Hon Dr Michael Cullen Minister of Finance

23 September 2004

Strong 2003/04 fiscal outturn

“The final outturn for the 2003-2004 financial year shows a continued strengthening of the Government’s fiscal position,” Finance Minister Michael Cullen said today.

“The operating balance for the year just ended is $7.4 billion. This is an excellent result reflecting the strong economic performance over the past year showing itself through higher than forecast tax revenue and surpluses from Crown entitites.

A portion of the operating surplus ($0.8 billion) reflects revaluation changes.

Removing this large non-cash item from the operating balance gives the OBERAC (operating balance excuding revaluations and accounting changes) of $6.6 billion.

However Dr Cullen highlights that while this is an excellent result, it does not mean it is all cash that is just sitting around in a bank account because:

$1.3 billion was used on capital purchases such as new machines for hospitals, building new roads and prisons $1.7 billion was used for loans – such as those made to students and District Health Boards $1.9 billion was put aside to save for future New Zealand Superannuation costs $1.2 billion represents the non-cash element of the OBERAC such as surpluses retained by SOEs and Crown entities which they can use for future investment.

Once these have all been accounted for the Crown’s cash surplus for the year was $520 million. This will lower debt and therefore future interest costs ensuring a sound fiscal position in the future.

The gross debt level as a percentage of GDP continues to fall to 25.4 percent of GDP (this figure was 27.7 percent in June 2003). This is also reflected in net Crown debt which has has dropped to 10.8 percent of GDP (this figure was 13.5 percent at 30 June 2003). Such a fall in debt is consistent with a year of very strong economic performance. Not to lower debt in such circumstances would not reflect responsible fiscal management.

“This demonstrates the Government’s sound planning for the future – through providing for known future pressures, investing in the country’s infrastructure and building a sound fiscal position through the repaying of debt.

ENDS

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