and transfer payments | - | - | (101) | - | 16,850 | 15,844 |
Personnel expenses | 1,876 | 1,755 | (7) | (6) | 15,116 | 13,562 |
Operating expenses | 8,558 | 7,180 | (18,909) | (17,452) | 29,277 | 25,314 |
Finance costs | 443 | 376 | (449) | (177) | 2,652 | 2,760 |
FX losses/(gains) | (3) | (45) | - | - | (411) | (17) |
GSF and ACC liability revaluation movements | - | - | - | - | 1,600 | 3,447 |
Total Expenses | 10,874 | 9,266 | (19,466) | (17,635) | 65,084 | 60,910 |
Expenses by Functional Classification | ||||||
Social security and welfare | - | - | (369) | (434) | 18,969 | 18,522 |
Health | - | - | (8,512) | (7,847) | 9,262 | 8,444 |
Education | 22 | 13 | (6,045) | (5,485) | 10,430 | 8,619 |
Other functional classifications | 10,412 | 8,922 | (4,091) | (3,691) | 24,182 | 22,582 |
Forecast for future new spending | - | - | - | - | - | - |
Finance costs and FX losses/(gains) | 440 | 331 | (449) | (178) | 2,241 | 2,743 |
Total expenses | 10,874 | 9,266 | (19,466) | (17,635) | 65,084 | 60,910 |
Net surplus of TEIs | - | - | - | - | 54 | 133 |
Minority interest | (78) | (41) | - | - | (78) | (41) |
Operating balance | 1,799 | 958 | (1,189) | (441) | 11,473 | 6,247 |
State-owned enterprises | Inter-segment elimins | Total Crown | ||||
---|---|---|---|---|---|---|
Actual 2006 $m | Actual 2005 $m | Actual 2006 $m | Actual 2005 $m | Actual 2006 $m | Actual 2005 $m | |
Assets | ||||||
Financial assets | 5,368 | 3,990 | (7,075) | (7,397) | 56,446 | 45,308 |
Physical assets | 16,231 | 13,255 | - | - | 79,441 | 67,494 |
Investment in SOEs & Crown entities (including TEIs) | - | - | (24,169) | (23,823) | 5,475 | 5,010 |
Other assets | 2,421 | 2,431 | (238) | (582) | 16,909 | 13,019 |
Total Assets | 24,020 | 19,676 | (31,482) | (31,802) | 158,271 | 130,831 |
Liabilities | ||||||
Borrowings | 7,901 | 6,617 | (7,075) | (7,397) | 39,427 | 36,864 |
Other liabilities | 3,004 | 2,979 | (796) | (1,182) | 47,441 | 43,984 |
Total Liabilities | 10,905 | 9,596 | (7,871) | (8,579) | 86,868 | 80,848 |
Net Worth | 13,115 | 10,080 | (23,611) | (23,223) | 71,403 | 49,983 |
Taxpayer funds | 7,073 | 6,211 | (23,611) | (23,223) | 33,477 | 21,780 |
Revaluation reserves | 5,749 | 3,654 | - | - | 37,633 | 27,988 |
Minority interest | 293 | 215 | - | - | 293 | 215 |
Net Worth | 13,115 | 10,080 | (23,611) | (23,223) | 71,403 | 49,983 |
Analysis of Financial Assets and Borrowings | ||||||
Advances and cash | 4,148 | 2,902 | (2,327) | (2,127) | 12,926 | 12,246 |
MSDs and equity investments | 1,220 | 1,088 | (4,748) | (5,270) | 43,520 | 33,062 |
Total Financial Assets | 5,368 | 3,990 | (7,075) | (7,397) | 56,446 | 45,308 |
Borrowings - Sovereign guaranteed | - | - | (4,598) | (5,132) | 29,879 | 28,645 |
Borrowings - Non-sovereign guaranteed | 7,901 | 6,617 | (2,477) | (2,265) | 9,548 | 8,219 |
Total Borrowings | 7,901 | 6,617 | (7,075) | (7,397) | 39,427 | 36,864 |
Borrowings less Financial Assets | 2,533 | 2,627 | - | - | (17,019) | (8,444) |
Statement of Segments (continued)#
Actual 2006 | Actual 2005 | |||||
---|---|---|---|---|---|---|
Total revenue $m | Total expenses $m | Net segment $m | Total revenue $m | Total expenses $m | Net segment $m | |
Total Crown by Functional Classification | ||||||
Social security and welfare | 4,655 | 18,969 | (14,314) | 3,448 | 18,522 | (15,074) |
GSF pension expenses | 566 | 1,671 | (1,105) | 468 | 2,442 | (1,974) |
Health | 313 | 9,262 | (8,949) | 213 | 8,444 | (8,231) |
Education | 670 | 10,430 | (9,760) | 697 | 8,619 | (7,922) |
Core government services | 72 | 2,046 | (1,974) | 448 | 2,085 | (1,637) |
Law and order | 385 | 2,420 | (2,035) | 359 | 2,131 | (1,772) |
Defence | - | 1,339 | (1,339) | - | 1,229 | (1,229) |
Transport and communications | 5,164 | 5,986 | (822) | 4,979 | 5,948 | (969) |
Economic and industrial services | 7,503 | 6,334 | 1,169 | 5,266 | 4,859 | 407 |
Primary services | 700 | 1,219 | (519) | 729 | 1,128 | (399) |
Heritage, culture and recreation | 1,352 | 2,361 | (1,009) | 1,165 | 2,032 | (867) |
Housing and community development | 806 | 758 | 48 | 750 | 697 | 53 |
Other | - | 48 | (48) | - | 31 | (31) |
Finance costs | 1,819 | 2,652 | (833) | 1,318 | 2,760 | (1,442) |
Net foreign-exchange losses/(gains) | - | (411) | 411 | - | (17) | 17 |
Unallocated revenues (tax revenue) | 52,576 | - | 52,576 | 47,225 | - | 47,225 |
Net surplus of TEIs | - | - | 54 | - | - | 133 |
Minority interest | - | - | (78) | - | - | (41) |
Total Crown | 76,581 | 65,084 | 11,473 | 67,065 | 60,910 | 6,247 |
Actual 2006 | Actual 2005 | |||||||
---|---|---|---|---|---|---|---|---|
Physical assets $m | Total assets $m | Total borrowings $m | Total liabilities $m | Physical assets $m | Total assets $m | Total borrowings $m | Total liabilities $m | |
Total Crown by Functional Classification | ||||||||
Social security and welfare | 488 | 20,593 | 756 | 15,323 | 435 | 19,877 | 658 | 14,267 |
GSF pension expenses | - | 4,172 | - | 15,231 | - | 3,429 | - | 14,951 |
Health | 3,836 | 6,137 | 650 | 2,400 | 3,249 | 5,120 | 531 | 2,214 |
Education | 10,561 | 17,771 | 54 | 954 | 9,699 | 16,246 | 65 | 964 |
Core government services | 2,211 | 32,139 | 29,787 | 38,905 | 2,240 | 21,047 | 28,648 | 36,382 |
Law and order | 2,856 | 4,395 | 13 | 622 | 2,205 | 3,706 | 15 | 576 |
Defence | 4,514 | 5,020 | - | 195 | 3,808 | 4,358 | - | 283 |
Transport and communications | 21,649 | 27,313 | 4,554 | 6,918 | 17,392 | 21,877 | 2,734 | 5,049 |
Economic and industrial services | 11,464 | 15,877 | 2,897 | 3,943 | 10,019 | 14,106 | 3,499 | 4,222 |
Primary services | 1,610 | 2,424 | 203 | 439 | 1,258 | 2,070 | 224 | 483 |
Heritage, culture and recreation | 6,740 | 7,943 | 117 | 1,262 | 5,564 | 6,594 | 52 | 761 |
Housing and community development | 13,335 | 14,305 | 396 | 639 | 11,452 | 12,217 | 438 | 652 |
Other | 177 | 182 | - | 37 | 173 | 184 | - | 44 |
Total Crown | 79,441 | 158,271 | 39,427 | 86,868 | 67,494 | 130,831 | 36,864 | 80,848 |
Statement of Accounting Policies#
Reporting Entity#
The Financial Statements of the Government of New Zealand have been prepared in accordance with the requirements of the Public Finance Act 1989.
The Government reporting entity as specified in Part 3 of the Public Finance Act 1989 comprises:
- Ministers of the Crown
- Departments
- Reserve Bank of New Zealand
- Government Superannuation Fund
- Offices of Parliament
- New Zealand Superannuation Fund
- State-owned enterprises
- Air New Zealand Limited
- Crown entities
A more detailed listing of the components of the Government reporting entity is set out in the supplementary information at Supplementary Information.
Accounting Policies#
These financial statements comply with generally accepted accounting practice. The measurement base applied is historical cost adjusted for revaluations of certain property, plant and equipment, state highways, commercial forests and marketable securities held for trading purposes. The accrual basis of accounting has been used unless otherwise stated.
Reporting and forecast period
The reporting and forecast period for these financial statements is the year ended 30 June 2006.
The Budget forecast is the original forecast for the financial year, as presented in the 2005 Budget on 19 May 2005. The estimated actual forecast, as presented in the 2006 Budget on 18 May 2006, has been prepared using actual data which was available at the time of the finalisation of the Budget forecasts (8 May 2006).
Basis of combination
Ministers of the Crown, departments, Offices of Parliament, the Reserve Bank of New Zealand, the GSF, the NZS Fund, SOEs (including Air New Zealand Limited) and Crown entities (excluding TEIs) are combined using the purchase method of combination. Corresponding assets, liabilities, revenues and expenses are added together line by line. Transactions and balances between these sub-entities are eliminated on combination. Offices of Parliament have previously been excluded from the financial statements, however due to legislative changes they now form part of the Government reporting entity.
TEIs are equity accounted, which recognises these entities’ net assets, including asset revaluation movements and surpluses and deficits.
Note 13 outlines in more detail why there is a difference in the accounting treatment of TEIs from other Crown entities.
Revenue#
Revenue levied through the Crown’s sovereign power#
The Crown provides many services and benefits that do not give rise to revenue. Further, payment of tax does not, of itself, entitle a taxpayer to an equivalent value of services or benefits, as there is no direct relationship between paying tax and receiving Crown services and transfers.
Such revenue is received through the exercise of the Crown’s sovereign power. Where possible, revenue is recognised at the time the debt to the Crown arises.
Revenue type | Revenue recognition point |
---|---|
Source deductions | When an individual earns income that is subject to PAYE |
Residents’ withholding tax[1] | When an individual is paid interest or dividends subject to deduction at source |
Fringe benefit tax (FBT) | When benefits are provided that give rise to FBT |
Provisional tax[2] | When taxable income is earned |
Terminal tax[2] | Assessment filed date |
Goods and services tax | When the liability to the Crown is incurred |
Excise duty | When goods are subject to duty |
Road user charges and motor vehicle fees | When payment for the fee or charge is made |
Stamp, cheque and credit card duties | Assessment filed date |
Other indirect taxes | When the debt to the Crown arises |
Levies (eg, ACC levies) | When the obligation to pay the levy to the Crown is incurred |
Revenue earned through operations#
If revenue has been earned by the Crown in exchange for the provision of outputs (products or services) to third parties, the Crown receives its revenue through operations. Such revenue is recognised when it is earned.
Investment income#
Investment income is recognised in the period in which it is earned.
Premiums and discounts#
Premiums arising on the issue of a debt instrument are treated as a reduction in the cost of borrowing. Discounts arising on the purchase of a monetary asset are treated as an increase in investment income.
Premiums and discounts are recognised in the Statement of Financial Position on issue, and are amortised over the period of the instrument on a yield-to-maturity basis.
For floating rate debt instruments, the amortisation is over the first interest period. Discounts on monetary assets deemed short-term securities are amortised on a straight-line basis.
The forward margin associated with forward foreign-exchange contracts is amortised over the period of the contract on a straight-line basis.
Gains#
Realised gains arising from sales of assets or the early repurchase of liabilities are recognised in the Statement of Financial Performance in the period in which the transaction occurs.
Unrealised foreign-exchange gains on monetary assets and liabilities, and unrealised gains on marketable securities held for trading purposes and listed equity investments, are recognised in the Statement of Financial Performance.
Unrealised and realised gains related to hedging activity are recognised in the Statement of Financial Performance in the same period in which losses on the underlying hedged position are recognised.
Unrealised gains arising from changes in the value of property, plant and equipment (including state highways) are recognised as at balance date. To the extent that a gain reverses a loss previously charged to the Statement of Financial Performance, the gain is credited to the Statement of Financial Performance. Otherwise, gains are credited to an asset revaluation reserve for that class of asset.
Unrealised gains arising from changes in the value of commercial forests are credited to the Statement of Financial Performance.
Unrealised gains (excluding foreign-exchange gains) arising from changes in the value of investments and marketable securities held for investment and unlisted equity investments are recognised as at balance date only to the extent that they reverse a loss previously charged to the Statement of Financial Performance. Gains effecting such a reversal are credited to the Statement of Financial Performance.
Expenses#
General#
Expenses are recognised in the period to which they relate.
Welfare benefits#
Welfare benefits are recognised in the period when an application for a benefit has been received and the eligibility criteria met.
Grants and subsidies#
Where grants and subsidies are discretionary until payment, the expense is recognised when the payment is made. Otherwise, the expense is recognised when the specified criteria have been fulfilled and notice has been given to the Crown.
Discounts and premiums#
Discounts arising on the issue of a debt instrument are treated as an increase in the cost of borrowing. Premiums arising on the purchase of a monetary asset are treated as a reduction in investment income.
Discounts and premiums are recognised in the Statement of Financial Position on issue, and are amortised over the period of the instrument on a yield-to-maturity basis.
For floating rate debt instruments, the amortisation is over the first interest period. Premiums on monetary assets deemed short-term securities are amortised on a straight-line basis.
The forward margin associated with forward foreign-exchange contracts is amortised over the period of the contract on a straight-line basis.
Losses#
Realised losses arising from sales of assets or the early repurchase of liabilities are recognised in the Statement of Financial Performance in the period in which the transaction occurs.
Unrealised foreign-exchange losses on monetary assets and liabilities, and unrealised losses on marketable securities held for trading purposes and listed equity investments, are recognised in the Statement of Financial Performance.
Unrealised and realised losses related to hedging activity are recognised in the Statement of Financial Performance in the same period in which gains on the underlying hedged position are recognised.
Unrealised losses (excluding foreign-exchange losses) arising from changes in the value of property, plant and equipment (including state highways), and investments and marketable securities held for investment and unlisted equity investments are recognised at balance date. Unrealised losses are first applied against any revaluation reserve for that class of asset. The balance, if any, is charged to the Statement of Financial Performance.
Unrealised losses arising from changes in the value of commercial forests are charged to the Statement of Financial Performance.
Foreign-currency transactions#
Short-term transactions covered by forward exchange contracts are translated into New Zealand dollars using the forward rates specified in those contracts.
Other transactions in foreign currencies are translated into New Zealand dollars using the exchange rate on the date of the transaction. Exchange differences arising on settlement of these transactions are recognised in the Statement of Financial Performance.
Outstanding foreign-exchange contracts are translated at the closing exchange rate. Exchange gains and losses are included in the Statement of Financial Performance in the period in which they arise.
Depreciation#
Depreciation is charged on a straight-line basis at rates calculated to allocate the cost or valuation of an item of property, plant and equipment, less any estimated residual value, over its estimated useful life. Typically, the estimated useful lives of different classes of property, plant and equipment are as follows:
- Freehold buildings
- 25 to 60 years
- Specialist military equipment
- 5 to 25 years
- Other plant and equipment
- 3 to 25 years
- State highways:
-
- Pavement (surfacing)
- 7 years
- Pavement (other)
- 36 years
- Bridges
- 90 to 100 years
- Aircraft (ex specialist military equipment)
- 10 to 20 years
- Electricity distribution network
- 2 to 80 years
- Electricity generation assets
- 25 to 55 years
Assets#
Foreign monetary assets#
Where short-term foreign monetary assets are subject to forward exchange contracts, they are translated into New Zealand dollars at the contract rate. Otherwise, foreign monetary assets are translated at the closing exchange rate.
Exchange gains and losses are included in the Statement of Financial Performance in the period in which they arise.
Receivables and advances excluding student loans#
Receivables and advances excluding student loans are recorded at the amounts expected to be ultimately collected in cash.
Student loans#
Student loans are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method, less any impairment loss. The effective interest rate discounts estimated future cash receipts through the expected life of the loan to the net carrying amount of the loan but does not consider future credit losses. Interest is recognised on the loan evenly in proportion to the amount outstanding over the period to repayment.
Allowances for estimated irrecoverable amounts are recognised when there is objective evidence that the loan is impaired. Impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the loan and that a ‘loss’ event (or events) has an impact on the estimated future cash flows of the student loan book value that can be reliably measured.
Interest and impairment losses are recognised in the Statement of Financial Performance.
Inventories#
Inventories are recorded at the lower of cost and net realisable value. Where inventories acquired are recorded at cost, the weighted average cost method is used. Appropriate allowance has been made for obsolescence.
Investments#
Marketable securities held for trading purposes
Marketable securities held for trading purposes are recorded at fair value.
Equity investments
Listed equity investments (other than those forming part of the reporting entity) are recorded at fair value.
Other equity investments (other than those forming part of the reporting entity) are recorded at lower of cost and fair value.
Other investments and marketable securities held for investment purposes
Other investments, including marketable securities held for investment purposes, are recorded at the lower of cost and fair value.
Investments held for hedging purposes are recorded on the same basis as the item being hedged.
Items of property, plant and equipment#
Items of property, plant and equipment are initially recorded at cost.
Revaluations are carried out for most classes of property, plant and equipment to reflect the service potential or economic benefit obtained through control of the asset. Revaluation is based on the fair value of the asset. Where an asset is recorded using depreciated replacement cost, depreciated replacement cost is based on the estimated present cost of construction, reduced by factors for age and deterioration of the asset.
Classes of property, plant and equipment assets that are revalued, are revalued at least every five years.
Classes of property, plant and equipment assets that are revalued are regularly reviewed to ensure the carrying value is not materially different from fair value.
For each property, plant and equipment asset project, borrowing costs incurred during the period required to complete and prepare the asset for its intended use are expensed.
Land and buildings
Land and buildings are recorded at fair value less accumulated depreciation on buildings. In cases where valuations conducted in accordance with the New Zealand Property Institute’s standards are not available, valuations conducted in accordance with the Rating Valuation Act 1998, which have been confirmed as appropriate by an independent valuer, have been used.
Specialist military equipment
Specialist military equipment is recorded at depreciated replacement cost (fair value) less accumulated depreciation. Valuations have been obtained through specialist assessment by New Zealand Defence Force advisers, and the basis of these valuations have been confirmed as appropriate by an independent valuer.
State highways
State highways are recorded at depreciated replacement cost based on the estimated present cost of constructing the existing asset by the most appropriate method of construction. Land associated with the state highways is valued using an opportunity cost based on adjacent use, as an approximation of fair value.
Aircraft (excluding specialist military equipment)
Aircraft (excluding SME) are recorded at fair value less any accumulated depreciation.
Electricity distribution network
Electricity distribution network assets are recorded at cost less accumulated depreciation.
Electricity generation assets
Electricity generation assets are recorded at fair value less any accumulated depreciation.
Other items of property, plant and equipment – at cost
Other property, plant and equipment, which include motor vehicles and office equipment, are recorded at cost less accumulated depreciation.
