10 December 2014

Paul Helm
Chief Government Accountant
The Treasury

Financial Statements of the Government of New Zealand for the Four Months Ended 31 October 2014

The Financial Statements of the Government of New Zealand for the four months ended 31 October 2014 were released by the Treasury today. These statements are compared against forecasts based on the Budget Economic and Fiscal Update (BEFU 14) released on 15 May 2014.

The operating balance before gains and losses (OBEGAL) was in deficit by $1.0 billion, which was $260 million more than expected, largely owing to lower than forecast core Crown revenue and higher than forecast core Crown expenses.

Core Crown tax revenue was $97 million (0.5%) lower than the Budget forecast with both GST and source deductions being lower than expected ($200 million and $75 million respectively) which is expected to be a permanent difference. Partly offsetting these negative variances, other individuals and corporate tax were more than expected ($70 million and $129 million respectively).

Core Crown tax revenue was around 8% higher than in the equivalent four month period a year earlier, and is currently ahead of the Pre-election Update forecasts. This rate of growth is unlikely to continue over the rest of the 2014/15 year due to changes in economic conditions, including the flow-through from lower dairy prices and an ongoing low rate of inflation.

Core Crown expenses were $118 million or 0.5% higher than forecast at $24.0 billion.

The primary reason for the variance was the Crown’s signing of a $103 million Deed of Indemnity in regards to Solid Energy. The costs associated with the indemnity do not impact OBEGAL, however, as both entities are within the Government Reporting Entity.

Excluding these costs, core Crown expenses were close to forecast.

The operating balance (including gains and losses) was in deficit by $1.0 billion, $1.2 billion lower than the forecast surplus. Gains of $2.0 billion were recorded on financial instruments, which was $1.1 billion ahead of forecast. However, these gains were not enough to offset the actuarial losses on the ACC and Government Superannuation Fund liabilities ($1.6 billion and $0.4 billion respectively), resulting from changes in short term discount rates.

The core Crown residual cash deficit (at $2.2 billion) was close to forecast. Within this result there were higher than forecast operating payments, offset by higher than forecast tax receipts and lower than forecast capital spending. With residual cash being close to forecast, core Crown net debt at $61.9 billion (27% of GDP) was also close to forecast.

At 31 October, total Crown assets were valued at $257.3 billion and liabilities were $177.6 billion while the Crown’s share of net worth stood at $74.5 billion.

November results are due to be published on 23 January 2015 and will be the first results reported against the new Half Year Economic and Fiscal Update (HYEFU 14), which is due to be released on the 16 December.

Click here to read the full report.

ENDS

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