Financial Statements of the Government of New Zealand for the Year Ended 30 June 2014

The Treasury has published today the Financial Statements of the Government of New Zealand for the Year Ended 30 June 2014, and a related Snapshot, which is a high level presentation of key facts and figures of the financial year intended to make the financial statements more user friendly and accessible.

See Financial Statements of the Government of New Zealand for the Year Ended 30 June 2014 and the Snapshot.

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From the Summary

Overall the Crown's operating performance continued to improve...

The operating balance before gains and losses (OBEGAL) deficit decreased from $4.4 billion, to $2.9 billion.

The continued narrowing of the OBEGAL deficit was a result of further growth in the nominal economy (leading to a higher tax take).

Excluding the impact of the Canterbury rebuild, the adjusted OBEGAL deficit was $2.6 billion this year; which was around half the comparative figure for the previous year.

Figure 1 - OBEGAL (excluding minority interests)

Source: The Treasury

... as the New Zealand economy continued to grow leading to an increase in the tax take...

Real gross domestic product expanded at an annual average rate of 3.5% in the June 2014 year, with strong growth in construction, primary industries and some services. In current dollar or nominal terms, the value of output increased 7.8%, largely as a result of a 15.8% increase in the goods terms of trade. Weekly paid hours were up 3.2% from the previous year and average hourly wages were up 2.6%, giving an increase in total weekly gross earnings of 5.8%.

The increase in economic activity and growth in employment led to core Crown tax revenue being $2.8 billion higher than a year earlier, with all major tax types improving to reach $61.5 billion. As a share of the economy, core Crown tax revenue was 26.8% of GDP - that compares, for example, with a peak in the past decade of 31.2% of GDP in the year to June 2006.

Figure 2 - Core Crown revenue and expenses

Source: The Treasury

...while core Crown expenses remained relatively flat...

In nominal terms, core Crown expenses increased $1.2 billion (1.7%) to $71.5 billion for the year to 30 June. As a share of the nominal economy, core Crown expenses were equal in value to 31.2% of GDP (33.1% of GDP in 2013).

The largest drivers of growth in nominal core Crown expenditure were New Zealand Superannuation expenditure as a result of indexation and an increase in the number of recipients, along with spending decisions in Budget 2013, primarily relating to health and education.

...and investment gains led to an operating balance surplus...

The total Crown operating balance, inclusive of gains and losses, was a surplus of $2.8 billion, as net gains of $5.4 billion more than offset the OBEGAL deficit.

Figure 3 - Operating balance (excluding minority interests)

Source: The Treasury

...strengthening the Crown's net worth

With an operating surplus, the Crown's net worth increased for the second consecutive year. Total assets increased by $11.7 billion, while liabilities increased by $0.9 billion.

The higher asset values were largely the result of revaluations to Crown assets contributing to the increase in value of property, plant and equipment ($6.5 billion) and strong equity markets which contributed to an uplift in financial assets ($4.4 billion).

The increase in liabilities was due mainly to an increase in borrowings, partly offset by lower earthquake liabilities as claims were settled.

Figure 4 - Net worth attributable to the Crown

Source: The Treasury

...however cash deficits continued, causing net debt to rise

With the Crown recording an OBEGAL deficit, and maintaining capital spending, the resulting residual cash deficit meant that net debt continued to rise in nominal terms. Net debt reached $59.9 billion (26.2% of GDP) at 30 June 2014, up from $55.8 billion (26.3% of GDP) a year earlier. The rate of growth, however, has slowed in recent years as cash deficits have become smaller. At $4.1 billion, the residual cash deficit was $1.6 billion less than the year before as tax receipts grew faster than operating payments. In addition, this year included proceeds of $2.3 billion from the Government share offer programme ($0.7 billion higher than last year).

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