Other physical assets for which an objective estimate of market value is difficult to obtain
Such physical assets (national parks, for example) are recorded at fair value less any accumulated depreciation.
Commercial forests#
Commercial forests are recorded at fair value less estimated point-of-sale costs. This takes into account age, quality of timber and the forest management plan.
Goodwill and intangible assets#
The excess of cost over the fair value of the net assets of entities acquired (subsidiaries) at the date of acquisition is recognised as goodwill. The balance of goodwill is assessed annually for evidence of impairment in excess of annual amortisation.
Identifiable intangible assets which have been purchased are initially recorded at cost and thereafter either at cost less accumulated amortisation and any accumulated impairment losses or, where in the rare case where an active market exists, at a revalued amount being fair value at the date of the revaluation less any subsequent accumulated amortisation and any subsequent accumulated impairment losses.
Goodwill and identifiable intangible assets are amortised on a systematic basis to the Statement of Financial Performance over their period of expected benefit. The maximum period of amortisation is 20 years.
Liabilities#
Borrowings#
In the Statement of Financial Position, borrowings (including currency swaps) are recorded at nominal value adjusted for the unamortised portion of the premium or discount on issue.
Foreign monetary liabilities#
Where short-term foreign monetary liabilities are subject to forward exchange contracts, they are translated into New Zealand dollars at the contract rate. Otherwise, foreign monetary liabilities are translated at the closing exchange rate.
Exchange gains and losses are recognised in the Statement of Financial Performance in the period in which they arise.
Pension liabilities#
Pension liabilities in respect of the contributory service of superannuation scheme members are recorded at the latest actuarial value of the Crown's liability for pension payments. Movements of the liability are reflected in the Statement of Financial Performance.
ACC claims liabilities#
The future cost of ACC claims liabilities is revalued annually based on the latest actuarial information. Movements of the liability are reflected in the Statement of Financial Performance.
Currency issued#
Currency issued represents a liability in favour of the holder. Currency issued for circulation, including an amount to cover expected future redemption of demonetised currency, is recognised at face value.
Leases#
Finance leases transfer to the Crown as lessee substantially all the risks and rewards incident on the ownership of a leased asset. The obligations under such leases are capitalised at the present value of the minimum lease payments. The capitalised values are amortised over the period in which the Crown expects to receive benefits from their use.
Operating leases, where the lessors substantially retain the risks and rewards of ownership, are recognised in a systematic manner over the term of the lease.
Leasehold improvements are capitalised and the cost is amortised over the unexpired period of the lease or the estimated useful life of the improvements, whichever is shorter.
Employee entitlements#
Employee entitlements to salaries and wages, annual leave, long service leave, retiring leave and other similar benefits are recognised when they accrue to employees. The liability for employee entitlements is carried as the present value of the estimated future cash outflows.
Other liabilities#
All other liabilities are recorded at the estimated obligation to pay.
Commitments#
Commitments are future expenses and liabilities to be incurred on contracts that have been entered into at balance date. Commitments include those operating and capital commitments arising from non-cancellable contractual or statutory obligations. Interest commitments on debts and commitments relating to employment contracts are not included in the Statement of Commitments.
Contingent liabilities and contingent assets#
Contingent liabilities and contingent assets are recorded in the Statement of Contingent Liabilities and Contingent Assets at the point at which the contingency is evident.
Changes in Accounting Policies#
In November 2005 the Government agreed (with effect from 1 April 2006) that interest will not be charged on student loans where certain criteria, largely related to being domiciled in New Zealand, are met. To better reflect the value of student loans under this no-interest policy, the accounting policy for reporting loans has also been updated. The accounting policy is to initially recognise student loans at their fair value and to subsequently report them at amortised cost. This accounting policy is to apply from 2005/06 and is consistent with the ‘loans and receivables’ designation under International Accounting Standard 39 (IAS 39) for financial instruments. The Crown will be adopting the New Zealand equivalent to IAS 39 for all financial instruments from 1 July 2007.
The key changes resulting from the no-interest student loan policy and adopting a new accounting policy are:
- There is a one-off write-down of $1,415 million in 2005/06 of the existing loan book value to fair value[1]
- The difference between the fair value of new loans and the amount lent is recognised as an expense in the year the loan is provided
- The initial fair value write-down will be unwound (ie, recognised as income) over the maturity of the loans. The value will be adjusted for any impairment (eg, non repayments caused, for example by death or bankruptcy of the borrowers).
For an analysis of the annual movement in student loans refer to Note 9 in the notes to the financial statements.
There has been a change in the method for estimating provisional tax revenue. Provisional tax revenue is now recognised in the period in which it is earned. Previously, the estimation was on the payment due date. The new method will better align tax revenue estimation with the accounting policy for tax revenue at the time the debt to the Crown arises. In doing so, the financial statements will have a more reliable estimate of tax receivables as at each balance date.
The transition to the new estimation method has resulted in a $1.8 billion increase in tax receivables in the Statement of Financial Position. This increase reflects tax revenue earned in April, May and June 2006 but which was not due for payment until after June 2006. In accordance with FRS-7, this change in estimate is also reflected as a one-off increase in tax revenue in the Statement of Financial Performance. In effect, tax revenue for this transition year captures more than just the normal 12 months of provisional tax revenue.
This change has no impact on taxpayers’ obligations or tax receipts; hence there are no cash flow impacts for the Crown.
There have been no other changes in accounting policies. All other policies have been applied on a basis consistent with the previous year.
Comparatives#
To ensure consistency with the current period, comparative figures have been restated where appropriate.
Notes
- [1]New data around the assumptions of overseas borrowers primarily reduced the write down by $64 million from that calculated in November 2005
Notes to the Financial Statements#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Forecast | Actual | |||
Income Tax Revenue (accrual) | ||||
Individuals | ||||
19,240 | 19,817 | Source deductions | 19,936 | 18,324 |
4,051 | 4,309 | Other persons | 4,940 | 4,103 |
(874) | (952) | Refunds | (953) | (876) |
456 | 453 | Fringe benefit tax | 450 | 441 |
22,873 | 23,627 | Total Individuals | 24,373 | 21,992 |
Corporate Tax | ||||
7,798 | 8,049 | Gross companies tax | 9,413 | 7,537 |
(162) | (206) | Refunds | (270) | (232) |
793 | 1,003 | Non-resident withholding tax | 1,096 | 927 |
176 | 191 | Foreign-source dividend withholding payments | 160 | 188 |
8,605 | 9,037 | Total Corporate Tax | 10,399 | 8,420 |
Other Income Tax | ||||
1,459 | 1,863 | Resident withholding tax on interest income | 1,879 | 1,501 |
63 | 65 | Resident withholding tax on dividend income | 74 | 59 |
2 | 2 | Estate and gift duties | 3 | 2 |
1,524 | 1,930 | Total Other Income Tax | 1,956 | 1,562 |
33,002 | 34,594 | Total Direct Income Tax | 36,728 | 31,974 |
Goods and Services Tax | ||||
17,479 | 17,811 | Gross goods and services tax | 18,241 | 17,378 |
(7,115) | (7,448) | Refunds | (7,664) | (7,180) |
10,364 | 10,363 | Total Goods and Services Tax | 10,577 | 10,198 |
Other Indirect Taxation | ||||
902 | 897 | Petroleum fuels excise | 852 | 823 |
850 | 853 | Tobacco excise | 834 | 842 |
1,048 | 1,009 | Customs duty | 1,083 | 947 |
796 | 756 | Road user charges | 731 | 713 |
505 | 513 | Alcohol excise | 516 | 491 |
288 | 254 | Gaming duties | 275 | 281 |
219 | 221 | Motor vehicle fees | 221 | 217 |
72 | 64 | Energy resources levies | 73 | 73 |
56 | 83 | Approved issuer levy and cheque duty | 83 | 65 |
4,736 | 4,650 | Total Other Indirect Taxation | 4,668 | 4,452 |
15,100 | 15,013 | Total Indirect Taxation | 15,245 | 14,650 |
48,102 | 49,607 | Total Tax Revenue Collected | 51,973 | 46,624 |
Other Sovereign Revenues (accrual) | ||||
2,097 | 2,151 | ACC levies | 2,326 | 2,119 |
242 | 250 | Fire Service levies | 254 | 249 |
82 | 82 | EQC levies | 82 | 80 |
785 | 645 | Other | 749 | 667 |
3,206 | 3,128 | Total Other Sovereign Revenues | 3,411 | 3,115 |
51,308 | 52,735 | Total Sovereign Revenue | 55,384 | 49,739 |
Notes to the Financial Statements (continued)#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Forecast | Actual | |||
Income Tax Receipts (cash) | ||||
Individuals | ||||
19,240 | 19,775 | Source deductions | 19,897 | 18,380 |
4,611 | 4,933 | Other persons | 4,883 | 4,640 |
(1,410) | (1,565) | Refunds | (1,503) | (1,365) |
452 | 447 | Fringe benefit tax | 450 | 432 |
22,893 | 23,590 | Total Individuals | 23,727 | 22,087 |
Corporate Tax | ||||
8,444 | 8,478 | Gross companies tax | 8,512 | 8,365 |
(812) | (753) | Refunds | (833) | (735) |
779 | 996 | Non-resident withholding tax | 1,093 | 949 |
175 | 191 | Foreign-source dividend withholding payments | 157 | 185 |
8,586 | 8,912 | Total Corporate Tax | 8,929 | 8,764 |
Other Income Tax | ||||
1,459 | 1,871 | Resident withholding tax on interest income | 1,862 | 1,498 |
63 | 65 | Resident withholding tax on dividend income | 74 | 60 |
2 | 2 | Estate and gift duties | 2 | 2 |
1,524 | 1,938 | Total Other Income Tax | 1,938 | 1,560 |
33,003 | 34,440 | Total Direct Income Tax | 34,594 | 32,411 |
Goods and Services Tax | ||||
16,928 | 17,580 | Gross goods and services tax | 17,705 | 16,729 |
(6,563) | (7,229) | Refunds | (7,216) | (6,719) |
10,365 | 10,351 | Total Goods and Services Tax | 10,489 | 10,010 |
Other Indirect Taxation | ||||
902 | 897 | Petroleum fuels excise | 847 | 812 |
850 | 853 | Tobacco excise | 842 | 838 |
1,048 | 1,009 | Customs duty | 1,074 | 968 |
792 | 756 | Road user charges | 721 | 714 |
505 | 513 | Alcohol excise | 514 | 483 |
289 | 267 | Gaming duties | 273 | 287 |
224 | 226 | Motor vehicle fees | 199 | 205 |
72 | 67 | Energy resources levies | 73 | 73 |
56 | 81 | Approved issuer levy and cheque duty | 80 | 66 |
4,738 | 4,669 | Total Other Indirect Taxation | 4,623 | 4,446 |
15,103 | 15,020 | Total Indirect Taxation | 15,112 | 14,456 |
48,106 | 49,460 | Total Tax Receipts Collected | 49,706 | 46,867 |
Other Sovereign Receipts (cash) | ||||
2,063 | 2,215 | ACC levies | 2,256 | 2,052 |
242 | 250 | Fire Service levies | 254 | 249 |
82 | 82 | EQC levies | 83 | 81 |
608 | 589 | Other | 653 | 592 |
2,995 | 3,136 | Total Other Sovereign Receipts | 3,246 | 2,974 |
51,101 | 52,596 | Total Sovereign Receipts | 52,952 | 49,841 |
Note 2: Sale of Goods and Services#
The Statement of Segments shows the sale of goods and services as a total for each area of the Crown (ie, total sales for core Crown, Crown entities and SOEs). The total for Crown entities includes such items as lottery sales, housing rental and Crown research institutes (CRI) sales. The total sales of SOEs (including Air NZ) represents the majority of their income from electricity generation and distribution services, postal services, advertising and air travel sales.
Note 3: Investment Income#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Investment Income | ||||
580 | 1,445 | NZS Fund Investment Income | 1,139 | 646 |
1,446 | 1,919 | Interest income | 2,145 | 1,618 |
547 | 335 | Student loans | 344 | 498 |
69 | 65 | Dividends | 117 | 87 |
- | 630 | Gain on Sale of Southern Hydro | 630 | - |
593 | 1,779 | Gains/(losses) on marketable securities, deposits and equity investments | 1,436 | 867 |
87 | 17 | Other | 17 | 98 |
3,322 | 6,190 | Total Investment Income | 5,828 | 3,814 |
Note 4: Other Revenue#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
- | - | Unrealised (losses)/gains arising from changes in the value of commercial forests | 15 | (23) |
84 | 88 | GSF contributions | 104 | 102 |
43 | 61 | Petroleum royalties | 61 | 51 |
30 | 27 | Cost recovery income from fisheries | 29 | 30 |
2,133 | 2,401 | Other | 1,823 | 2,021 |
2,290 | 2,577 | Total Other Operational Revenue | 2,032 | 2,181 |
Note 5: Subsidies and Transfer Payments#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Social Assistance Grants | ||||
6,392 | 6,415 | New Zealand Superannuation | 6,414 | 6,083 |
1,501 | 1,493 | Domestic purposes benefit | 1,493 | 1,547 |
1,687 | 1,699 | ACC payments | 1,708 | 1,549 |
800 | 714 | Unemployment benefit | 712 | 831 |
1,088 | 1,074 | Invalids benefit | 1,073 | 1,026 |
1,312 | 1,355 | Family support | 1,285 | 846 |
803 | 843 | Accommodation supplement | 843 | 750 |
541 | 541 | Sickness benefit | 541 | 510 |
398 | 351 | Student allowances | 354 | 359 |
270 | 263 | Disability allowances | 261 | 267 |
1,728 | 1,803 | Other social assistance grants | 1,675 | 1,629 |
125 | 115 | Subsidies | 127 | 118 |
Other Transfer Payments | ||||
320 | 346 | Official development assistance | 330 | 297 |
37 | 35 | Other | 34 | 32 |
17,002 | 17,047 | Total Subsidies and Transfer Payments | 16,850 | 15,844 |
Note 6: Personnel Expenses#
The Statement of Segments shows the personnel expenses as a total for each area of total Crown (ie, total personnel expenses for core Crown, Crown entities and SOEs).
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
1,043 | 1,301 | GSF pension costs | 1,392 | 1,032 |
123 | 129 | Other pension expenses | 206 | 108 |
13,317 | 13,416 | Other personnel expenses | 13,518 | 12,422 |
14,483 | 14,846 | Total Personnel Expenses | 15,116 | 13,562 |
Personnel expenses include salaries and allowances to Ministers of the Crown totalling $6.7 million (30 June 2005: $6 million). In addition, Ministers are provided with ministerial accommodation in Wellington and receive allowances when travelling in New Zealand.
Note 7: Operating Expenses#
Operating expenses relate to those expenses incurred in the course of undertaking the functions and activities of entities included in the Government financial statements, excluding those expenses separately identified in the Statement of Financial Performance and other notes. Items disclosed separately below are those required by Financial Reporting Standards.
Other operating costs is the large residual item. Most of these costs represent payments made for services provided by third parties (roading maintenance for example) or for raw materials (fuel, medicines or inventory for example). They also include other day-to-day operating costs.
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Depreciation Expenses | ||||
857 | 863 | Buildings | 880 | 793 |
111 | 109 | Electricity distribution networks | 109 | 106 |
212 | 204 | Electricity generation assets | 198 | 166 |
191 | 186 | Specialist military equipment (SME) | 187 | 189 |
265 | 228 | State highways | 252 | 225 |
187 | 198 | Aircraft (excluding SME) | 102 | 101 |
856 | 872 | Other plant and equipment | 905 | 850 |
65 | 55 | Other assets | 75 | 98 |
2,744 | 2,715 | Total Depreciation Costs | 2,708 | 2,528 |
Other Operating Expenses | ||||
754 | 777 | Rental and leasing costs | 820 | 789 |
512 | 246 | Change in provision for doubtful debts | 429 | 984 |
63 | 59 | Write-off of bad debts | 81 | 93 |
94 | 89 | Goodwill amortised | 75 | 97 |
19 | 19 | Audit fees | 28 | 25 |
13 | 2 | Fees paid to auditors for other services | 4 | 5 |
- | - | Asset impairment losses | 90 | 74 |
350 | 1,073 | Grants paid | 1,578 | 1,267 |
337 | 358 | Lottery prize payments | 398 | 350 |
- | - | Loss/(gain) on sale of assets | 93 | 2 |
- | - | Net revaluation losses | (274) | 53 |
- | 1,479 | Write down of existing student loans to fair value | 1,415 | - |
- | 300 | Write down of new loans to fair value | 328 | - |
22,237 | 22,527 | Other operating costs | 21,504 | 19,047 |
27,123 | 29,644 | Total Operating Expenses (including depreciation) | 29,277 | 25,314 |
Note 8: Cash and Marketable Securities, Deposits and Equity Investments#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
By Category | ||||
2,446 | 3,319 | Total Cash | 4,168 | 3,710 |
19,026 | 26,468 | Marketable securities and deposits (MSD) | 27,668 | 21,464 |
13,042 | 15,267 | Equity investments (eg, shares) | 15,394 | 10,896 |
662 | 281 | Reserve position at the IMF | 458 | 702 |
32,730 | 42,016 | Total MSDs and Equity Investments | 43,520 | 33,062 |
35,176 | 45,335 | Cash and MSDs and Equity Investments | 47,688 | 36,772 |
By Portfolio Management: | ||||
12,997 | 18,714 | Reserve Bank and NZDMO managed funds | 19,284 | 14,776 |
8,350 | 9,240 | NZS Fund | 8,555 | 5,571 |
3,187 | 3,370 | Government Superannuation Fund | 3,959 | 3,233 |
5,757 | 7,398 | ACC portfolio | 7,882 | 5,987 |
1,649 | 2,241 | EQC portfolio | 1,943 | 1,675 |
790 | 1,053 | Other holdings | 1,897 | 1,820 |
32,730 | 42,016 | Total MSDs and Equity Investments | 43,520 | 33,062 |
The asset values above are net of any cross-holdings. For example, the asset portfolios of the NZS Fund, GSF, EQC and ACC currently all hold amounts of New Zealand Government stock. For financial reporting purposes these amounts are eliminated within the combined financial statements. The total portfolios, including cross-holdings of New Zealand Government stock, are shown below, along with commentary on the restricted nature of some of the assets (for example the GSF assets are only available for the payment of GSF benefits – because of the restricted nature of these assets they are excluded from the definition of net core Crown debt).
Nature of financial assets – some are restricted in their purpose#
Within the financial assets above, several portfolios are restricted in their nature in that they are only available to meet very specified purposes and are not available (by statute or other reasons) for general use by the Crown. It is for this reason that such assets are excluded from the definition of net core Crown debt – one of the Crown’s key fiscal policy indicators.
New Zealand Superannuation Fund#
The assets of the NZS Fund is the Government’s means of building up assets to partially pre-fund future New Zealand superannuation expenses and may only be used for New Zealand Superannuation. The assets in this fund total $10.2 billion as at 30 June 2006. The Government’s contributions to the NZS Fund are calculated over a 40-year rolling horizon to ensure superannuation entitlements over the next 40 years can be met.
Government Superannuation Fund#
The GSF Authority administers the portfolio of the GSF totalling $4.2 billion. These assets result from contributions by beneficiaries built up through time and can only be applied to the ongoing payment of GSF benefits (as provided by the GSF Act). Also refer Note 16.
