30 June 1999 Crown Financial Statements Released

  • Bill Birch

The Financial Statements of the Government of New Zealand for the year ended 30 June 1999 were released by the Treasury today.

The changes against forecast for the key fiscal indicators are:

Actual Forecast Variance
$million $million $million
Operating 1,777 2,164 (387)

Crown balance 6,022 5,456 566
(net worth)
Net Crown debt 21,701 22,369 668

The operating balance was around $1.8 billion, $400 million lower than forecast.

Net worth and net debt are around $550 million and $650 million better than forecast respectively.
The operating balance came in $400 million lower than forecast largely due to:

  • The Government Superannuation Fund unfunded pension liability revaluation ($646 million). This is non-cash in nature, reflecting both lower discount rates ($283 million), and changes in the actual net liability?primarily employee wage growth and retirement assumptions ($226 million)
  • Lower-than-forecast tax revenue $200m

These items were partly offset by higher-than-forecast SOE and Crown entity surpluses ($287 million).

Expenses, excluding the movement in GSF unfunded liability and foreign exchange movements, are slightly lower than forecast ($81 million).

The 1998/99 operating balance has been influenced by a number of "one-off" items such as the gain on sale of Contact Energy and the Airport companies, and the GSF revaluation.

While these items create volatility, both upside and downside, they do not impact the underlying operating balance trend. If GSF and other "one-off" items were removed, a surplus of around $150 million would remain.

Despite the $400 million lower-than-forecast operating balance, net worth was around $550 million higher than forecast. This was due to other positive movements (which do not impact on the operating balance):

  • The Crown has recognised the ACC unfunded liability on the books for the first time. The adjustment required to bring this liability on was around $750 million below the estimate in the 1999 Budget, largely due to a shift in discount rates.
  • Year-end net asset revaluations, such as State highways, were around $200 million. These revaluations are not forecast.

Net debt was 22.0% of GDP (22.5% forecast), around $650 million ahead of forecast. This increase was mainly due to timing differences that are expected to reverse in 1999/2000.