11 July 2003 Media Statement

Mallard on May Crown Financial Statements

Acting Finance Minister Trevor Mallard today welcomed the recent turnaround from loss to profit of the government’s investment portfolios, as reflected in the Crown Financial Statements out today.

The Crown Financial Statements for the 11 months to the end of May showed the rebound in overseas equity markets had produced year-to-date gains of around $100 million in the Government Superannuation Fund, ACC and EQC.

“This is good news, especially in light of the imminent entry into the market of the New Zealand Superannuation Fund,” Trevor Mallard said.

Trevor Mallard noted the Crown’s debt position was broadly in line with budget night forecasts but that there had been some “bumpiness” around the surplus figures with the operating balance running $759 million ahead of forecast and the OBERAC $802 million ahead.

“The increase reflects higher tax revenues than were anticipated in the budget and the rebound in the GSF and EQC fund returns.

“But, while the improvement in the OBERAC is likely to continue through to the final outcome for the 2002-03 year, the improvement in the operating balance will be affected by the reduction in discount rates since the budget.

“Although valuations of the GSF and ACC liabilities are still to be completed, reductions in discount rates of the scale experienced since the budget have in the past had a significant impact.

“A similar movement between the 2002 December Economic and Fiscal Update and the 2003 budget, for example, carved around $1 billion off the operating balance forecast,” Trevor Mallard said.

ENDS

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