EQC – Natural Disaster Fund (NDF)#
The EQC is New Zealand’s primary provider of seismic disaster insurance to residential property owners. The EQC administers the NDF, comprising capital and reserves. The EQC draws on the NDF money to pay out claims for damage caused by natural disasters.
ACC portfolio#
ACC manages the ACC scheme. At present there is a substantial outstanding claims liability associated with past claims of around $12.7 billion. To manage the payment of these claims in the future, ACC is building up a matching portfolio of assets. The target is to have the residual claims fully funded by 2014. Also refer Note 17.
9,278 | 10,242 | NZS Fund | 9,726 | 6,555 |
---|---|---|---|---|
3,587 | 3,744 | GSF financial assets | 4,166 | 3,521 |
8,314 | 8,798 | ACC portfolio | 9,080 | 8,123 |
4,837 | 5,273 | EQC portfolio | 5,232 | 4,557 |
Note 9: Advances#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Forecast | Actual | |||
7,195 | 5,472 | Student loans (see analysis below) | 5,569 | 6,465 |
2,615 | 2,871 | Kiwibank mortgages | 2,609 | 1,575 |
88 | 79 | Residential care loans | 71 | 77 |
48 | 57 | Mäori development rural lending | 80 | 51 |
24 | 24 | Forestry encouragement loans | 24 | 25 |
6 | 6 | Catchment authorities | 5 | 6 |
477 | 421 | Other | 400 | 337 |
10,453 | 8,930 | Total Advances | 8,758 | 8,536 |
Analysis of Student Loans | ||||
Outstanding balance | ||||
8,178 | 8,189 | Total loans outstanding (including interest) | 8,370 | 7,499 |
(983) | (2,717) | Total provisions (capital and interest) | (2,801) | (1,034) |
7,195 | 5,472 | Total Student Loans | 5,569 | 6,465 |
Movement during the year | ||||
6,465 | Opening balance | 6,465 | ||
(1,479) | Initial fair value write down | (1,415) | ||
(18) | Other impairment | (13) | ||
1,042 | Amount borrowed in current year | 1,046 | ||
(299) | Fair value write down on new borrowings | (328) | ||
(574) | Repayments made during the year | (550) | ||
335 | Interest unwind | 358 | ||
- | Other movements | 6 | ||
5,472 | Closing balance | 5,569 | ||
Movement during the year | ||||
6,594 | Opening balance | 5,995 | ||
1,040 | Amount advanced in current year | 971 | ||
547 | Interest accrued on outstanding loan balances | 498 | ||
(402) | Repayment of base capital | (313) | ||
(253) | Repayment of accrued interest | (259) | ||
(339) | Interest written off and movement in provision for interest write-offs and doubtful debts | (435) | ||
8 | Other movements | 8 | ||
7,195 | Closing Balance | 6,465 |
Student Loans Book Value#
Student loans are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method, less any impairment loss.
Fair value is the amount for which the loans could be exchanged between knowledgeable, willing parties in an arms length transaction. Fair value on initial recognition of student loans, is determined by projecting forward the repayments required under the scheme, to a willing buyer and discounting them back at an appropriate discount rate.
As student loans are subsequently measured at amortised cost, the model projects all future cash flows to the Crown associated with the loan and the effective interest rate is calculated at initial recognition. This rate is used to spread the Crown’s interest income across the life of the loan and determines the loan’s book value at each reporting date. If the timing of future receipts is revised, the book amount at reporting date is adjusted to reflect the revised estimated cash flows at the loans’ original effective interest rate. The adjustment is recognised as income or expense in the Statement of Financial Performance.
Note 9: Advances (continued)#
With the support of the Ministry of Education (MOE), Inland Revenue Department (IRD) and Ministry of Social Development (MSD) have adapted the Ministry of Education’s valuation model to reflect the recently introduced student loans no interest, amnesty and voluntary repayments legislation. The substantive information has remained consistent with previous years, incorporating educational, demographic, income and loan data. As such, the fair value is sensitive to changes on a number of underlying assumptions, including future income levels, repayment behaviour and macro economic factors such as inflation and the discount rate. The significant assumptions are as follows:
30 June 2006 | 30 June 2005 | |
---|---|---|
Weighted average effective interest rate | 6.63% | Not applicable |
Interest rate applied to loans for overseas borrowers | 6.9% (6.7% outyears) | 7.0% (6.8% outyears) |
Cost of administration as a % of the average outstanding loan balance | 0.15% | 0.20% |
CPI | 3.2% | 2.8% |
Future salary inflation | 3.6% | 3.4% |
The data for student loans has been integrated from files provided by IRD, MSD and MoE. It consists of records of all borrowers from the start of student loans in 1992, the data from 1997 is limited with mainly IRD information available. The current data is up to 31 March 2003, and contains information on borrowings, repayments, income, educational factors, socio-economic factors amongst others and has been analysed and incorporated into the valuation model. Data to 31 March 2005 is now in the process of being analysed and will be available to be incorporated in the valuation model in 2006/07. Any revised future cash flows arsing from incorporating the updated data that impact the valuation will be recognised as they occur in 2006/07.
Given the lead time required between analysing the raw data and its availability for use in the valuation model, it is expected that there will always be a 15 month lag between the available data set and the valuation reported in the annual financial statements.
Student Loans Fair Value#
Fair value is the amount for which the loan book could be exchanged between knowledgeable, willing parties in an arms length transaction as at 30 June 2006. The estimated fair value of the student loan debt at 30 June 2006 has been determined to be approximately $5,538 million($5,994 million at 30 June 2005).
The fair value calculated is sensitive to underlying assumptions chosen. For example a 1% increase in the discount rate would decrease fair value by approximately $339 million, whereas a 1% decrease in the discount rate would increase fair value by approximately $391 million.
The 2006 Student Loan Annual Report contains more information on the student loan scheme.
Through the everyday operations of the student loan scheme the Crown is exposed to the risk that borrowers will default on their obligation to repay their loans or die before their loan is repaid, causing the scheme to incur a loss.
The student loan scheme policy does not require borrowers to provide any collateral or security to support advances made. As the total sum advanced is widely dispersed over a large number of borrowers, the scheme does not have any material individual concentrations of credit risk.
The credit risk is reduced by collection of repayments through the tax system.
Note 10: Receivables#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
5,585 | 5,691 | Taxes receivable | 8,720 | 5,641 |
4,305 | 4,465 | Accounts receivable | 5,259 | 4,610 |
70 | 75 | Receivable from the sale and purchase of Maui gas | 74 | 121 |
245 | 202 | Prepayments | 421 | 511 |
10,205 | 10,433 | Total Receivables | 14,474 | 10,883 |
Included in taxes receivable at nominal value less provision for doubtful debts are general taxes receivable administered by the Inland Revenue Department. The gross book value of the debtors was $8,824 million, $899 million has been provided as a provision for doubtful debts. Included in accounts receivables at gross value less provision for doubtful debts are debtor portfolios held by the Ministries of Social Development and Justice. Due to the nature of these portfolios the collectability of outstanding amounts take place over a significant period of time. The debtor portfolio held by the Ministry of Justice largely relates to outstanding court and enforcement fines and associated filing and enforcement fees. The gross book value of the debtor portfolio was $547 million, $123 million has been provided as a provision for doubtful debts reflecting the nature of the collectability of the debtors. The debtor portfolio held by the Ministry of Social Development largely relates to benefit overpayments, advances on benefits and recoverable special needs grant. The gross book value was $821 million, $408 million has been provided as a provision for doubtful debts reflecting the nature of the collectability of the debtors. Work is currently underway to estimate the fair value of long term receivables held by the Ministry of Justice, Ministry of Social Development and Inland Revenue Department as part of the Government’s transition to NZ IFRS.
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
72 | 76 | International Bank for Reconstruction and Development | 86 | 74 |
78 | 81 | Asian Development Bank | 92 | 79 |
84 | 110 | Other | 145 | 68 |
234 | 267 | Total Other Investments | 323 | 221 |
Note 12: Property, Plant and Equipment#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Forecast | Actual | |||
By Type | ||||
Gross Carrying Value | ||||
9,962 | 11,488 | Land (valuation) | 13,803 | 11,693 |
476 | 454 | Properties intended for sale (lower of book value or NRV) | 467 | 470 |
21,204 | 21,171 | Buildings (valuation) | 21,859 | 19,457 |
2,231 | 2,358 | Electricity distribution network (cost) | 2,311 | 2,123 |
7,032 | 7,155 | Electricity generation assets (valuation) | 8,536 | 7,260 |
2,880 | 2,138 | Aircraft (ex SME) (valuation) | 2,068 | 1,139 |
14,258 | 15,867 | State highways (valuation) | 17,948 | 14,909 |
3,710 | 3,511 | Specialist Military Equipment (valuation) | 3,422 | 3,032 |
9,813 | 9,150 | Other plant and equipment (cost) | 9,692 | 8,987 |
5,316 | 6,808 | Other assets (valuation) | 7,965 | 6,751 |
76,882 | 80,100 | Total Gross Carrying Value | 88,071 | 75,821 |
Accumulated Depreciation | ||||
2,917 | 1,986 | Buildings | 1,307 | 1,324 |
313 | 297 | Electricity distribution network | 299 | 187 |
767 | 319 | Electricity generation assets | 111 | 169 |
371 | 198 | Aircraft (ex SME) | - | - |
499 | 453 | State highways | - | - |
838 | 800 | Specialist military equipment | 344 | 621 |
5,776 | 5,568 | Other plant and equipment | 6,008 | 5,595 |
309 | 370 | Other assets | 561 | 431 |
11,790 | 9,991 | Total Accumulated Depreciation | 8,630 | 8,327 |
Net Carrying Value | ||||
9,962 | 11,488 | Land (valuation) | 13,803 | 11,693 |
476 | 454 | Properties intended for sale (lower of book value or NRV) | 467 | 470 |
18,287 | 19,185 | Buildings (valuation) | 20,552 | 18,133 |
1,918 | 2,061 | Electricity distribution network (cost) | 2,012 | 1,936 |
6,265 | 6,836 | Electricity generation assets (valuation) | 8,425 | 7,091 |
2,509 | 1,940 | Aircraft (ex SME) (valuation) | 2,068 | 1,139 |
13,759 | 15,414 | State highways (valuation) | 17,948 | 14,909 |
2,872 | 2,711 | Specialist military equipment (valuation) | 3,078 | 2,411 |
4,037 | 3,582 | Other plant and equipment (cost) | 3,684 | 3,392 |
5,007 | 6,438 | Other assets (valuation) | 7,404 | 6,320 |
65,092 | 70,109 | Total Net Carrying Value | 79,441 | 67,494 |
By holding | ||||
64,751 | 69,087 | Freehold assets | 77,858 | 66,282 |
341 | 1,022 | Leasehold assets | 1,583 | 1,212 |
65,092 | 70,109 | Total Net Carrying Value | 79,441 | 67,494 |
Note 12: Property, Plant and Equipment Assets (continued)#
State highways#
State highways comprise the land, formation works, road structure, drainage works and traffic facilities of the roads, plus bridges, culverts, tunnels, stock and pedestrian underpasses, protection works and retaining structures. The land, including that held for future highway development, was valued on a fair value basis while other elements of the state highways were valued on the basis of depreciated replacement cost. After allowing for new works and depreciation during the year to 30 June 2006, the depreciated replacement cost is assessed at $17,948 million ($14,909 million as at 30 June 2005).
Replacement costs were determined by estimating the costs of new construction of the network by the most appropriate method of construction. The methodology applied used information from the road assessment and maintenance management (RAMM) database and the bridge inventory held by Transit New Zealand. This information was supplemented by local knowledge and expertise of the valuers: Opus International Consultants and land and property valuations supplied by DTZ New Zealand Limited.
Other assets#
There are difficulties associated with obtaining an objective valuation for some of the Crown’s assets. These are discussed below:
National Archives Holdings
Archives in the possession of Archives New Zealand have been valued and recorded at a best estimate of fair value as at 30 June 2006. Determination of the fair value of $559 million at 30 June 2006 ($548 million as at 30 June 2005) was based on a valuation in December 2003 using a methodology that divided the collection into categories by format and age, to associate records that could be said to have a broad commonality of value. Benchmark valuations were obtained from an independent valuer, Dunbar Sloane, through market assessments and from other collections of a similar nature to Government archives. Accessions since the date of the valuation are valued on the basis of these benchmarks. The value of the Treaty of Waitangi and other exceptional items were based on a valuation from an international auction house, Sotheby’s in December 2004 and from Dunbar Sloane in January 2005 respectively, through market assessments and from other collections of similar nature.
National library collections
The Heritage Collections are valued at fair value. The valuation was performed by National Library staff at 30 June 2003, with the valuation methodology reviewed by an independent valuer. The carrying value of $858 million as at 30 June 2006 ($855 million as at 30 June 2005) includes the value of purchases for the collections since the last revaluation and the value of material received through donation and legal deposit. Section 11 of the National Library of New Zealand (Te Puna Mātauranga o Aotearoa) Act 2003 requires the Crown to own the collections of the Alexander Turnbull Library in perpetuity. The Heritage Collections are not depreciated.
The General and Schools Collections are recorded at net book value of $20 million as at 30 June 2006 ($20 million as at 30 June 2005).
National parks, forest parks, conservation areas and recreational facilities
The Conservation Estate was recorded at their valuation of $3,963 million as at 30 June 2006 ($2,971 million as at 30 June 2005). The valuation of the Conservation Estate was based on rateable valuations prepared by Quotable Value New Zealand and was independently reviewed by valuersnet.nz.
The Department of Conservation recreational facilities were recorded at their fair valuation of $256 million as at 30 June 2006 ($257 million as at 30 June 2005). The recreational facilities are subject to an asset management plan and are recorded in the Visitor Assets Management System (VAMS).
The fences that border Conservation Estate areas or form part of the recreational facilities have been fair valued and recorded at $75 million as at 30 June 2006 ($77 million as at 30 June 2005). Over the three years to 30 June 2006, 44 of the 49 Department’s Areas were sampled, valued by the Department of Conservation and confirmed by an independent valuer. This was extrapolated to provide a national value.
The use and disposal of all the Crown land managed by the Department of Conservation is determined by legislation, in particular the Reserves Act 1977 and the National Parks Act 1980 and the Conservation Act 1987.
The Crown land managed by the Department is not subject to mortgages or other charges or treaty claims. Specific areas may, however, be included in the Treaty settlements if the Crown decides to offer those areas to claimants. Some areas may be subject to leases, licences or permits issued by the Department under concession provisions of the relevant legislation.
Parliamentary Library
The Parliamentary Library has been valued and recorded at $25 million ($27 million as at 30 June 2005). The reference collection is valued at historical cost and the heritage collection at current market value on a three yearly basis by the Service’s Library staff in accordance to guidelines released by the Zealand Library Association and the National Library of New Zealand.
Crown Research Institutes “collection type” asset values
The Crown, when establishing Crown Research Institutes in 1992, transferred various national databases and reference collections to individual Institutes at nil value. No reliable valuation is able to be obtained for these assets, and so they remain at nil value. Many of the databases and collections were specifically identified by the Foundation for Research, Science and Technology as being of significant importance and as such have covenants attached to them restricting an Institute’s ability to deal with them.
Rail Assets
In 2004 the Crown purchased the national rail infrastructure and some related assets. The purchase included the rail infrastructure for $1. Effective 1 September 2004, the infrastructure assets were transferred from the Crown to ONTRACK at book value. The Crown has committed funding to upgrade the national rail infrastructure and as at 30 June 2006 $119 million of this expenditure has been capitalised.
Note 13: Accounting Treatment of TEIs#
Section 27 (2) of the Public Finance Act 1989 (the Act) requires the Crown to prepare financial statements in accordance with generally accepted accounting practice. Section 27 (3) of the Act also requires the Crown to record its interest in entities such as Offices of Parliament and Crown entities within its financial statements.
The applicable financial reporting standards (FRSs) that determine the basis of combination of entities that make up the Government reporting entity are FRS 37: Consolidating Investments in Subsidiaries and FRS 38: Accounting for Investments in Associates.
FRS 37 provides the basis for establishing whether the Crown’s interest in an entity should be line-by-line combined. The control test in FRS 37 requires consideration of both the Crown’s level of power and the benefit in relation to entities.
FRS 37 is not clear about how the definition of control in FRS 37 should be applied in some circumstances in the public sector, particularly where legislation provides certain public sector entities with some statutory autonomy and independence. Treasury’s view is that line-by-line combination of such entities would provide a more conceptually complete and consistent picture of the Government’s financial activities and position. However, given the lack of clarity in applying FRS 37, the 2006 Financial Statements of the Government equity account the TEIs as the Crown cannot unilaterally determine their operating and financing policies, but does have a number of powers in relation to these entities.
The following table shows the financial effect if the revenue, expenses, assets and liabilities of TEIs were line-by-line combined and contrasts this with the treatment in the financial statements of equity accounting TEIs’ net surpluses and net assets. If TEIs were line-by-line combined there would be an increase in total revenues and expenses, total Crown debt and total assets and liabilities. The operating balance and net worth are the same under both accounting treatments.
Note that the following table indicates the total revenues and expenses of TEIs in the second column. However, the impact on the total Crown results from combining TEIs line by line would be to increase revenues and expenses, but only to the extent the TEI totals were not funded by the Crown (ie, by the amount in the third column). The Statement of Financial Position would alter as indicated in the following table.
TEIs as at 30 June 2006 $ millions | Equity accounting (current treatment) 2006 | Impact on total Crown[2] | Equity accounting (current treatment) 2005 | Impact on total Crown |
---|---|---|---|---|
Operating Results | ( ) = reduce item | |||
Revenues | - | 1,843 | - | 1,423 |
Expenses | - | 1,789 | - | 1,290 |
Net surplus of TEIs | 54 | - | 133 | - |
Operating Balance (no change) | 54 | 54 | 133 | 133 |
Assets and Liabilities | ||||
Assets | ||||
Financial assets | - | 867 | - | 914 |
Property, plant and equipment | - | 5,684 | - | 5,125 |
Other assets | 248 | 226 | ||
Net investment in TEIs | 5,475 | (5,475) | 5,010 | (5,010) |
Total assets | 5,475 | 1,325 | 5,010 | 1,255 |
Liabilities | ||||
Gross debt | 226 | 331 | ||
Other liabilities | 1,099 | 924 | ||
Total Liabilities | 1,325 | 1,255 | ||
Net Worth (no change) | 5,475 | - | 5,010 | - |
Notes
- [2]This is the impact on the total Crown results if a full line by line combination approach was adopted.
Note 14: Intangible Assets (including goodwill)#
Goodwill and intangible assets as at 30 June 2006 total $630 million ($737 million as at 30 June 2005). Intangible assets (including goodwill) comprise:
30 June 2006 $m | 30 June 2005 $m | |
---|---|---|
Intangible assets | 228 | 279 |
Goodwill | 402 | 458 |
Total Intangible Assets | 630 | 737 |
Goodwill is primarily made up of:
- remaining goodwill on acquisition of Air New Zealand of $258 million ($305 million as at 30 June 2005). It is amortised over a 10-year period. This results in an expense of $47 million per year.
- goodwill on acquisitions by SOEs.
The following table reconciles the movement in goodwill during the year.
