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Source: MIL-OSI Submissions
Source: New Zealand Treasury

The interim Financial Statements of the Government of New Zealand for the three months ended 30 September 2021 (the financial statements) were released by the Treasury today.

The 30 September 2021 results factor in a stronger than expected starting position from the financial year 2020/21.

The economy has continued to perform better than expected for the first quarter of the 2021/22 financial year, resulting in tax revenue being higher than forecast. However, the increase in COVID-19 Alert Levels triggered a number of government fiscal support measures which meant expenses were higher than forecast and more than offset the increased tax revenue. As a result, both the operating balance before gains and losses (OBEGAL) deficit and residual cash deficit were higher than forecast in the 2021 Budget Economic and Fiscal Update (BEFU 2021).

Year to date Full Year
September

2021

Actual1
$m

September

2021
BEFU 2021

Forecast1
$m

Variance2
BEFU 2021 $m
Variance BEFU 2021 % June

2022
BEFU 2021

Forecast3
$m

Core Crown          
Core Crown tax revenue 23,990 21,708 2,282 10.5 93,188
Core Crown revenue 25,930 23,329 2,601 11.1 99,778
Core Crown expenses 31,022 27,842 (3,180) (11.4) 114,717
Core Crown residual cash (9,926) (8,559) (1,367) (16.0) (39,232)
Net core Crown debt4 112,200 122,829 10,629 8.7 153,311
as a percentage of GDP 33.0% 36.2%     43.8%
Gross debt5 113,777 96,878 (16,899) (17.4) 95,943
as a percentage of GDP 33.5% 28.5%     27.4%
Total Crown          
Operating balance before gains and losses (5,352) (4,570) (782) (17.1) (18,409)
Operating balance (excluding minority interests) (11,556) (4,029) (7,527) (186.8) (15,648)
Total borrowings 179,429 181,149 1,720 0.9 215,234
Net worth attributable to the Crown 139,264 108,033 31,231 28.9 96,551
as a percentage of GDP 41.0% 31.8%     27.6%

    Using the most recently published GDP (for the year ended 30 June 2021) of $339,603 million (Source: Stats NZ).
    Favourable variances against forecast have a positive sign and unfavourable variances against forecast have a negative sign.
    Using BEFU 2021 forecast GDP for the year ending 30 June 2022 of $349,742 million (Source: The Treasury).
    Net core Crown debt excluding student loans and other advances. Net debt may fluctuate during the year largely reflecting the timing of tax receipts.
    Gross sovereign-issued debt excluding settlement cash and Reserve Bank bills.

    Core Crown tax revenue for the three months to September 2021 was $2.3 billion (10.5%) above the BEFU 2021 forecast, with positive variances across most tax types, specifically, corporate tax ($1.0 billion), other individuals’ tax ($0.6 billion), source deductions revenue ($0.5 billion) and GST revenue ($0.2 billion). These positive variances reflect economic conditions being better than forecast.

    Core Crown expenses were $31.0 billion, $3.2 billion above forecast, mainly owing to the resurgence of COVID-19 on 17 August 2021 which triggered a number of fiscal support measures. As a result, wage subsidies and COVID-19 resurgence support payments were $2.6 billion and $0.9 billion respectively higher than forecast.

    The operating balance before gains and losses (OBEGAL) was a $5.4 billion deficit, $0.8 billion higher than forecast, mainly reflecting the core Crown results discussed above.

    When total gains and losses are added to the OBEGAL result, the operating balance was a $11.6 billion deficit, and $7.5 billion higher than the deficit forecast. The variance in gains and losses largely related to the following:

    ACC’s outstanding claims liability increased resulting in valuation losses being $3.0 billion higher than forecast. This variance was mostly a result of changes to the discount rates and inflation assumptions used to revalue this liability.
    An increase in carbon prices has resulted in a loss from the Emissions Trading Scheme of $3.0 billion above forecast.
    Net losses on financial instruments were $0.4 billion, $1.2 billion below forecast, largely due to changes in market prices.

    The core Crown residual cash deficit of $9.9 billion was $1.4 billion more than the deficit forecast. This was largely owing to increased payments as a result of the shift in Alert Levels causing transfer payments and subsidies payments to be $3.4 billion higher than forecast, partly offset by tax receipts being $1.6 billion higher than expected.

    Net core Crown debt was $112.2 billion (33.0% of GDP) at 30 September 2021, $10.6 billion lower than forecast. This was largely owing to the favourable variance from the 30 June 2021 results of $11.6 billion, which was partly reduced by the core Crown residual cash variance of $1.4 billion.

    Net worth attributable to the Crown at $139.3 billion was $31.2 billion higher than forecast. Most of this variance relates to the 31 June 2021 results variance of $39.9 billion partly offset by the operating balance variance discussed above.

    MIL OSI