7 April 2006
MEDIA STATEMENT
Friday 7 April 2006
Dr Peter Bushnell
Deputy Secretary to the Treasury

Financial Statements of the Government for the Eight Months Ended 28 February 2006

The Financial Statements of the Government of New Zealand for the eight months ended 28 February 2006 were released by the Treasury today.

These financial statements are compared against monthly forecasts based on the 2005 Half Year Economic and Fiscal Update (Half Year Update). The forecasts for the Half Year Update were based on actual results to 31 October.

Net cash flow from core operating and investing activity (released on 30 March 2006) was in line with forecast at $1.3 billion.

Gross sovereign-issued debt (GSID) was $35.8 billion (23.2% of GDP), around $3.2 billion higher than forecast. This was largely due to increased borrowing as a result of:

- the Reserve Bank raising the settlement cash level to $2 billion (previously $20 million) due to their concerns over liquidity pressures in the payments system created by the February NZ Government Bond maturity (the bond maturity reduces the amount of collateral available for banks to use).(1) This is likely to remain through to year-end;

(1) The Reserve Bank made this announcement on 10 February 2006.

- higher than forecast rollover of repurchase agreements of securities held by the Reserve Bank of around $0.7 billion (the forecast was based on levels as at 31 October 2005); and

- additional issuance of Government Stock (around $0.3 billion).

Net core Crown debt was $10.3 billion, which was around $0.3 billion lower than forecast, largely due to higher issues of circulating currency and unrealised foreign exchange gains (both of which are not forecast as a matter of policy).

The operating balance of $6.6 billion in February was higher than forecast by $2.7 billion. This has primarily been driven by higher investment income (which has been the trend since November). This was due to:

- the gain on sale of Southern Hydro by Meridian Energy of around $0.6 billion (reported in November), which was not forecast;

- higher than expected investment gains of the NZS Fund (around $0.7 billion),

- ACC (around $0.3 billion), EQC (around $0.2 billion) and GSF (around $0.2 billion); and

- core Crown expenses being around $0.5 billion lower than forecast, spread across a number of departments.

Since the OBERAC removes the investment gains, it is mainly delays in departmental spending that has resulted in the OBERAC being $0.8 billion ahead of forecast, at $4.7 billion.

ENDS

Media Statement and Crown Financial Statements for the eight months ended 28 February 2006:
See ... http://img.scoop.co.nz/media/pdfs/0604/cfs28feb06media.pdf

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