Description ($million) | 30 June 2006 | 30 June 2005 |
---|---|---|
Opening balance | ||
Gross goodwill | 717 | 709 |
Accumulated amortisation | (259) | (162) |
Net opening balance | 458 | 547 |
Goodwill acquired during the period | 19 | 8 |
Goodwill amortised during the period | (75) | (97) |
Closing balance | ||
Gross goodwill | 748 | 717 |
Accumulated amortisation | (346) | (259) |
Net closing balance | 402 | 458 |
Note 15: Payables and Provisions#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
8,957 | 7,131 | Accounts payable and accruals | 8,899 | 8,593 |
2,326 | 2,742 | Taxes repayable | 3,570 | 2,778 |
541 | 488 | Provisions | 477 | 466 |
- | 582 | Provision for Kyoto Protocol | 656 | 310 |
891 | 944 | National Provident Fund guarantee | 998 | 944 |
1,271 | 1,388 | Provision for employee entitlements | 1,533 | 1,360 |
13,986 | 13,275 | Total Payables and Provisions | 16,133 | 14,451 |
The Crown guarantees the payment of benefits by the Board of Trustees of the National Provident Fund. The annual report of these schemes as at 31 March 2006, prepared in June2006, has indicated the DBP Annuitants Scheme, which contains pensioners only, has a deficit of $998 million, a increase of $54 million from 30 June 2005.
Analysis of Provisions | ||||
---|---|---|---|---|
541 | 466 | Opening balance | 466 | 485 |
100 | 157 | Additional provisions made in the year | 469 | 310 |
(99) | (123) | Provisions used in period | (360) | (243) |
(1) | (12) | Reversal of previous provision | (98) | (86) |
541 | 488 | Closing Balance | 477 | 466 |
Analysis of Provision for Kyoto Protocol Obligation | ||||
- | 310 | Opening balance | 310 | - |
- | 272 | Additional provisions made in the year | 346 | 310 |
- | 582 | Closing Balance | 656 | 310 |
Actual 30 June 2006 Emission Units[3] million tonnes (Mt) | Actual 30 June 2005 Emission Units million tonnes (Mt) | |
---|---|---|
Kyoto Target (Assigned Amount Units) | 307.6 | 307.6 |
Less AAUs allocated to emission reducing projects | 7.5 | 7.5 |
Total commitment target | 300.1 | 300.1 |
Projected emission units | ||
Agriculture | 198.7 | 202.0 |
Energy (including transport) and industrial processes | 193.0 | 194.4 |
Waste | 6.5 | 5.3 |
Solvent and other product use | 0.3 | 0.0 |
Total projected emission units | 398.5 | 401.7 |
Less net removals via forests | 57.2 | 70.9 |
Add statistical adjustment | 0.0 | 5.5 |
Net projected emission units | 341.3 | 336.3 |
Deficit in units | 41.2 | 36.2 |
$ million | $ million | |
Deficit in $ millions | 656 | 310 |
New Zealand ratified the Kyoto Protocol in December 2002. This international agreement commits New Zealand to reducing its average net emissions of greenhouse gases over 2008-2012 (the first commitment period of the Kyoto Protocol or CP1) to 1990 levels or to take responsibility for the difference. New Zealand can meet its commitment through emissions reductions and use of the Kyoto Protocol flexibility mechanisms such as Joint Implementation, the Clean Development Mechanism, and offsetting increased emissions against carbon removed by forests.
The estimate of New Zealand’s net obligation at 30 June 2006 $NZ656 million (2005: $NZ310 million). This obligation is based on a deficit of 41.2 Mt of emission units measured using an exchange rate of $US0.6063 = $NZ1 (based on 30 June 2006 exchange rate) and a carbon price of $US9.65 per unit. (30 June 2005 $US0.7010 = $NZ1, and carbon price $US6 per unit). In December 2005, the quantum of the deficit was adjusted upwards from 36.2 Mt to 64.0 Mt. This reflected the Government’s decision not to proceed with the carbon tax and also a reassessment of likely levels of deforestation in the first Kyoto commitment period. The subsequent change to 41.2 Mt from the figure of 64.0 Mt reflects the re-estimation of likely levels of emissions as discussed above.
Provisions by their nature are more uncertain than most other items in the statement of financial position. Fluctuations in the value of the estimate may occur through changes in the assumptions underlying the quantum, through movements in the price of carbon and the exchange rate of the United States dollar.
The quantum of the deficit has been compiled from agricultural, forest sink and deforestation projections provided by the Ministry of Agriculture and Forestry, energy (including transport) and industrial processes projections from the Ministry of Economic Development and waste projections from the Ministry for the Environment. The estimate includes the effects of refinements in modelling processes and updated assumptions on variables such as economic growth, population growth and oil prices as at May 2006. The projections use the latest information from the national inventory of greenhouse gas emissions and removals submitted to the United Nations Framework Convention on Climate Change Secretariat on 13 April 2006. The net removals via forests is reported after deducting 21 Mt for estimated deforestation. This estimate assumes policy interventions to operationalise the Government’s policy to cap its liability at this amount. In the absence of policy interventions, and assuming current market conditions prevail, a deforestation intentions survey conducted in 2005 indicated likely deforestation of 38.5 Mt, which would result in an increase in the provision of $279 million.
AEA Technology, an independent UK based firm, has assessed the reasonableness of the assumptions and methodologies underpinning the projections in 2005. The review team’s key finding was that “the methodologies employed to project emissions and sinks across the different sectors [are] generally sound and reasonable in their approach”. This report was finalised in October 2005.
The carbon price has been determined by the Treasury based on a consultant’s report. The Allen Consulting Group has reviewed this work.
No liability or contingent liability for periods beyond 2012 has been recognised, as New Zealand currently has no specific obligations beyond the First Commitment Period. The architecture of any obligations in future periods has yet to be negotiated.
Notes
- [3]One emission unit is equivalent to one tonne of greenhouse gas emissions converted to carbon dioxide equivalents by the global warming potential.
Note 16: Government Superannuation Fund (GSF) Liability#
The GSF liabilities have been calculated by the Government Actuary as at 30 June 2006. The liabilities arise from closed schemes for past and present public sector employees (set out in the GSF Act 1956). A Projected Aggregate Funding Method, based on balance-date membership data, is used for the valuation. This method requires the benefits payable from the GSF in respect of past service to be estimated and then discounted back to the valuation date.
The GSF net unfunded liability included as at 30 June 2006 was $11,438 million. This was an increase of $7 million compared with 30 June 2005.
The 2006 movement in the net unfunded liability of $7 million reflects an increase in the gross liability of $279 million and an increase in net assets of $272 million.
The main drivers of the movement in the net unfunded liability are changes to the economic assumptions since 30 June 2005 and actual GSF experience to 30 June 2006.
The changes in underlying assumptions accounts for $359 million of the movement. The significant change in valuation assumptions was an increase in the Consumer Price Index, of 2.25% (2.0% as at 30 June 2005). The other principal long-term financial assumptions used in the calculation remained unchanged, which were an average after-tax discount rate of 3.8% and an annual salary increases rate, before any promotional effects, of 3.0%. The remainder of the change is due to actual fund experience.
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
GSF Liability and Asset Information | ||||
Gross GSF Liability | ||||
14,103 | 14,952 | Opening gross liability | 14,952 | 13,542 |
(24) | 409 | Net projected change | 279 | 1,410 |
14,079 | 15,361 | Closing Gross Liability | 15,231 | 14,952 |
Less Net Assets Available to the GSF Scheme | ||||
3,510 | 3,521 | Opening asset value | 3,521 | 3,375 |
Net projected change: | ||||
- | 455 | - Investment valuation changes | 368 | 279 |
77 | (208) | - Contributions and other income less membership payments | (96) | (133) |
77 | 247 | Total projected change | 272 | 146 |
3,587 | 3,768 | Closing Net Asset Values | 3,793 | 3,521 |
Net Unfunded Liability of the GSF Schemes | ||||
10,593 | 11,431 | Opening unfunded liability | 11,431 | 10,167 |
(101) | 162 | Net projected change | 7 | 1,264 |
10,492 | 11,593 | Net Unfunded Liability | 11,438 | 11,431 |
Opening balance | 11,431 | 10,167 |
---|---|---|
Expected service cost | 221 | 208 |
Expected interest cost | 622 | 548 |
Change in underlying valuation assumptions | 359 | 1,240 |
Experience gains and asset gains | (197) | (110) |
Expected return on assets | (207) | (199) |
Change in data | (152) | 227 |
Expected contributions | (639) | (650) |
Closing Balance | 11,438 | 11,431 |
30 June 2006 $m | 30 June 2005 $m | |
---|---|---|
Liabilities to Pensioners | ||
Pensioners | 9,054 | 8,700 |
Deferred pensioners | 943 | 871 |
Liabilities to Contributors | ||
General Government Superannuation Fund members | 4,051 | 3,897 |
Police | 635 | 897 |
Armed Forces | 389 | 428 |
Judges | 58 | 59 |
Prison Services | 41 | 41 |
Islands | 45 | 43 |
Members of Parliament | 15 | 16 |
Total Liabilities in respect of Past Services | 15,231 | 14,952 |
Less Assets available to schemes | 3,793 | 3,521 |
Total Net Pension Liabilities | 11,438 | 11,431 |
Note 17: ACC Claims Liability#
Claims Obligation#
The ACC claims liability is the amount of funds required to be invested now, so that together with the future investment earnings on those funds ACC has enough funding to meet the estimated future payment obligations on its current claims.
Liability Calculation#
PricewaterhouseCoopers Actuarial Pty Limited have prepared the independent actuarial estimate of the ACC claims liability as at 30 June 2006. This estimate includes the expected future payments relating to accidents that occurred prior to balance date (whether or not the associated claims have been reported to, or accepted by, ACC) and also the expected administrative expenses of managing these claims.
The estimate of the claims liability as at 30 June 2006 was $12,715 million. This is an increase of $1,331 million compared with 30 June 2005. The primary drivers of the increase were changes in economic assumptions (mainly an increase in future inflation has increased the liability, which is partially offset by an increase in the discount rate applied from 5.75% at 30 June 2005 to 5.83% at 30 June 2006), revisions to the claim handling expense provision, claim experience and modelling movements.
Valuation Movement Due to Experience and Assumption Changes#
If the assumptions underlying the 30 June 2005 valuation were used, the estimated 30 June 2006 valuation would be $12,009 million. The actual valuation for 30 June 2006 was $12,715 million. The difference in the two numbers was $706 million. This is shown in the following table:
As at 30 June 2006 $m | As at 30 June 2005 $m | Change 2006 $m | |
---|---|---|---|
30 June 2005 liability | 11,384 | 11,384 | - |
30 June 2006 liability | 12,715 | 12,009 | (706) |
Change in Liability | 1,331 | 625 | (706) |
Reconciliation of the 30 June 2006 gross liability valuation: | |||
Changes in economic assumptions | 119 | ||
Claim experience and modelling | 587 | ||
706 |
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
ACC Liability and Asset Information | ||||
Gross ACC Liability | ||||
11,154 | 11,384 | Opening gross liability | 11,384 | 9,347 |
597 | 1,187 | ACC claims liability movement | 1,321 | 2,037 |
- | 10 | Transfer from other insurers | 10 | - |
11,751 | 12,581 | Closing Gross Liability | 12,715 | 11,384 |
Less Net Assets Available to ACC | ||||
6,902 | 7,217 | Opening net asset value | 7,217 | 5,969 |
823 | 1,596 | Net change | 1,663 | 1,248 |
7,725 | 8,813 | Closing Net Asset Values | 8,880 | 7,217 |
Net ACC Reserves (net liability) | ||||
(4,252) | (4,167) | Opening reserves position | (4,167) | (3,378) |
226 | 399 | Net change | 332 | (789) |
(4,026) | (3,768) | Closing Reserves Position (net liability) | (3,835) | (4,167) |
Residual Claims Account | (1,882) | (1,588) |
---|---|---|
Motor Vehicle Account | (1,660) | (1,810) |
Non-Earners’ Account | (1,309) | (1,278) |
Medical Misadventure Account | (352) | (332) |
Earners’ Account | 532 | 433 |
Self-Employed Work Account | 76 | - |
Employers’ Account | 757 | 408 |
Account Reserves | (3,838) | (4,167) |
Subsidiaries and revaluation reserves | 3 | - |
Total Closing Reserves | (3,835) | (4,167) |
The ACC reserves disclosed above represent the net assets and liabilities for each of the various accounts operated by ACC. Details on how the unfunded liability of each account will be managed in the future are contained in the 2006 ACC Annual Report (broadly the policy is to fully fund the major accounts by 2014).
Note 18: Revaluation Reserves#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
20,458 | 27,988 | Opening Balance | 27,988 | 19,838 |
Net Revaluations | ||||
- | 32 | Land and buildings | 2,386 | 3,368 |
- | - | State highways | 2,559 | 1,417 |
- | - | TEIs | 1,800 | 341 |
- | - | Electricity generation assets | 1,419 | 1,986 |
- | (16) | Other assets | 1,705 | 1,085 |
- | 16 | Total Net Revaluations | 9,869 | 8,197 |
- | (15) | Transfers to taxpayer funds | (224) | (47) |
20,458 | 27,989 | Closing Asset Revaluation Reserve | 37,633 | 27,988 |
Asset Revaluation Reserve (by component total) | ||||
12,893 | 16,211 | Land and buildings | 18,356 | 16,194 |
1,309 | 2,695 | Electricity generation assets | 4,495 | 2,695 |
3,266 | 4,683 | State Highways | 7,242 | 4,683 |
974 | 1,315 | TEIs | 3,020 | 1,315 |
2,016 | 3,085 | Other assets | 4,520 | 3,101 |
20,458 | 27,989 | Closing Asset Revaluation Reserve | 37,633 | 27,988 |
Note 19: Foreign Currencies#
All monetary amounts in these financial statements are expressed in New Zealand dollars. The New Zealand dollar closing rates for major currencies were:
30 June 2006 | 30 June 2005 | |
---|---|---|
United States dollar | 0.60630 | 0.70100 |
Japanese yen | 69.68000 | 77.2650 |
British pound | 0.33075 | 0.38760 |
Euro | 0.47695 | 0.57950 |
Note 20: Risk Management#
The Crown is subject to a number of financial risks which arise as a result of its debt portfolios, investment funds and transactions with foreign suppliers that are undertaken by the entities that make up the Government reporting entity.
Individual entities that form the Government reporting entity are responsible for ensuring appropriate risk management strategies and policies are in place within any mandate provided by legislation (eg, the Public Finance Act has requirements on borrowing, investing and financial powers applying to departments). Information and risk disclosures for individual entities are disclosed in the relevant entity’s annual report. Key risk management strategies across the Crown include:
Core Crown#
The core Crown is risk averse and seeks to minimise net finance costs associated with its debt and maximise returns on its specific investment funds. Key strategies of material entities forming the core Crown segment include:
- New Zealand Debt Management Office (NZDMO) is responsible for the efficient management of Crown debt and associated assets. NZDMO’s strategic objective is to maximise the long-term economic return on the Crown’s financial assets and debt in the context of the Government’s fiscal strategy, particularly its aversion to risk.
- The Crown has a foreign-reserve policy that requires the Reserve Bank to manage sufficient levels of foreign currency reserves to intervene in New Zealand’s currency markets.
- The Government Superannuation Fund and New Zealand Superannuation Fund are required to invest assets on a prudent commercial basis. In doing so they manage and administer the assets in a manner consistent with best practice portfolio management and maximising return without undue risk to the respective Fund as a whole.
SOEs and Crown entities#
- The State-Owned Enterprises Act 1986 requires SOEs to operate commercially. With the varying nature of the activities of SOEs, each individual entity has its own risk management strategies (eg, the electricity industry is exposed to electricity spot rate movements).
- As with SOEs, individual Crown entities are responsible for ensuring that they have risk management strategies appropriate to their operations. For example, ACC and the EQC will have specific policies in relation to the investment portfolios they manage.
Detailed risk management policy disclosure of Government reporting entities can be found in an individual entity’s Annual Report.
Credit risk#
Credit risk refers to the risk of a loss due to the non-performance by counterparties to discharge an obligation.
Financial instruments which subject the Crown to credit risk include bank balances, receivables, advances, investments, interest rate options, forward rate agreements, foreign exchange forward contracts, foreign exchange swaps, interest rate swaps and foreign currency options.
The entities within the Crown reporting entity manage their exposure to credit risk by:
- maintaining credit exposure only with highly rated institutions, for which the probability of default is low. The creditworthiness of counterparties is continuously monitored
- ensuring diversification of credit exposure by limiting the exposure to any one financial institution
- in some instances requiring a form of collateral from certain counterparties.
In addition the Crown is exposed to risk in relation to its holding of equity investments held largely by NZSF, GSF, ACC and EQC.
Concentration risk of credit exposure#
As at 30 June 2006 the concentrations of credit exposure by industry type were as follows:
30 June 2006 $m | 30 June 2005 $m | |
---|---|---|
Sovereign issuers (excluding New Zealand sovereign-guaranteed) | 5,762 | 4,447 |
Supranational financial institutions | 1,337 | 1,147 |
Foreign banks | 11,838 | 5,302 |
Other | 28,751 | 25,876 |
Total Credit Exposure | 47,688 | 36,772 |
As at 30 June 2006 the concentrations of credit exposure by geographical area were as follows:
30 June 2006 $m | 30 June 2005 $m | |
---|---|---|
USA | 14,411 | 8,050 |
Europe | 11,612 | 11,341 |
Japan | 1,722 | 1,068 |
Australia | 2,363 | 1,463 |
New Zealand | 12,894 | 10,985 |
Supranational | 1,810 | 1,147 |
Other | 2,876 | 2,718 |
Total Credit Exposure | 47,688 | 36,772 |
As at 30 June 2006 the concentrations of credit exposure by credit rating using the lower rating of Standard & Poor’s or Moody’s were as follows:
30 June 2006 $m | % of 2006 credit exposure | 30 June 2005 $m | % of 2005 credit exposure | ||
---|---|---|---|---|---|
AAA | 16,681 | 35.0% | 12,071 | 32.8% | |
AA | 11,165 | 23.4% | 10,094 | 27.5% | |
A | 2,085 | 4.4% | 1,963 | 5.3% | |
IMF reserve position | 341 | 0.7% | 609 | 1.7% | |
Non-rated and other[4] | 17,416 | 36.5% | 12,035 | 32.7% | |
Total Credit Exposure | 47,688 | 100% | 36,772 | 100% |
Interest rate risk#
Interest rate risk refers to the risk of loss due to adverse movement in interest rates. In general interest rate risk is managed strategically by issuing a mix of fixed and floating rate debt, including interest rate swaps. Derivative transactions outstanding as at 30 June 2006 are disclosed at Derivatives.
Foreign exchange risk#
Foreign exchange risk refers to the risk of loss due to adverse movements in foreign exchange rates. The range of instruments currently being used to minimise the Crown’s exposure to foreign exchange risk includes currency and interest rate swaps, foreign-exchange contracts and futures contracts. The foreign exchange risk associated with the core Crown’s borrowing is effectively neutralised by the Crown holding a commensurate amount of foreign currency assets. ACC, EQC, GSF and NZSF are exposed to foreign exchange risk through their foreign currency-denominated investments. The extent to which the foreign exchange exposure is hedged depends on the best practice and prudent policies adopted by each entity.
Refinancing/repricing risk#
Refinancing/repricing risk refers to the risk that maturing debt is refinanced, maturing assets are reinvested or instruments repriced are at an unacceptable yield.
