New Zealand Economy – Interim Financial Statements of the Government of New Zealand for the six months ended 31 December 2021

Using the most recently published GDP (for the year ended 30 September 2021) of $343,519 million (Source: Stats NZ).
Favourable variances against forecast have a positive sign and unfavourable variances against forecast have a negative sign.
Using HYEFU 2021 forecast GDP for the year ending 30 June 2022 of $362,788 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 six months to 31 December 2021 was $1.5 billion (3.0%) above forecast, at $51.0 billion. The variance consists of favourable variances in corporate tax ($0.7 billion), source deductions ($0.4 billion), other individuals’ tax and GST revenue ($0.2 billion each).

Core Crown expenses were $62.9 billion, which was $0.7 billion (1.0%) below forecast, mainly attributable to lower than forecast health expenditure ($0.3 billion) and lower than expected uptake of the COVID-19 Resurgence Support Payment ($0.2 billion).

The operating balance before gains and losses (OBEGAL) deficit of $8.0 billion was $2.8 billion lower than the forecast deficit, mainly reflecting the core Crown results discussed above. In addition, the results of Crown entities and State-owned enterprises were stronger than forecast by $0.4 billion and $0.2 billion respectively.

When total gains and losses are added to the OBEGAL result, the operating balance was $13.3 billion in deficit, and $2.6 billion lower than the deficit forecast. The key drivers of the variance in net gains and losses were:

Net losses on non-financial instruments were $1.5 billion higher than forecast primarily owing to the ACC outstanding claims liability valuation being $1.0 billion higher than forecast due to movements in the discount rates and inflation assumptions used to calculate the claims liability. In addition, net losses on the Emissions Trading Scheme liability were $0.4 billion higher than forecast owing to an increase in carbon prices.
Net gains on financial instruments were $1.3 billion higher than forecast primarily as a result of returns on the Crown’s investment portfolios (New Zealand Superannuation Fund and ACC), as current investment returns were higher than those forecast.

The core Crown residual cash deficit of $25.2 billion was higher than forecast by $0.6 billion. Net operating cash outflows were $1.9 billion higher than forecast, largely due to the timing of payments so this variance is mostly expected to be temporary in nature. However, this was partially offset by capital payments which were lower than expected by $1.3 billion, driven by lower than forecast uptake of the Reserve Bank’s Funding for Lending Programme (FLP).

Net core Crown debt was $126.4 billion (36.8% of GDP) at 31 December 2021, slightly above forecast by $0.1 billion, as the core Crown residual cash variance was offset by issuances of circulating currency. When FLP advances are included, net core Crown debt was $119.7 billion (34.8% of GDP), $1.3 billion above forecast.

Gross debt at $117.6 billion (34.2% of GDP) was $1.7 billion higher than forecast. This is owing to issuances of $1.5 billion in euro-commercial paper which was not forecast and an unfavourable movement in core Crown derivatives in loss of $0.2 billion. The majority of this variance has a corresponding impact on financial assets and therefore does not impact on net core Crown debt.

Net worth attributable to the Crown was $138.3 billion at 31 December 2021, $3.0 billion higher than forecast. Most of this variance relates to the favourable operating balance discussed above.