13 September 2001 Media Statement

Final outturn rewards strong fiscal discipline - Cullen

"The financial statements for the year ended 30 June 2001 show the Crown accounts are in a healthy position, reflecting the government's prudent fiscal stance," Finance Minister Michael Cullen said today.

The clearest guide to the quality of the Crown's fiscal management was the newly-introduced indicator - the OBERAC. This came in at $2.107 billion, around $400 million higher than forecast in this year's budget.

"The OBERAC represents the operating balance after revaluations and accounting policy changes have been stripped out. Movements, particularly in the evaluation of ACC and GSF liabilities, are often large and are intensely interest rate sensitive so tend to cancel each other out over time.

"In the 1999-2000 year, for example, they increased the operating surplus by around $700 million. In the 2000-2001 year, they reduced it by around $600 million," Dr Cullen said.

"In neither case did the movement bear any reflection at all on the government's financial stewardship."

The operating balance showed a surplus of $1.409 billion. Tax revenues were up 8 percent on the previous year and expenditure was up 4 percent.

The growth in spending reflected the policy decisions in the 2000 Budget, including the restoration of the 65 percent wage relativity for New Zealand Superannuation, the return to income-related state house rentals, measures to reduce the cost to students of student loans and the creation of Industry New Zealand.

Other contributors to the increase in expenditure were demographic factors in health and education spending and benefit indexation.

Dr Cullen said the final outturn for the 2000-2001 year showed the government was firmly on target for all its fiscal objectives.

Net worth, at $11.463 billion, was over 25 percent up on the 1999-2000 year.
Net Crown debt was continuing to track down and was now at 18.1 percent of gross domestic product.

"These results demonstrate that the Labour-Alliance government is managing its finances in a manner consistent with our intentions, signalled in the 2001 Budget, to build the economy and to establish and sustain the New Zealand Superannuation Fund.

"The government’s strategy of strengthening fiscal surpluses, investing in much needed capital projects and setting aside an allowance for the pressures of an ageing population is being achieved.

"We intend to continue balancing economic growth with social responsibility in the upcoming years," Dr Cullen said.

ENDS

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