As at 30 June 2006 assets and liabilities will mature or reprice within the following periods:
Effective interest rate[5] % | Total 30 June 2006 $m | 0-12 months $m | 1-2 years $m | 2-5 years $m | 5-10 years $m | >10 years $m | |
---|---|---|---|---|---|---|---|
Domestic Assets | |||||||
Cash and deposits | 3,770 | 3,770 | |||||
Marketable securities | 5.8-8.2 | 2,036 | (1,393) | 184 | 1,797 | 1,437 | 11 |
Others | 5.3 | 2,851 | 2,020 | 520 | 33 | 35 | 243 |
Foreign Assets | |||||||
Cash and deposits | 1,243 | 1,243 | |||||
Marketable securities | 2.4-4.3 | 24,604 | 21,192 | 693 | 718 | 1,500 | 501 |
Others | 13,184 | 13,180 | 4 | ||||
Total Assets | 47,688 | 40,012 | 1,397 | 2,548 | 2,972 | 759 | |
Domestic Liabilities | |||||||
Government stock | 6.3 | 17,002 | 2,611 | 4,878 | 7,882 | 1,631 | |
Treasury bills | 6.9 | 4,860 | 4,860 | ||||
Retail stock | 6.0 | 532 | 471 | 40 | 21 | ||
Other | 5-8 | (4,049) | (3,749) | 2,791 | (670) | (1,338) | (1,083) |
Foreign Liabilities | |||||||
Foreign currency debt | 6-7.6 | 21,082 | 17,402 | 855 | 835 | 1,418 | 572 |
Total Liabilities | 39,427 | 21,595 | 3,686 | 5,064 | 7,962 | 1,120 |
As at 30 June 2005 assets and liabilities will mature or reprice within the following periods:
Effective interest rate % | Total 30 June 2005 $m | 0-12 months $m | 1-2 years $m | 2-5 years $m | 5-10 years $m | >10 years $m | |
---|---|---|---|---|---|---|---|
Domestic Assets | |||||||
Cash and deposits | 3,505 | 3,505 | |||||
Marketable securities | 6.1-8.4 | 5,872 | 1,070 | 328 | 2,001 | 2,467 | 6 |
Others | 2,386 | 1,625 | 574 | 29 | 31 | 127 | |
Foreign Assets | |||||||
Cash and deposits | 775 | 775 | |||||
Marketable securities | 2-3.1 | 15,541 | 10,706 | 1,056 | 1,485 | 1,570 | 724 |
Others | 8,693 | 8,686 | 2 | 5 | |||
Total Assets | 36,772 | 26,367 | 1,960 | 3,515 | 4,068 | 862 | |
Domestic Liabilities | |||||||
Government stock | 6.3 | 16,058 | 2,343 | 2,668 | 3,742 | 6,506 | 799 |
Treasury bills | 6.5 | 5,245 | 5,245 | ||||
Retail stock | 5.7 | 582 | 476 | 68 | 38 | ||
Other | 6.1-8.4 | (521) | (1,550) | 218 | 859 | 1 | (49) |
Foreign Liabilities | |||||||
Foreign currency debt | 5.3 | 15,500 | 9,866 | 1,589 | 1,875 | 1,295 | 875 |
Total Liabilities | 36,864 | 16,380 | 4,543 | 6,514 | 7,802 | 1,625 |
Liquidity risk#
Liquidity risk refers to the loss due to the lack of liquidity preventing quick or cost-effective liquidation of products, positions or portfolios.
Liquidity risk is managed on an individual entity basis, which generally requires entities to hold assets of appropriate quantity and quality to meet all their obligations as they fall due.
Derivatives#
The Crown’s involvement in derivatives comprises currency and interest rate swaps, foreign exchange and futures contracts, foreign exchange and interest rate options outstanding.
30 June 2006 Book value $m | 30 June 2006 Fair value $m | 30 June 2006 Notional value $m | |
---|---|---|---|
Foreign exchange contracts | 104 | 253 | 21,118 |
Foreign exchange options | (537) | (520) | 11,568 |
Currency swaps in gain position | 257 | 285 | 3,668 |
Currency swaps in loss position | (793) | (813) | (1,078) |
Net currency swaps | (536) | (528) | 2,590 |
Interest rate options | 1 | 1 | 125 |
Interest rate swaps in gain position | 149 | 269 | 14,177 |
Interest rate swaps in loss position | (48) | (148) | 3,635 |
Net interest rate swaps | 101 | 121 | 17,812 |
Futures in gain position | 43 | 85 | 635 |
Futures in loss position | (11) | (15) | 365 |
Net futures | 32 | 70 | 1,000 |
Net Derivative Instruments | (835) | (603) | 54,213 |
30 June 2005 Book value $m | 30 June 2005 Fair value $m | 30 June 2005 Notional value $m | |
---|---|---|---|
Foreign exchange contracts | 123 | 378 | 22,249 |
Foreign exchange options | 1 | 1 | 53 |
Currency swaps in gain position | 427 | 491 | 5,007 |
Currency swaps in loss position | (277) | (327) | 332 |
Net currency swaps | 150 | 164 | 5,339 |
Interest rate options | 13 | 11 | 155 |
Interest rate swaps in gain position | 162 | 372 | 9,160 |
Interest rate swaps in loss position | (41) | (175) | 3,229 |
Net interest rate swaps | 121 | 197 | 12,389 |
Futures in gain position | 74 | 125 | 1,024 |
Futures in loss position | (50) | (53) | (571) |
Net futures | 24 | 72 | 453 |
Net Derivative Instruments | 432 | 823 | 40,638 |
Fair value of financial instruments#
As at 30 June 2006 the fair values of assets and liabilities were as follows:
30 June 2006 Book value $m | 30 June 2006 Fair value $m | 30 June 2005 Book value $m | 30 June 2005 Fair value $m | |
---|---|---|---|---|
Domestic Assets | ||||
Cash and deposits | 3,770 | 3,770 | 3,505 | 3,505 |
Marketable securities | 2,036 | 1,598 | 5,872 | 5,076 |
Others | 2,851 | 3,422 | 2,386 | 3,278 |
Foreign Assets | ||||
Cash and deposits | 1,243 | 1,243 | 775 | 775 |
Marketable securities | 24,604 | 24,603 | 15,541 | 15,447 |
Others | 13,184 | 13,184 | 8,693 | 8,693 |
Total Assets | 47,688 | 47,820 | 36,772 | 36,774 |
Domestic Liabilities | ||||
Government stock | 17,002 | 17,546 | 16,058 | 16,892 |
Treasury bills | 4,860 | 4,859 | 5,245 | 5,247 |
Retail stock | 532 | 530 | 583 | 582 |
Other | (4,049) | (4,346) | (522) | (1,263) |
Foreign Liabilities | ||||
Foreign currency debt | 21,082 | 21,218 | 15,500 | 15,452 |
Total Liabilities | 39,427 | 39,807 | 36,864 | 36,910 |
Refer to note 9 (student loans) and note 10 (accounts receivable) for discussion on carrying amounts compared to estimated fair values.
Note 21: Contingent Liabilities and Contingent Assets#
30 June 2006 $m | 30 June 2005 $m | |
---|---|---|
Guarantees and indemnities | 405 | 149 |
Uncalled capital | 2,592 | 2,233 |
Legal proceedings and disputes | 1,032 | 586 |
Other contingent liabilities | 2,073 | 1,502 |
Total Quantifiable Contingent Liabilities | 6,102 | 4,470 |
Total Quantifiable Contingent Assets | 106 | 107 |
Only contingent liabilities involving amounts of over $10 million are separately disclosed. Contingent liabilities below $10 million are included in the “other quantifiable contingent liabilities” total. Comparatives have been adjusted where appropriate to align with the disclosure of new “material” contingent liabilities. The total amount of prior years’ contingent liabilities remains unchanged.
Contingent liabilities are costs that the Crown will have to face if a particular event occurs. Typically, contingent liabilities consist of guarantees and indemnities, legal disputes and claims, and uncalled capital. The contingent liabilities facing the Crown are a mixture of operating and balance sheet risks, and they can vary greatly in magnitude and likelihood of realisation. In general, if a contingent liability were realised it would reduce the operating balance and net worth, and increase Crown debt. However, in the case of contingencies for uncalled capital, the negative impact would be restricted to Crown debt.
Where contingent liabilities have arisen as a consequence of legal action being taken against the Crown, the amount shown is an estimation of the possible amount of any award against the Crown. It does not represent either an admission that the claim is valid or an estimation of the amount of any award against the Crown.
Contingent assets are potential assets dependent on a particular event occurring. As at 30 June 2006, the Crown had quantifiable contingent assets totalling $106 million ($107 million at 30 June 2005). $93million ($101 million at 30 June 2005) relates to suspensory loans issued by the Ministry of Education to integrated schools.
Guarantees and indemnities#
Guarantees and indemnities are disclosed in accordance with FRS 15 Provisions, Contingent Liabilities and Contingent Assets. In addition, guarantees given under Section 65ZD of the Public Finance Act 1989 are disclosed in accordance with Section 27(f) of the same act.
Cook Islands – Asian Development Bank (ADB) loans
Before 1992, the New Zealand Government guaranteed the Cook Islands’ borrowing from the ADB. These guarantees have first call on New Zealand’s Official Development Assistance.
$17 million at 30 June 2006 ($16 million at 30 June 2005).
Indemnification of receivers and managers – Terralink Limited
The Crown has issued a Deed of Receivership indemnity to the appointed receivers of Terralink Limited against claims arising from the conduct of the receivership.
$10 million at 30 June 2006 ($10 million at 30 June 2005).
Indemnification of touring exhibitions
The Crown has a contingent liability for damages and losses under the scheme for indemnifying touring exhibitions.
$250 million at 30 June 2006 (nil at 30 June 2005).
Ministry of Justice – Treaty settlements, tax liabilities
Under Deeds of Settlement completed in the Treaty settlement process the Crown has indemnified the appropriate governance entity against any goods and services tax or income tax liability arising from the payment of tangible redress.
$87 million at 30 June 2006 ($76 million at 30 June 2005).
Ministry of Transport – funding guarantee
The Minister of Finance has issued a guarantee of $10 million to the Transport Accident Investigation Commission. The guarantee allows the Commission to assure payment to suppliers of specialist salvage equipment in the event of the Commission initiating an urgent investigation of any future significant transport accident.
$10 million at 30 June 2006 ($10 million at 30 June 2005).
Post Office Bank (PostBank) – guaranteed deposits
In the sale of PostBank to ANZ Banking Group Limited (ANZ), the Crown agreed to continue its guarantee, under the Post Office Bank Act 1987, of certain PostBank deposits lodged with the Bank before 1 July 1988. ANZ agreed to indemnify the Crown for the cost of any liability that may arise from the Crown guarantee. The amount guaranteed reduces as deposits mature.
$11 million at 30 June 2006 ($11 million at 30 June 2005).
Guarantees and indemnities of SOEs and Crown entities
$19 million at 30 June 2006 ($16 million at 30 June 2005).
Other Guarantees and indemnities
$1 million at 30 June 2006 ($10 million at 30 June 2005).
Uncalled capital#
The Crown’s uncalled capital subscriptions are as follows: | Uncalled capital at 30 June 2006 $m | Uncalled capital at 30 June 2005 $m |
---|---|---|
Asian Development Bank | 1,223 | 1,050 |
European Bank for Reconstruction and Development | 15 | 12 |
International Bank for Reconstruction and Development | 1,354 | 1,171 |
Legal proceedings and disputes#
The amounts under quantifiable contingent liabilities for legal proceedings and disputes are shown exclusive of any interest and costs that may be claimed if these cases were decided against the Crown.
Where contingent liabilities have arisen as a consequence of legal action being taken against the Crown, the amount shown is the amount claimed and thus the maximum potential cost. It does not represent either an admission that the claim is valid or an estimation of the possible amount of any award against the Crown.
Health – legal claims#
Claims against the Crown in respect of people allegedly contracting hepatitis C through contaminated blood and blood products.
$90 million at 30 June 2006 ($88 million at 30 June 2005).
Tax in dispute#
Represents the outstanding debt of those tax assessments raised, against which an objection has been lodged and legal action is proceeding.
$784 million at 30 June 2006 ($345 million at 30 June 2005).
Other legal claims against SOEs and Crown entities#
$25 million at 30 June 2006 ($20 million at 30 June 2005).
Other legal claims#
$133 million at 30 June 2006 ($133 million at 30 June 2005).
Other quantifiable contingent liabilities#
International finance organisations#
The Crown has lodged promissory notes with the following international finance organisation:
30 June 2006 $m | 30 June 2005 $m | |
---|---|---|
IMF | 1,806 | 1,286 |
Payment of the notes depends upon the operation of the rules of the organisation.
Reserve Bank – demonetised currency#
The Crown has a contingent liability for the face value of the demonetised $1 and $2 notes issued which have yet to be repatriated.
$37 million at 30 June 2006 ($24 million at 30 June 2005).
Social Development – claim for judicial review#
A claim for judicial review of the Crown’s interpretation and application of Special Benefit direction. The claim seeks representation order for all applicants for the Special Benefit from December 2000 to date.
$67 million at 30 June 2006 ($56 million at 30 June 2005).
Transpower New Zealand Limited – other quantifiable contingent liabilities#
In the current self-regulating environment, Transpower operates its revenue setting methodology with an Economic Value (EV) framework that analyses economic gains and losses between those attributable to shareholders and those attributable to customers. The balance of the accumulated gain (loss) from monopoly activities attributable to customers (the EV balance) may be passed on to customers over time. Any such transfer would occur after consideration by Directors of the balance of this account and its likely future movement in order to preserve stability and predictability of prices.
$99 million at 30 June 2006 ($87 million at 30 June 2005).
Other quantified contingent liabilities of SOEs and Crown entities#
$38 million at 30 June 2006 ($16 million at 30 June 2005).
Other quantifiable contingent liabilities#
$26 million at 30 June 2006 ($33 million at 30 June 2005).
Unquantifiable Contingent Liabilities#
This part of the Statement provides details of those contingent liabilities of the Crown which cannot be quantified.
Guarantees and indemnities#
Asure New Zealand Limited
The Crown has indemnified the directors of Asure New Zealand Limited in the event that they incur any personal liability for redundancies arising from any agreement by international trading partners that allows post-mortem meat inspection by parties other than the Ministry of Agriculture and Forestry, or its sub-contractor.
At Work Insurance Limited
The Crown has indemnified the liquidators of At Work Insurance Limited (Deloitte Touche Tohmatsu) against various employment-related claims.
Auckland Rail Lease
The Crown has indemnified Toll NZ Limited against any losses arising from breaches of the Sale and Purchase Agreement with the Crown relating to the purchase of the Auckland rail lease and infrastructure assets.
Bona Vacantia property
P&O NZ Ltd sought a declaratory judgement that property disclaimed by a liquidator is bona vacantia. A settlement has been reached, which includes a Crown indemnity in favour of New Zealand Aluminium Smelters and Comalco in relation to aluminium dross disposed of in their landfill, for costs that may be incurred in removing the dross and disposing of it at another site if they are required to do so by an appropriate authority. The Minister of Finance signed the indemnity on 24 November 2003. In February 2004, a similar indemnity was signed in respect of aluminium dross currently stored at another site in Invercargill.
Building Industry Authority
The Building Industry Authority (BIA) is a joint defendant in a number of claims before the courts and the Weathertight Homes Resolution Service relating to the BIA's previous role as regulator of the building industry. The BIA has been disestablished and absorbed into the Department of Building & Housing and, to prevent conflicts of interest, Treasury was given responsibility for managing weathertight claims against the BIA on behalf of the Crown from 1 July 2005.
Crown research institutes (CRIs)
The Crown has indemnified the CRIs for any costs arising from certain third-party claims that are the result of acts or omissions prior to the transfer date, for costs of complying with statutes, ordinances and bylaws which relate to or affect certain buildings, and (subject to certain limitations) for the costs of obtaining title to land.
District Court Judges, Justices of the Peace, Coroners and Disputes Tribunal
Section 119 of the District Courts Act 1947 indemnifies District Court Judges acting in their civil jurisdiction. Section 196A of the Summary Proceedings Act 1957 also indemnifies District Court Judges for any liabilities arising as a result of an act done by a Judge in excess of, or without, jurisdiction.
Section 35 of the Coroners Act 1988 confers on Coroners acting within the Coroner Act 1988 the same privileges and immunities as District Court Judges under the Summary Proceedings Act 1957.
Under section 197 of the Summary Proceedings Act 1957, Justices of the Peace are similarly covered as long as a High Court Judge certifies that they have acted in good faith and ought to be indemnified.
Section 58 of the Disputes Tribunal Act 1988 confers on Disputes Tribunal referees acting within the Disputes Tribunal Act 1988 the same protection as Justices of the Peace under the Summary Proceedings Act 1957.
District health boards – director indemnity – (DHBs)
The Crown has provided transitional indemnities to directors and officers of some DHBs, for liabilities arising from inherited assets and business practices under the Building Act 1991 and the Health and Safety in Employment Act 1992.
Earthquake Commission (EQC)
The Crown is liable to meet any deficiency in the EQC’s assets in meeting the Commission’s financial liabilities (section 16 of the Earthquake Commission Act 1993).
Electricity Corporation of New Zealand Limited (ECNZ) #
The ECNZ Sale and Purchase Agreement provides for compensation to ECNZ for any tax, levy, or royalty imposed on ECNZ for the use of water or geothermal energy for plants in existence or under construction at the date of the Sale and Purchase Agreement. The Agreement also provides for compensation for any net costs to ECNZ arising from resumption of assets pursuant to the Treaty of Waitangi (State Enterprises) Act 1988.
The Deed of Assumption and Release between ECNZ, Contact Energy Limited and the Crown provides that the Crown is no longer liable to ECNZ in respect of those assets transferred to it from ECNZ. As a result of the split of ECNZ in 1999, Ministers have transferred the benefits of the Deed to ECNZ’s successors – Meridian Energy Limited, Mighty River Power Limited and Genesis Power Limited.
Under the Transpower New Zealand Limited (Transpower) Sale and Purchase and Debt Assumption Agreements, the Crown has indemnified ECNZ for any losses resulting from changes in tax rules applicable to transactions listed in the Agreements. Additionally, the Crown has indemnified the directors and officers of ECNZ for any liability they may incur in their personal capacities as a result of the Transpower separation process.
Following the split of ECNZ in 1999 into three new companies, the Crown has indemnified ECNZ in relation to all ECNZ’s pre-split liabilities, including:
- existing debt and swap obligations
- hedge contracts and obligations
- any liabilities that arise out of the split itself.
Ministry of Fisheries – indemnity provided for delivery of registry services#
The Crown has indemnified Commercial Fisheries Services Limited against claims made by third parties arising from Commercial Fisheries Services undertaking registry services under contract to the Chief Executive of the Ministry of Fisheries. This indemnity, provided under the Fisheries Acts 1983 and 1996, expires on 30 September 2009.
Genesis Power Ltd (Genesis Energy)#
The Crown has entered into a deed with Genesis Energy to share a specified and limited amount of risk around the sufficiency of Genesis Energy’s long term supply of gas to cover the Huntly e3p’s (a 385 MW combined cycle gas turbine power station) minimum needs. The agreement sees the Crown compensate Genesis Energy in the event it has less gas than it needs.
Geothermal carbon tax indemnity #
As part of the sale and purchase agreement between the Crown and Mighty River Power (MRP), the Crown has agreed to provide an indemnity for the payment of carbon taxes, should legislation be passed that does not allow for an automatic pass-through of the charges to end-users. The indemnity is time bound and contractually limited in the amount that can be claimed. The indemnity is not limited to MRP and will be available to any subsequent owner of the Crown’s Kawerau geothermal assets.
Housing New Zealand Corporation (HNZC) #
The Crown has indemnified the following entities in respect of the accuracy of information provided on the sale of various parcels of HNZC (formerly Housing Corporation of New Zealand) mortgages: ANZ Bank, National Bank (formerly Countrywide Bank) and Westpac Banking Corporation.
Under the sale of mortgages to Westpac, HNZC has insured the purchaser against certain credit losses with the Crown standing behind this obligation.
HCNZ Lender’s Mortgage Insurance Indemnity: The Minister of Finance is deemed under section 24(2) of the Housing Corporation Act 1974 to have guaranteed HCNZ in respect of Homebuy first mortgages insured by HCNZ through contracted insurance agents.
Legal proceedings have been initiated against a number of defendants, including the Crown, alleging breach of fiduciary duties in respect of the transfer of the Agreement for Sale and Purchase and mortgage agreements to HNZC under the Housing Assets Transfer Act 1993.
In addition, the Crown has provided a warranty in respect of title to the assets transferred to HNZC (formerly Housing New Zealand) and has indemnified the company against any breach of this warranty. The Crown has indemnified the company against any third-party claims that are a result of acts or omissions prior to 1 November 1992. It has also indemnified the directors and officers of the company against any liability consequent upon the assets not complying with statutory requirements, provided it is taking steps to rectify any non-compliance.
Indemnities against acts of war and terrorism#
The Crown has indemnified Air New Zealand against claims arising from acts of war and terrorism that cannot be met from insurance, up to a limit of US$1 billion in respect of any one claim.
Maui Partners #
The Crown has entered into confidentiality agreements with the Maui Partners in relation to the provision of gas reserves information. The deed contains an indemnity against any losses arising from a breach of the deed.
National Provident Fund#
The National Provident Fund (NPF) has been indemnified for certain potential tax liabilities. Under the NPF Restructuring Act 1990, the Crown guarantees:
- the benefits payable by all NPFschemes (section 60)
- investments and interest thereon deposited with the NPF Board prior to 1 April 1991 (section 61)
- payment to certain NPF defined contribution schemes where application of the 4% minimum earnings rate causes any deficiency or increased deficiencies in reserves to arise (section 72).
A provision has been made in these financial statements in respect of the actuarially assessed deficit in the DBP (Annuitants’) Scheme (refer Note 15 of the financial statements).
New Zealand Railways Corporation#
The Crown has indemnified the directors of the New Zealand Railways Corporation against any liability arising from the surrender of the licence and lease of the Auckland rail corridor.
The Crown has further indemnified the directors of New Zealand Railways Corporation against any liability arising from the transfer of the rail network and associated assets and liabilities to the Corporation on 1 September 2004.
Persons exercising investigating powers#
Section 63 of the Corporations (Investigation and Management) Act 1989 establishes a Crown indemnity to the Securities Commission, the Registrar and Deputy Registrar of Companies, and statutory managers, advisory committee members and investigators appointed under the Act, from liability relating to the exercise of powers under the Act unless bad faith is shown.
Ports of Auckland#
The Crown has entered into a confidentiality agreement with Ports of Auckland in relation to the purchase of two marinas. The agreement contains an indemnity against any losses arising from a breach of the agreement.
Public Trust#
The Crown is liable to meet any deficiency in the Public Trust’s Common Fund (section 52 of the Public Trust Act 2001).
Purchasers of Crown operations#
The Crown has indemnified the purchasers of various Crown operations for losses owing to changes in legislation which uniquely and adversely affect those purchasers.
Reserve Bank of New Zealand (the Reserve Bank)#
The Crown pays to the Reserve Bank any exchange losses incurred by the Reserve Bank as a result of dealing in foreign exchange under sections 17, 18 and 21(2) of the Act.
The Crown has entered into an agreement to provide funding to the Reserve Bank in the event they undertake foreign exchange market interventions under section 16 of the Reserve Bank Act for the purpose of influencing the level of the exchange rate.
State Insurance and Rural Bank – Tax liabilities#
The Crown has granted to the purchasers of the State Insurance Office Limited and the Rural Banking and Finance Corporation Limited an indemnity for certain potential tax liabilities.
Synfuels – Waitara Outfall Indemnity#
As part of the 1990 sale of the Synfuels plant and operations to New Zealand Liquid Fuels Investment Limited (NZLFI), the Crown transferred to NZLFI the benefit and obligation of a Deed of Indemnity between the Crown and Borthwick-CWS Limited (and subsequent owners) in respect of the Waitara effluent transfer line which was laid across the Waitara meat processing plant site.
The Crown has the benefit of a counter indemnity from NZLFI which has since been transferred to Methanex Motunui Limited.
Tainui Corporation#
Several leases of Tainui land at Huntly and Meremere have been transferred from ECNZ to Genesis Power. The Crown has provided guarantees to Tainui Corporation relating to Genesis Power’s obligations under the lease agreements.
Toll NZ Ltd – purchase of rail network assets#
The agreement between the Crown and Toll NZ Ltd for the Crown’s purchase of the rail network and associated assets on 30 June 2004 contains the following provisions:
- the Crown has indemnified Toll NZ Ltd against any liability arising from the assigned contracts, leases, etc after their assignment dates
- the Crown has indemnified Toll NZ Ltd against certain potential claims by employees
- the Crown has an option to purchase the Tranz Scenic Stations from Toll NZ Ltd for a period of three years (to 30 June 2007).
Works Civil Construction#
The Crown has provided an indemnity to the purchasers of Works Civil Construction in relation to the activities of the Ministry of Works and Development prior to 1 April 1989. In addition, an indemnity has been provided against certain costs, claims or damages in relation to the Clyde and Ohaaki power projects.
Works Consultancy Services#
The Crown has provided an indemnity to the purchasers of Works Consultancy Services in relation to the activities of the Ministry of Works and Development prior to 1 April 1989.
Other unquantifiable contingent liabilities#
Abuse Claims#
There is ongoing legal action against the Crown in relation to historical abuse claims. At this stage the number of claimants and outcome of these cases are uncertain.
Accident Compensation Corporation (ACC) litigations
There are several legal actions against ACC in existence, arising in the main from challenges to operational decisions made by ACC. No accrual has been made for such contingent liabilities as ACC will be vigorously defending these claims.
A particular issue before the courts is access of ACC claimants to lump sum compensation for asbestos related illnesses. On 3 June 2005 the High Court overturned a decision by the District Court made in 2004 that had upheld an interpretation that a lump sum payment was required to be paid in respect of one claimant. Leave to appeal this decision to the Court of Appeal has been granted to the claimant.
If the Court of Appeal overturns the decision made in the High Court, ACC could be exposed to substantial future liability in respect of claims for asbestosis and possibly other illnesses listed under Schedule 2 of the Injury Prevention Rehabilitation and Compensation Act 2001.
Environmental Liabilities#
Under common law and various statutes, the Crown may have responsibility to remedy adverse effects on the environment arising from Crown activities.
During 2002/03 departments managing significant Crown properties undertook exercises to establish the nature and quantity of any contaminated sites. These exercises continued into the 2004/05 year. Where appropriate, departmental systems have been implemented to identify, monitor and assess potential contaminated sites.
In accordance with FRS 15: Provisions, Contingent Liabilities and Contingent Assets any contaminated sites for which costs can be reliably measured have been included in the Statement of Financial Position as provisions.
Genesis Power Limited#
Carter Holt Harvey (CCH) commenced proceedings against Genesis Power Limited in May 2001 in connection with a co-generation agreement with ECNZ.
Rugby World Cup 2011#
The Crown has agreed in joint venture arrangements with the New Zealand Rugby Union to an uncapped underwrite of the costs of hosting the 2011 Rugby World Cup, on a loss sharing basis (Crown 67%, NZRU 33%). A provision for the forecast losses has been made in the Government financial statements.
The Crown has agreed to reimburse New Zealand income tax that might be incurred by the joint venture entity (Rugby New Zealand 2011 Limited) or the NZRU in relation to the joint venture entity, and has also agreed to reimburse the NZRU for New Zealand withholding tax that might be incurred on certain payments made in relation to the tournament.
The Crown has further agreed to review its level of support to the tournament if the actual tax revenue arising from the tournament exceeds forecasts.
Sale of Crown assets#
On the sale of Crown assets and the corporatisation of Crown assets into SOEs and Crown entities, the Crown has generally provided a warranty that the Crown was the rightful owner of the assets transferred, and that the assets were free of encumbrances.
Treaty of Waitangi claims#
Under the Treaty of Waitangi Act 1975, any Māori may lodge claims relating to land or actions counter to the principles of the Treaty with the Waitangi Tribunal. Where the Tribunal finds a claim is well founded, it may recommend to the Crown that action be taken to compensate those affected. The Tribunal can make recommendations that are binding on the Crown with respect to land which has been transferred by the Crown to an SOE or tertiary institution, or is subject to the Crown Forest Assets Act 1989.
Settlement relativity payments#
The Deeds of Settlement negotiated with Waikato-Tainui and Ngai Tahu include a relativity mechanism. The mechanism provides that, where the total redress amount for all historical Treaty settlements exceeds $1 billion in 1994 present-value terms, the Crown is liable to make payments to maintain the real value of Ngai Tahu’s and Waikato-Tainui’s settlements as a proportion of all Treaty settlements. The agreed relativity proportions are 17% for Waikato-Tainui and approximately 16% for Ngai Tahu. The non-quantifiable contingent liability relates to the risk that total settlement redress, including binding recommendations from the Waitangi Tribunal, will trigger these relativity payments.
Foreshore and seabed
The Foreshore and Seabed Act 2004 (FSA):
- vests the full legal and beneficial ownership of the public foreshore and seabed in the Crown
- provides for the recognition and protection of ongoing customary rights with respect to the public foreshore and seabed
- enables applications to the High Court to investigate if previously held common law rights have been adversely impacted, and if so, providing for those affected either to participate in the administration of a foreshore and seabed reserve or else enter into formal discussions on redress, and
- provides for general rights of public access and recreation in, on, over, and across the public foreshore and seabed and general rights of navigation within the foreshore and seabed.
The public foreshore and seabed means the marine area that is bounded on the landward side by the line of mean high water spring; and on the seaward side by the outer limits of the territorial sea, but does not include land subject to a specified freehold interest (refer section 5 of the FSA).
The FSA codifies the nature of the Crown's ownership interest in the public foreshore and seabed on behalf of the public of New Zealand. Although full legal and beneficial ownership of the public foreshore and seabed has been vested in the Crown, there are significant limitations to the Crown's rights under the FSA. As well as recognising and protecting customary rights, the FSA significantly restricts the Crown's ability to alienate or dispose of any part of the public foreshore and seabed and significantly restricts the Crown's ability to exclude others from entering or engaging in recreational activities or navigating in, on or within the public foreshore and seabed. Because of the complex nature of the Crown's ownership interest in the public foreshore and seabed and because we are unable to obtain a reliable valuation of the Crown's interest, the public foreshore and seabed has not been recognised as an asset in these financial statements.
Contingent Liability Movements#
Of the contingent liabilities detailed above, the following are new this year:
- Indemnification of touring exhibitions – quantified guarantees and indemnities
- Rugby World Cup 2011 – other unquantified contingent liabilities
The following items were resolved or recognised as a liability or expired over the year:
- New Zealand Railways Corporation – guaranteed borrowings – quantified guarantees and indemnities
Note 22: Subsequent Event#
On 29 August 2006 Mighty River Power Limited executed documents for the issue of a 15 year NZ$300 million credit wrapped floating rate bond. This will be issued on 7 September 2006. Mighty River Power Limited have also advised the Guardian Trust on the 29 August of its intention to exercise its early repayment option in relation to NZ$113.8 million of fixed rate bonds. The repayment will be made on the 15 September 2006.
Additional Statements on Core Crown#
Core Crown Cash Flow Reconciliation to Government Stock Issues (for the year ended 30 June 2006)#
Forecast | Actual | |||
---|---|---|---|---|
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Original Budget $m | Estimated Actual $m | 30 June 2006 $m | 30 June 2005 $m | |
Forecast | Actual | |||
Reconciliation of Net Core Crown Cash Flow from Operations with Net Cash Proceeds from Domestic Bonds | ||||
This statement outlines the core Crown bonds reconciliation. Government stock balances and flows between NZDMO, the NZS Fund and the GSF are not eliminated. This presents the complete activity of the NZDMO bond programme. | ||||
Core Crown Cash Flows from Operations | ||||
48,911 | 50,325 | Total tax receipts | 50,507 | 47,571 |
503 | 487 | Total other sovereign receipts | 539 | 478 |
1,059 | 1,756 | Interest, profits and dividends | 1,893 | 1,446 |
1,239 | 1,493 | Sales of goods and services and other receipts | 1,449 | 1,272 |
(15,548) | (15,468) | Subsidies and transfer payments | (15,357) | (14,409) |
(27,577) | (28,563) | Personnel and operating costs | (28,167) | (25,815) |
(1,992) | (1,954) | Finance costs | (2,005) | (1,983) |
(271) | (7) | Forecasts for future new spending | - | - |
6,324 | 8,069 | Net Cash Flows from Operations | 8,859 | 8,560 |
Investing Flows | ||||
Net advances | ||||
(616) | (720) | Student loans | (674) | (659) |
(66) | (60) | Housing New Zealand Corporation | (44) | (42) |
(154) | (217) | District health boards and RHMU | (105) | 41 |
- | (56) | Tranz Rail New Zealand Limited | (57) | (15) |
55 | 78 | Other | 58 | 47 |
(781) | (975) | Total Net Advances | (822) | (628) |
(2,128) | (1,988) | Net Purchase of Physical Assets | (1,826) | (1,372) |
Net investments | ||||
(58) | (143) | District health boards | (46) | (193) |
(285) | (214) | Housing New Zealand Corporation | (216) | (76) |
- | - | Air New Zealand Limited | - | (150) |
(105) | (157) | Other | (127) | (164) |
(2,337) | (2,337) | Contributions to the NZS Fund | (2,337) | (2,107) |
(500) | (500) | Purchase of Reserve Bank reserves | (500) | (766) |
(100) | - | Forecast new capital spending | - | - |
(3,385) | (3,351) | Net (Purchase)/Sale of Investments | (3,226) | (3,456) |
30 | 1,755 | Available for Debt Repayment/(Required to be Financed) | 2,985 | 3,104 |
Financing Activity | ||||
332 | (2,663) | Other net sale/(purchase) of marketable securities and deposits | (2,039) | (3,119) |
(1,000) | 414 | Net issue/(repayment) of other New Zealand-dollar borrowing | 419 | (1,455) |
838 | (277) | Net (repayment)/issue of foreign currency borrowing | (1,801) | 1,905 |
174 | 259 | Net (inflows)/outflows of cash | 105 | (93) |
- | 211 | Issues of circulating currency | 165 | 188 |
374 | (301) | Net Cash Inflows/(Outflows) to be Offset by Domestic Bonds | (166) | 530 |
Gross Cash Proceeds from Domestic Bonds | ||||
2,200 | 2,682 | Domestic bonds (market) | 2,375 | 2,146 |
375 | 568 | Domestic bonds (non-market) | 740 | 459 |
2,575 | 3,250 | Total Gross Cash Proceeds from Domestic Bonds | 3,115 | 2,605 |
(2,574) | (2,574) | Repayment of domestic bonds (market) | (2,574) | (2,797) |
(375) | (375) | Repayment of domestic bonds (non-market) | (375) | (338) |
(374) | 301 | Net (Repayments of)/Cash Proceeds from Domestic Bonds | 166 | (530) |
Statement of Unappropriated Expenditure (for the year ended 30 June 2006)#
An appropriation is a statutory authorisation by Parliament for the incurring of expenses or capital expenditure. This Statement reports expenses or capital expenditure in excess, or outside the scope, of existing appropriations, and breaches of projected net asset balances.
Section 26B of the Public Finance Act 1989 authorises the Minister of Finance to approve limited amounts of expenses or capital expenditure in excess of, but within the scope, of an existing appropriation. Unappropriated amounts incurred in terms of such an approval are shown separately in this Statement.
Expenses or capital expenditure incurred without appropriation under 26B of the Public Finance Act 1989 or any other authority is unlawful unless validated by Parliament. Unappropriated expenses or capital expenditure in excess of the limits which the Minister of Finance can approve require validating legislation. Such validating legislation will be accompanied by a report to the House of Representatives that sets out the unappropriated items together with an explanation of the Minister Responsible for the expenses or capital expenditure.
Amounts in this Statement are expressed in thousands of dollars, reflecting the level at which appropriations are made.
The Estimates of Appropriations ($000) | Amount in excess of Appropriation ($000) | ||
---|---|---|---|
Department | |||
Vote – | |||
Appropriation | |||
Ministry for Culture and Heritage | |||
Arts, Culture and Heritage – | |||
Other Expenses to be Incurred by the Crown | |||
New Zealand Memorial in Korea | 60 | 45 | |
Capital Expenditure | |||
National Memorial Park in Wellington | -[1] | 4,952 | |
Ministry of Economic Development | |||
Economic, Industry and Regional Development – | |||
Non-Departmental Output Expenses | |||
New Zealand’s Participation at Expo 2005 Aichi, Japan | 971 | 689 | |
Other Expenses to be Incurred by the Crown | |||
Large Budget Screen Production Fund | 35,556 | 9,126 | |
Energy – | |||
Capital Expenditure | |||
Development of Reserve Electricity Generation Capacity | - | 9 | |
Ministry of Health | |||
Health – | |||
Capital Expenditure | |||
Health Sector Projects | 1,112 | 2,202 | |
Response to Significant Health Emergencies | - | 16,512 | |
Department of Internal Affairs | |||
Community and Voluntary Sector – | |||
Other Expenses to be Incurred by the Crown | |||
Community Organisation Grants Scheme | 11,394 | 336 | |
Emergency Management – | |||
Other Expenses to be Incurred by the Crown | |||
Emergency Expenses | 171[2] | 7,269 | |
Departmental Net Asset Schedule | 31,175 | 4,046 | |
Department of Labour | |||
Labour – | |||
Other Expenses to be Incurred by the Crown | |||
Bad Debt Expense | - | 2 | |
Ministry of Justice | |||
Courts – | |||
Other Expenses to be Incurred by the Crown | |||
Care of Children Act Costs | 3,120[3] | 1,194 | |
Justice – | |||
Other Expenses to be Incurred by the Crown | |||
Contribution to Foreshore and Seabed Negotiation Costs | - | 90 | |
Ministry of Research, Science and Technology | |||
Research, Science and Technology – | |||
Departmental Output Expenses | |||
Contract Management | 643 | 48 | |
Ministry of Transport | |||
Transport – | |||
Departmental Output Expenses | |||
Sector Leadership and Support | 524[4] | 2 |
- [1] The original Estimates of Appropriations was nil. Cabinet authority was later provided to reduce the appropriation by $846,000 (approved by Cabinet on 12 September 2005) before an in-principle transfer was authorised in the October 2005 Baseline Update process.
- [2] The Estimates of Appropriations of $48,000 has been increased by $123,000 met from Imprest Supply (approved by Cabinet on 11 July 2005).
- [3] The Estimates of Appropriations of $3,315,000 has been reduced by $195,000 (approved in the October 2005 Baseline Update).
- [4] The Estimates of Appropriations of $424,000 has been increased by $100,000 met from Imprest Supply (approved in the October 2005 Baseline Update).
Statement of Unappropriated Expenditure (for the year ended 30 June 2006) (continued)#
The Supplementary Estimates of Appropriations ($000) | Amount in excess of Appropriation ($000) | ||
---|---|---|---|
The Supplementary Estimates of Appropriations ($000) | Amount in excess of Appropriation ($000) | ||
Department | |||
Vote – | |||
Appropriation | |||
Ministry of Agriculture and Forestry | |||
Biosecurity – Agriculture and Forestry – | |||
Departmental Output Expenses | |||
Quarantine Services | 50,779 | 812 | |
Department of Building and Housing | |||
Housing – | |||
Benefits and Other Unrequited Expenses | |||
Income Related Rental Subsidy | 395,233 | 258 | |
Department of Conservation | |||
Conservation – | |||
Departmental Output Expenses | |||
Conservation with the Community | 12,653 | 238 | |
Ministry of Education | |||
Education – | |||
Departmental Output Expenses | |||
Provision of School Sector Property | 1,102,244 | 5,951 | |
Non-Departmental Output Expenses | |||
School Transport | 117,022 | 103 | |
Department of Internal Affairs | |||
Local Government – | |||
Other Expenses to be Incurred by the Crown | |||
Depreciation | 160 | 7 | |
National Library of New Zealand | |||
National Library – | |||
Departmental Output Expenses | |||
Library and Information Services to Schools | 12,259[5] | 69 | |
Ministry of Social Development | |||
Social Development – | |||
Benefits and Other Unrequited Expenses | |||
Child Disability Allowance | 69,754 | 118 | |
Benefits and Other Unrequited Expenses | |||
Childcare Assistance | 109,543 | 72 | |
Benefits and Other Unrequited Expenses | |||
Disability Allowance Telephone Support | 6,722 | 13 | |
Benefits and Other Unrequited Expenses | |||
Orphan’s/Unsupported Child’s Benefit | 64,194 | 189 | |
Benefits and Other Unrequited Expenses | |||
Relocation Assistance | 124 | 3 | |
Benefits and Other Unrequited Expenses | |||
Residential Social Rehabilitation Assistance | 1,496 | 5 | |
Benefits and Other Unrequited Expenses | |||
Sickness Benefit | 540,164 | 979 | |
Benefits and Other Unrequited Expenses | |||
Student Allowances | 350,654 | 3,478 | |
Capital Investment in Organisations other than Departments | |||
Community Services Card Reimbursements | 216 | 1 | |
Capital Investment in Organisations other than Departments | |||
Student Loans | 1,034,403 | 11,140 | |
Veterans’ Affairs - Social Development – | |||
Benefits and Other Unrequited Expenses | |||
Medical Treatment | 14,757 | 91 | |
Benefits and Other Unrequited Expenses | |||
Veterans’ Pension | 128,079 | 89 | |
Benefits and Other Unrequited Expenses | |||
War Disablement Pensions | 112,791 | 562 |
- [5]The Supplementary Estimates of Appropriations of $12,109,000 has been increased by $150,000 transferred into this Output Class by the Public Finance (Transfers Between Outputs) Order 2006 (SR 2006/162).
Statement of Unappropriated Expenditure (for the year ended 30 June 2006) (continued)#
The Supplementary Estimates of Appropriations ($000) | Amount in excess of Appropriation ($000) | ||
---|---|---|---|
Department | |||
Vote – | |||
Appropriation | |||
Ministry of Health | |||
Health – | |||
Other Expenses to be Incurred by the Crown | |||
Legal Expenses | 5,459 | 26,322 | |
Ministry of Justice | |||
Courts – | |||
Other Expenses to be Incurred by the Crown | |||
Fines Provisions and Remittals | 5,725 | 16 | |
Other Expenses to be Incurred by the Crown | |||
Judicial Review Costs | 413 | 69 | |
Department of the Prime Minister and Cabinet | |||
Prime Minister and Cabinet – | |||
Departmental Output Expenses | |||
Policy Advice and Secretariat and Coordination Services | 7,270 | 448 | |
Ministry of Social Development | |||
Social Development – | |||
Benefits and Other Unrequited Expenses | |||
Defence Force Allowance | 10,020 | 133 | |
Benefits and Other Unrequited Expenses | |||
Transition to Work | 2,835 | 204 |
Statement of Unappropriated Expenditure (for the year ended 30 June 2006) (continued)#
The Supplementary Estimates of Appropriations ($000) | Amount in excess of Appropriation ($000) | ||
---|---|---|---|
The Supplementary Estimates of Appropriations ($000) | Amount in excess of Appropriation ($000) | ||
Department | |||
Vote – | |||
Appropriation | |||
Crown Law Office | |||
Attorney-General – | |||
Departmental Output Expenses | |||
Conduct of Criminal Appeals | 1,933 | 531 | |
Departmental Output Expenses | |||
The Exercise of Principal Law Officer Functions | 1,278 | 64 | |
Ministry of Economic Development | |||
Economic, Industry and Regional Development – | |||
Non-Departmental Output Expenses | |||
Enabling Services – Promotion of New Zealand Business and Development of Investment Opportunities | 26,160 | 261 | |
Non-Departmental Output Expenses | |||
Foundation Services – Business Information and Advice | 7,342 | 1 | |
Non-Departmental Output Expenses | |||
Growth Services – Customised Information and Advice | 20,056 | 1,366 | |
Non-Departmental Output Expenses | |||
Growth Services – Identifying and Leveraging New Business Opportunities | 29,167 | 1,519 | |
Energy – | |||
Departmental Output Expenses (Restricted by Revenue) | |||
Energy and Resource Information Services | 1,746 | 477 | |
Ministry of Foreign Affairs and Trade | |||
Foreign Affairs and Trade – | |||
Departmental Output Expenses | |||
Services for Other New Zealand Agencies Overseas | 11,739 | 179 | |
Ministry of Justice | |||
Courts – | |||
Other Expenses to be Incurred by the Crown | |||
Abortion Supervisory Committee – Certifying Consultants Fees | 4,334 | 433 | |
Other Expenses to be Incurred by the Crown | |||
Fines Provisions and Remittals | 5,725 | 1,321 | |
Other Expenses to be Incurred by the Crown | |||
Fines Writedowns | 37,585 | 1,129 | |
Other Expenses to be Incurred by the Crown | |||
Judicial Review Costs | 413 | 79 | |
Department of Labour | |||
Immigration – | |||
Departmental Output Expenses | |||
Services to Increase the Capacity of New Zealand Through Immigration | 147,973 | 1,087 | |
New Zealand Police | |||
Police – | |||
Departmental Output Expenses | |||
Case Resolution and Support to Judicial Process | 60,812 | 2,746 | |
Departmental Output Expenses | |||
Police Primary Response Management | 299,472 | 16,034 | |
Departmental Output Expenses | |||
Policy Advice and Ministerial Servicing | 1,512 | 69 | |
State Services Commission | |||
State Services – | |||
Other Expenses to be Incurred by the Crown | |||
State Sector Employment-Based Superannuation | 76,057 | 1,092 |
Statement of Unappropriated Expenditure (for the year ended 30 June 2006) (continued)#
Amount ($000) | ||
---|---|---|
Amount ($000) | ||
Department | ||
Vote – | ||
Appropriation | ||
Department of Building and Housing | ||
Housing – | ||
Capital Contributions to Other Persons or Organisations | ||
Housing New Zealand Limited (HNZL) – Loans to Refinance Crown Debt | ||
1 July 2005 to 30 June 2006 | 30,000 | |
1 July 2004 to 30 June 2005 | 101,350 | |
Housing New Zealand Corporation (HNZC) – Loans to Refinance Crown Debt 1 July 2003 to 30 June 2004 |
11,778 | |
Crown Law Office | ||
Attorney-General – | ||
Departmental Output Expenses | ||
Conduct of Criminal Appeals | 100 | |
Ministry of Education | ||
Education – | ||
Benefits and Other Unrequited Expenses | ||
Mapihi Pounamu | 18 | |
Parliamentary Service | ||
Parliamentary Service – | ||
Other Expenses to be Incurred by the Crown | ||
Party and Member Support | Unquantified[6] | |
The Treasury | ||
Finance – | ||
Departmental Output Expenses | ||
Debt and Related Financial Asset Management – Operational Management of the Crown’s Debt Portfolio and Associated Financial Investments | ||
1 July 2005 to 31 March 2006 | 482 | |
1 July 2004 to 30 June 2005 | 785 | |
1 July 2000 to 30 June 2004 | Unquantified | |
Capital Contributions to Other Persons or Organisations | ||
Housing New Zealand Corporation – Refinancing of Crown Debt 1 July 2002 to 30 June 2003 |
156,751 | |
Treasurer – | ||
Capital Contributions to Other Persons or Organisations | ||
Debt and Financial Asset Management - 1 July 1997 to 30 June 2000 |
Unquantified | |
Treasury – | ||
Capital Contributions to Other Persons or Organisations | ||
Liabilities Management - 1 July 1989 to 30 June 1997 |
Unquantified |
- [6] The Controller and Auditor-General is currently conducting an inquiry into advertising expenditure incurred by MPs and parliamentary parties under the 8 Party and Member Support appropriations in Vote Parliamentary Service in the 3 months before the 2005 General Election. He is examining whether the expenditure incurred was within the legal authority provided by Parliament for such expenditure. The inquiry is expected to be completed in October 2006. The Controller and Auditor-General expects to identify certain expenditure outside the scope of appropriation.
Statement of Unappropriated Expenditure (for the year ended 30 June 2006) (continued)#
Department | The Supplementary Estimates of Appropriations ($000) | Amount in excess of Appropriation ($000) |
---|---|---|
Department of Building and Housing | 9,481 | 909 |
Ministry of Foreign Affairs and Trade | 325,779 | 3,504 |
New Zealand Police | 308,307 | 10 |
Statement of Emergency Expenditure, Expenses or Liabilities (for the year ended 30 June 2006)#
Under section 25 of the Public Finance Act 1989, if a state of national emergency is declared under the Civil Defence Act 1983 or if the Government declares an emergency because of any situation that affects the public health or safety of New Zealand, the Minister of Finance may approve expenditure of public money or incurrence of expenses or liabilities to meet such emergency or disaster whether or not an appropriation by Parliament is available for the purpose. Once expenditure, expenses or liabilities have been incurred, the amounts that have not been appropriated must be disclosed in the annual financial statements of the Crown for the financial year and sanctioned by Parliament in an Appropriation Act.
During the year, no such emergency expenditure, expenses or liabilities were incurred.
Statement of Trust Money (as at 30 June 2006)#
Department | As at 30 June 2005 | Transfers | Contributions | Distributions | Revenue | Expenses | As at 30 June 2006 |
---|---|---|---|---|---|---|---|
Trust Account | ($000) | ($000) | ($000) | ($000) | ($000) | ($000) | |
Trust Account | ($000) | ($000) | ($000) | ($000) | ($000) | ($000) | |
Department | As at 30 June 2005 | Transfers | Contributions | Distributions | Revenue | Expenses | As at 30 June 2006 |
Agriculture and Forestry | |||||||
Meat Board Levies Trust | - | - | 55,925 | (55,938) | 13 | - | - |
Audit | |||||||
South Pacific Association of Supreme Audit Institutions Trust | 25 | - | - | - | 202 | (199) | 28 |
Building and Housing | |||||||
Housing Tenancy Bonds Trust | 187,065 | (187,065) | - | - | - | - | - |
Certifiers Bond Trust[1] | - | - | 171 | - | 7 | - | 178 |
Residential Tenancies Bond Trust[1] | 187,065 | 117,837 | (97,383) | - | - | 207,519 | |
Child, Youth and Family Services | |||||||
Children and Young Persons and Their Families Agency Trust | 370 | - | - | - | 8 | (10) | 368 |
Conservation | |||||||
Bonds/Deposits Trust | 7,128 | - | 1,694 | (3,400) | 355 | - | 5,777 |
Conservation Project Trust | 1,326 | - | 580 | (865) | 60 | (1) | 1,100 |
National Parks Trust | 31 | - | 71 | (58) | 1 | - | 45 |
Walkways Trust | 6 | - | 6 | - | 1 | - | 13 |
Wildlife and Reserves Trusts | 35 | - | - | (35) | - | - | - |
Corrections | |||||||
Prisons Trust | 420 | - | - | - | 10,785 | (10,659) | 546 |
Crown Law Office | |||||||
Legal Claims Trust | 85 | - | - | - | 1,440 | (1,476) | 49 |
Culture and Heritage | |||||||
Australian Trust for Oral History Archives Trust | 1,485 | - | - | (90) | 95 | - | 1,490 |
Dictionary of New Zealand Biography Trust | 416 | - | - | - | 29 | (97) | 348 |
New Zealand Encyclopaedia Trust | 1 | - | - | - | - | - | 1 |
New Zealand Historical Atlas Trust | 79 | - | - | - | 7 | - | 86 |
New Zealand History Research Trust | 1,463 | - | - | (80) | 96 | - | 1,479 |
Customs | |||||||
Alcohol Liquor Advisory Council Trust | 1,071 | - | 12,967 | (13,016) | 32 | - | 1,054 |
Customs Regional Deposit/Bonds Trust | 3,665 | - | 8,948 | (9,504) | 1 | - | 3,110 |
Heavy Engineering Research Association Trust | 67 | - | 959 | (959) | 1 | - | 68 |
Maritime Safety Authority Trust | 10 | - | 1,105 | (1,120) | 5 | - | - |
Economic Development | |||||||
Coal and Minerals Deposits Trust | 275 | - | 48 | (88) | - | - | 235 |
Official Assignee’s Office Trust | 13,043 | - | 10,721 | (9,842) | 760 | (4,878) | 9,804 |
Patent Co-operation Treaty Fees Trust | 103 | - | 1,145 | (1,145) | 12 | (14) | 101 |
Petroleum Deposits Trust | 1,077 | - | 38 | (31) | 1 | - | 1,085 |
Proceeds of Crime Trust | 2,150 | - | 2,894 | (849) | 212 | (1,049) | 3,358 |
Radio Frequencies Tender Trust | 190 | - | 158 | (81) | 14 | - | 281 |
Education | |||||||
Code of Practice for Providers who Enrol International Students Trust | 3,117 | - | - | - | 4,688 | (3,872) | 3,933 |
Conferences Trust | 20 | - | - | - | - | (18) | 2 |
Fisheries | |||||||
MAF Overfishing Account Trust | 2,192 | - | 9,239 | (9,015) | 188 | - | 2,604 |
MAFFish Forfeit Property Trust | 228 | - | 534 | (527) | 20 | - | 255 |
Foreign Affairs and Trade | |||||||
British Government/Tongan Parliamentary Services Trust | 3 | - | - | - | - | (3) | - |
New Zealand/France Friendship Trust | - | - | 48 | (38) | 1 | (1) | 10 |
Cook Island Trust | 4 | - | 1,301 | (1,306) | 12 | - | 11 |
Niue Trust | 17,505 | - | 4,674 | - | 907 | - | 23,086 |
Samoa Trust | - | - | 441 | (872) | 431 | - | - |
Health | |||||||
Health Benefits Offices Trust | 1,068 | - | - | (219) | 3,986,269 | (3,986,818) | 300 |
Inland Revenue | |||||||
Child Support Agency Trust Account | 10,108 | - | 149,796 | (150,842) | - | (1) | 9,061 |
Reciprocal Child Support Agreement Trust | 129 | - | 6,397 | (6,348) | - | - | 178 |
Internal Affairs | |||||||
New Zealand 1990 Scholarship Trust | 398 | - | 100 | - | 47 | - | 545 |
Unlimited Potential Programme Trust[1] | - | - | - | - | 525 | (186) | 339 |
Vogel House Trust | - | - | 4 | (4) | - | - | - |
Justice | |||||||
Chief Electoral Trust | - | - | - | 199 | (199) | - | |
Courts Law Trust | 12,288 | - | - | - | 13,960 | (16,003) | 10,245 |
Employment Court Trust | 238 | - | - | - | 171 | (289) | 120 |
Fines Trust | 31,253 | - | - | (4,298) | 210,058 | (209,970) | 27,043 |
Foreign Currency Trust | 5 | - | - | - | - | (5) | - |
Maori Land Court Trust | 34 | - | - | - | 8 | (4) | 38 |
Victims’ Claims Trust | - | - | - | 40 | - | 40 | |
Labour | |||||||
Employment Relations Service Trust | 16 | - | 253 | (224) | - | - | 45 |
Industrial Relations Act Security of Costs Trust | 11 | - | - | (11) | - | - | - |
New Zealand Immigration Service Trust | 5,282 | - | 5,809 | (4,085) | 245 | (35) | 7,216 |
Land Information New Zealand | |||||||
Crown Forestry Licences Trust | 11,095 | - | 55,319 | (65,442) | - | - | 972 |
Deposits Trust | 2,269 | - | 107 | (122) | - | - | 2,254 |
Endowment Rentals Trust | 1 | - | - | (129) | 129 | - | 1 |
Hunter Gift for the Settlement of Discharged Soldiers Trust | 50 | - | - | - | - | - | 50 |
National Library | |||||||
Macklin Bequest Fund Trust | 205 | - | - | - | 15 | - | 220 |
New Zealand Defence Force | |||||||
New Zealand Defence Force Trust | - | - | - | - | 9,967 | (9,967) | - |
Police | |||||||
Bequests, Donations and Appeals Trust | 186 | - | - | (125) | - | - | 61 |
Found Money Trust | 133 | - | 75 | (42) | - | - | 166 |
Money in Custody Trust | 1,589 | - | 2,141 | (674) | - | - | 3,056 |
Reparation Trust | 8 | - | 13 | (14) | - | - | 7 |
Social Development | |||||||
Australian Recovery Debt Trust | 5 | - | 54 | (54) | - | - | 5 |
Australian Dollar Reciprocal Trust | 290 | - | 2,314 | (2,421) | - | - | 183 |
Maintenance Trust | 85 | - | 1,276 | (1,238) | - | - | 123 |
Netherlands Recovery Debt Trust | - | - | 26 | (26) | - | - | - |
State Services | |||||||
Unlimited Potential Programme Trust[2] | 386 | - | - | (386) | - | - | - |
Treasury | |||||||
Trustee Act 1956 Trust | 824 | - | 77 | (83) | 31 | - | 849 |
Total | 322,611 | - | 455,265 | (443,029) | 4,242,048 | (4,245,754) | 331,141 |
Supplementary Information#
Government Reporting Entity as at 30 June 2006#
These financial statements are for the Government reporting entity as specified in Part III of the Public Finance Act 1989. This comprises Ministers of the Crown and the following entities:
Departments
Agriculture and ForestryArchives New Zealand
Building and Housing
Child, Youth and Family Services
Conservation
Corrections
Crown Law
Culture and Heritage
Customs
Defence
Economic Development
Education
Education Review Office
Environment
Fisheries
Foreign Affairs and Trade
Government Communications Security Bureau
Health
Inland Revenue
Internal Affairs
Justice
Labour
Land Information New Zealand
Māori Development
National Library
New Zealand Defence Force
Office of the Clerk
Pacific Island Affairs
Parliamentary Counsel Office
Parliamentary Service
Police
Prime Minister and Cabinet
Research, Science and Technology
Security Intelligence Service
Serious Fraud Office
Social Development
State Services Commission
Statistics
Transport
Treasury
Women’s Affairs
Others
Government Superannuation FundNew Zealand Superannuation Fund
Reserve Bank of New Zealand
Offices of Parliament
Office of the Controller and Auditor-GeneralOffice of the Ombudsmen
Parliamentary Commissioner for the Environment
State-owned enterprises
Agriquality LimitedAirways Corporation of New Zealand Limited
Animal Control Products Limited
Asure New Zealand Limited
Electricity Corporation of New Zealand Limited
Genesis Power Limited
Landcorp Farming Limited
Learning Media Limited
Meridian Energy Limited
Meteorological Service of New Zealand Limited
Mighty River Power Limited
New Zealand Post Limited
New Zealand Railways Corporation
Quotable Value Limited
Solid Energy New Zealand Limited
Terralink Limited (in liquidation)
Timberlands West Coast Limited
Transmission Holdings Limited
Transpower New Zealand Limited
Air New Zealand Limited (included for disclosure purposes as if it were a SOE)
Crown entities
Accident Compensation CorporationAccounting Standards Review Board
Alcohol Advisory Council of New Zealand
Arts Council of New Zealand Toi Aotearoa
Broadcasting Commission
Broadcasting Standards Authority
Career Services
Charities Commission
Children’s Commissioner
Civil Aviation Authority of New Zealand
Commerce Commission
Crown Health Financing Agency
Crown research institutes (9)
District health boards (21)
Earthquake Commission
Electoral Commission
Electricity Commission
Energy Efficiency and Conservation Authority
Environmental Risk Management Authority
Families Commission
Foundation for Research, Science and Technology
Government Superannuation Fund Authority
Guardians of New Zealand Superannuation
Health and Disability Commissioner
Health Research Council of New Zealand
Health Sponsorship Council
Housing New Zealand Corporation
Human Rights Commission
Land Transport New Zealand
Law Commission
Legal Services Agency
Maritime New Zealand
Mental Health Commission
Museum of New Zealand Te Papa Tongarewa Board
New Zealand Antarctic Institute
New Zealand Artificial Limb Board
New Zealand Blood Service
New Zealand Film Commission
New Zealand Fire Service Commission
New Zealand Historic Places Trust (Pouhere Toanga)
New Zealand Lotteries Commission
New Zealand Qualifications Authority
New Zealand Sports Drug Agency
New Zealand Symphony Orchestra
New Zealand Teachers Council
New Zealand Tourism Board
New Zealand Trade and Enterprise
New Zealand Venture Investment Fund Limited
Office of Film and Literature Classification
Pharmaceutical Management Agency
Police Complaints Authority
Privacy Commissioner
Public Trust
Radio New Zealand Limited
Retirement Commissioner
School boards of trustees (2,468)
Securities Commission
Social Workers Registration Board
Sport and Recreation New Zealand
Standards Council
Takeovers Panel
Te Reo Whakapuaki Irirangi (Te Māngai Pāho)
Te Taura Whiri i te Reo Māori (Māori Language Commission)
Television New Zealand Limited
Tertiary Education Commission
Tertiary education institutions (33)
Testing Laboratory Registration Council
Transit New Zealand
Transport Accident Investigation Commission
Organisations named or described in Schedule 4 to the Public Finance Act 1989
Agriculture and Marketing Research and Development TrustAsia New Zealand Foundation
Fish and game councils (12)
Leadership Development Centre Trust
New Zealand Fish and Game Council
New Zealand Game Bird Habitat Trust Board
New Zealand Government Property Corporation
New Zealand Lottery Grants Board
Ngai Tahu Ancillary Claims Trust
Pacific Co-operation Foundation
Pacific Islands Business Development Trust
Research and Education Advanced Network New Zealand Limited
Reserves boards (24)
Road Safety Trust
Information on Property, Plant and Equipment#
This section provides supplementary information on certain assets that are contained in the Statement of Financial Position.
State Highway Network#
The map shows the state highway network that has a total length of 10,894 kilometres. Of this, 5,972 kilometres are in the North Island and the remaining 4,922 kilometres in the South Island.
The Crown recognises 100% (by value) of the network in the Statement of Financial Position.
National Parks, Forest Parks and Conservation Areas#
The map shows the area covered by national parks, forest parks, conservation areas and reserves. The areas of each are:
Hectares | |
---|---|
National parks | 3,085,507 |
Conservation areas | 4,608,593 |
Reserves | 794,417 |
Total Area | 8,488,517 |
Fiordland National Park covers 1,261,240 hectares (15 % of the total area).
National Archives#
The National Archives, administered by Archives New Zealand, contains historically important archives, both textual and non-textual (including maps and plans, photographic prints and negatives and artworks). The collections held in Auckland, Wellington, Christchurch and Dunedin were completely revalued in December 2003.
Items of exceptional value held by Archives include the Declaration of Independence of the Northern Chiefs (1835), the Treaty of Waitangi (1840), the Letters Patent constituting New Zealand as a separate colony (1840), the proclamation of the Constitution Act (1853), and the Women’s Suffrage Petition (1893).
National Library Collections#
The National Library’s Heritage Collections are mainly in the Alexander Turnbull Library and provide a documentary record of New Zealand’s economic, social and cultural history. The collections, containing both published and unpublished material, include books, newspapers, manuscripts and archives, drawings and prints, scores and sound recordings, and cartographic and photographic items.
The General and Schools Collections provide a knowledge base for lending. The major collections are lending, schools and serials.
Specialist Military Equipment#
The major items of specialist military equipment included in the Statement of Financial Position are:
- two ANZAC class frigates, including electronic sensors for surface and air surveillance
- a fleet tanker
- other ships, including a hydrographic/oceanographic surveying ship, a diving tender and five inshore patrol craft
- six P3K Orion aircraft, equipped with sensors for conducting maritime air operations
- a fixed wing transport force consisting of five C130 Hercules and two Boeing 757s
- other aircraft, 14 Iroquois helicopters, five Sioux helicopters, and five Seasprite helicopters
- 24 light gun howitzers
- 12 Matra Mistral firing stations with Very Low Level Air Defence (VLLAD) capability
- 105 Light Armoured Vehicles (NZ LAV)
- 313 Light Operational Vehicles (LOVs) out of 321 LOVs being purchased have been capitalised.
There are major items of specialist military equipment held by the Crown, which are included in the Statement of Financial Position at zero value as they have been devalued. These include:
- the air combat force, comprising the fleet of A4 Skyhawk and Air Macchi MB339 aircraft including all associated rotables, inventory and munitions
- one Leander-class frigate (HMNZS Canterbury)
- 77 armoured personnel carrier (APC) variants.
Information for the International Monetary Fund on Special Data Dissemination Standards#
Maturity Profile of Gross Sovereign-issued Debt#
The following is the maturity profile of gross sovereign-issued debt, which is produced to meet International Monetary Fund (IMF) Special Data Dissemination Standards (SDDS) for central government debt.
Refinancing/repricing risk | ||||||
---|---|---|---|---|---|---|
$ million | 1 - 2 years | 2 - 5 years | 5 - 10 years | > 10 years | Total | |
New Zealand-Dollar Debt | ||||||
Government Stock | 3,197 | - | 6,010 | 11,519 | 1,725 | 22,451 |
Treasury Bills | 4,993 | - | - | - | - | 4,993 |
FX contracts and loans | (8,021) | 1,639 | (1,453) | (2,118) | (1,294) | (11,247) |
Retail Stock | 471 | 40 | 21 | - | - | 532 |
Total New Zealand-Dollar Debt | 640 | 1,679 | 4,578 | 9,401 | 431 | 16,729 |
Foreign-Currency Debt | ||||||
Total Foreign-Currency Debt | 17,017 | 729 | 255 | 617 | 114 | 18,732 |
Total Gross Sovereign-Issued Debt | 17,657 | 2,408 | 4,833 | 10,018 | 545 | 35,461 |
Core Crown Borrowing Statement#
The following information is the core Crown borrowing statement.
$ million | 30 June 2006 |
---|---|
Total Gross Sovereign-Issued Debt | 35,461 |
New Zealand dollars | 934 |
United States dollars | 9,834 |
Japanese yen | 417 |
Euro & other currencies | 7,644 |
Reserve position at IMF | 458 |
Total Marketable Securities, Deposits and Equity Investments | 19,287 |
Cash | 312 |
Student Loans | 5,566 |
Other advances | 2,551 |
Total Advances and Cash | 8,429 |
Net core Crown debt | 7,745 |
Information on SOEs and Crown Entities#
Accounting Policies#
The Crown’s financial interest in SOEs and Crown entities is reported in accordance with the Crown’s accounting policies. Adjustments have been made to restate the financial position and financial performance of certain entities, as reported in their own financial statements, to a basis consistent with the Crown’s accounting policies.
The Crown has line-by-line combined all SOEs and Crown entities (except TEIs).
The Crown has equity accounted 100% of the net assets of TEIs on the basis that, in the event of disestablishment of a TEI (which is subject to a resolution of the House), 100% of the net assets revert to the Crown in the absence of a decision to transfer the assets to a new or existing institution and, in the meantime, the Crown enjoys the benefits of the provision of a higher education to the public of New Zealand. Refer Note 13 for an explanation as to why TEIs are equity accounted.
Minority Interests#
The ownership interest in Air New Zealand Limited is 80.5%. The interest in Air New Zealand Limited is included within the total SOE information.
Balance Dates#
Except for those entities listed below, all SOEs and significant Crown entities have a balance date of 30 June, and the information reported in these financial statements is for the period ended 30 June 2006:
SOEs | Balance date | Information reported to |
---|---|---|
Asure New Zealand Limited | 30 September | 30 June 2006 |
Timberlands West Coast Limited | 31 March | 31 March 2006 |
Crown entities: | ||
School boards of trustees | 31 December | 31 December 2005 |
TEIs | 31 December | 30 June 2006 |
Financial Interest in SOEs, Crown entities and Air New Zealand Limited#
30 June 2006 | 30 June 2005 | ||||
---|---|---|---|---|---|
Total revenue $m | Attributable surplus/ (deficit) $m | Distributions to Crown $m | Attributable surplus/ (deficit) $m | Distributions to Crown $m | |
Total revenue $m | Attributable surplus/ (deficit) $m | Distributions to Crown $m | Attributable surplus/ (deficit) $m | Distributions to Crown $m | |
30 June 2006 | 30 June 2005 | ||||
SOEs | |||||
Agriquality New Zealand Limited | 79 | 1 | (2) | 3 | (2) |
Airways Corporation of New Zealand Limited | 130 | 8 | (8) | 8 | (10) |
Asure New Zealand Limited | 52 | 1 | (2) | 2 | (1) |
Electricity Corporation of New Zealand Limited | 6 | 5 | (5) | 4 | (9) |
Genesis Power Limited | 1,989 | 84 | - | 70 | (23) |
Landcorp Farming Limited | 120 | 20 | (5) | 49 | (2) |
Meridian Energy Limited | 2,852 | 849 | (878) | 218 | (148) |
Meteorological Service of New Zealand Limited | 30 | 3 | (3) | 4 | (7) |
Mighty River Power Limited | 1,012 | 101 | (36) | 121 | (30) |
New Zealand Post Limited | 1,242 | 69 | (48) | 137 | (28) |
New Zealand Railways Corporation | 156 | 153 | - | 1 | - |
Solid Energy New Zealand Limited | 570 | 86 | (20) | 6 | - |
Timberlands West Coast Limited | 18 | (9) | - | 2 | (1) |
Transpower New Zealand Limited | 676 | 97 | (10) | 141 | (40) |
Transmission Holdings Limited | 201 | 6 | (12) | 15 | (7) |
Animal Control Products | 7 | 1 | (2) | 1 | (1) |
Learning Media Limited | 24 | 1 | - | 1 | - |
Quotable Value New Zealand | 38 | 1 | (1) | 1 | (1) |
Total State-owned Enterprises | 9,202 | 1,477 | (1,032) | 784 | (310) |
Air New Zealand Limited[1] | 3,879 | 322 | (45) | 174 | (34) |
Total SOEs and Air New Zealand Limited | 13,081 | 1,799 | (1,077) | 958 | (344) |
Intra-segmental eliminations | (330) | - | - | - | - |
Total per statement of segments | 12,751 | 1,799 | (1,077) | 958 | (344) |
Crown Entities | |||||
Accident Compensation Corporation | 4,287 | 330 | - | (794) | - |
Crown research institutes | 587 | 31 | (18) | 7 | (15) |
District health boards (including the Crown Health Funding Agency) | 8,159 | (23) | - | (19) | - |
Earthquake Commission | 567 | 706 | - | 164 | - |
Housing New Zealand Corporation | 757 | 36 | (14) | 14 | (44) |
Museum of New Zealand Te Papa Tongarewa | 42 | (11) | - | (8) | - |
New Zealand Fire Service Commission | 266 | 9 | - | 23 | - |
Public Trust | 96 | 2 | - | 1 | - |
School boards of trustees | 4,255 | 57 | - | 32 | - |
Tertiary education commission | 2,220 | 16 | - | - | - |
Tertiary education institutions | - | 54 | - | 133 | - |
Transit New Zealand | 996 | 481 | - | 412 | - |
Television New Zealand Limited | 409 | 15 | (80) | 6 | (38) |
Other | 4,272 | 26 | - | 50 | - |
Total Crown Entities | 26,913 | 1,729 | (112) | 21 | (97) |
Intra-segmental eliminations | (1,598) | (136) | - | (122) | - |
Total per statement of segments | 25,315 | 1,593 | (112) | (101) | (97) |
Total Financial Interest in SOEs, Crown Entities and Air New Zealand Limited | 38,066 | 3,392 | (1,189) | 857 | (441) |
- [1] As outlined on page 81 of the 2002 Crown financial statements, on acquisition of Air New Zealand Limited, aircraft assets were recorded at fair value. Crown accounting policy is to revalue the aircraft assets annually, whereas the treatment adopted in Air New Zealand Limited’s financial statements is to record aircraft values at the lower of carrying value or recoverable amount, the latter being defined as the higher of market value or value-in-use. Ongoing revaluation movements will impact on the result as presented under Crown accounting policies which is largely the reason the result included in the Financial Statements of the Government differs from that published in the financial statements of Air New Zealand Limited.
Financial Interest in SOEs, Crown entities and Air New Zealand Limited (continued)#
Cashflow net purchase of assets $m | Property, plant and equipment $m | Total assets $m | Total borrowings $m | Total liabilities $m | Equity at 30 June 2006 $m | Equity at 30 June 2005 $m | |
---|---|---|---|---|---|---|---|
Cashflow net purchase of assets $m | Property, plant and equipment $m | Total assets $m | Total borrowings $m | Total liabilities $m | Equity at 30 June 2006 $m | Equity at 30 June 2005 $m | |
SOEs | |||||||
Agriquality New Zealand Limited | 12 | 31 | 50 | 17 | 23 | 27 | 22 |
Airways Corporation of New Zealand Limited | 20 | 105 | 125 | 25 | 86 | 39 | 40 |
Asure New Zealand Limited | - | - | 19 | - | 11 | 8 | 9 |
Electricity Corporation of New Zealand Limited | - | - | 18 | 16 | 17 | 1 | 2 |
Genesis Power Limited | 238 | 1,527 | 2,028 | 308 | 575 | 1,453 | 1,369 |
Landcorp Farming Limited | 26 | 1,117 | 1,373 | 220 | 228 | 1,145 | 830 |
Meridian Energy Limited | 71 | 4,795 | 5,339 | 755 | 1,102 | 4,237 | 2,469 |
Meteorological Service of New Zealand Limited | 3 | 8 | 15 | 4 | 8 | 7 | 7 |
Mighty River Power Limited | 148 | 2,479 | 2,708 | 436 | 611 | 2,097 | 2,033 |
New Zealand Post Limited | 68 | 382 | 3,728 | 2,992 | 3,192 | 536 | 483 |
New Zealand Railways Corporation | 146 | 323 | 394 | 71 | 111 | 283 | 27 |
Solid Energy New Zealand Limited | 92 | 224 | 352 | - | 118 | 234 | 168 |
Timberlands West Coast Limited | 2 | 54 | 64 | 3 | 5 | 59 | 66 |
Transpower New Zealand Limited | 262 | 2,205 | 2,885 | 1,543 | 1,631 | 1,254 | 1,173 |
Transmission Holdings Ltd | 17 | 148 | 205 | 68 | 108 | 97 | 101 |
Animal Control Products | - | 1 | 5 | - | 1 | 4 | 4 |
Learning Media Limited | 2 | 2 | 15 | - | 10 | 5 | 5 |
Quotable Value New Zealand | 2 | 6 | 15 | 1 | 7 | 8 | 7 |
Total State-owned Enterprises | 1,109 | 13,407 | 19,338 | 6,459 | 7,844 | 11,494 | 8,815 |
Air New Zealand Limited | 769 | 2,824 | 4,720 | 1,458 | 3,099 | 1,621 | 1,050 |
Total SOEs and Air New Zealand Limited | 1,878 | 16,231 | 24,058 | 7,917 | 10,943 | 13,115 | 9,865 |
Minority Interest | - | - | - | - | - | 293 | 215 |
Intra-segmental eliminations | - | - | (38) | (16) | (38) | - | - |
Total per statement of segments | 1,878 | 16,231 | 24,020 | 7,901 | 10,905 | 13,408 | 10,080 |
Crown Entities | |||||||
Accident Compensation Corporation | 65 | 183 | 10,409 | - | 14,244 | (3,835) | (4,167) |
Crown research institutes | 34 | 315 | 470 | 37 | 138 | 332 | 315 |
District health boards (including the Crown Health Funding Agency) | 348 | 3,795 | 4,501 | 1,199 | 2,515 | 1,986 | 1,477 |
Earthquake Commission | 3 | 11 | 5,323 | - | 63 | 5,260 | 4,554 |
Housing New Zealand Corporation | 342 | 13,237 | 13,385 | 1,781 | 1,938 | 11,447 | 9,660 |
Museum of New Zealand Te Papa Tongarewa | 10 | 954 | 981 | - | 6 | 975 | 870 |
New Zealand Fire Service Commission | 33 | 445 | 488 | 13 | 85 | 403 | 363 |
Public Trust | 6 | 8 | 815 | 765 | 772 | 43 | 40 |
School boards of trustees | 217 | 746 | 1,668 | 54 | 624 | 1,044 | 904 |
Television New Zealand Limited | 12 | 135 | 321 | 49 | 110 | 211 | 262 |
Tertiary education commission | 4 | 11 | 120 | - | 102 | 18 | 18 |
Tertiary education institutions | 439 | - | 5,475 | - | - | 5,475 | 5,011 |
Transit New Zealand | 732 | 17,958 | 18,117 | - | 154 | 17,963 | 14,923 |
Other | 64 | 189 | 2,519 | 1,231 | 2,019 | 500 | 590 |
Total Crown Entities | 2,309 | 37,987 | 64,592 | 5,129 | 22,770 | 41,822 | 34,820 |
Intra-segmental eliminations | - | - | (1,143) | (1,005) | (1,143) | - | - |
Total per statement of segments | 2,309 | 37,987 | 63,449 | 4,124 | 21,627 | 41,822 | 34,820 |
Total Financial Interest in SOEs, Crown Entities and Air New Zealand Limited | 4,187 | 54,218 | 87,469 | 12,025 | 32,532 | 55,230 | 44,900 |