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Cash flow on target – Cullen

Cash flow on target – Cullen

The Crown Financial Statements for the six months ended December show a net cash flow of $91 million which, Treasury advises, is broadly on track to achieve their full year forecast of $1.4 billion.

Finance Minister Michael Cullen said the projected $1.4 billion was needed to help fund the borrowing requirement of $2.2 billion over the next two years given that the December Economic and Fiscal Update was forecasting cash deficits in 2005-06 and 2006-07 of around $700 million and $1.55 billion respectively.

“The cash flow is an important indicator as it shows the balance after all spending, capital and operational, has been accounted for and represents either the amount available to the government for the repayment of debt or the amount that has to be borrowed.

“To that extent, it provides a check to the operating balance and the OBERAC both of which contain non-cash components which do not bear directly on the government’s bottom line.

“Both are, for example, running above December forecasts [the operating balance by $936 million; the OBERAC by $500 million] but neither is expected to materially improve the government’s final cash position or ability to fund its borrowing programme.

“$200 million comes from the surpluses of State Owned Enterprises and other Crown entities; money that will be left with the individual entity to further that entity’s goals rather than skimmed off by the government.

“A further $180 million reflects delayed spending in the health sector but this ‘gain’ is expected to be temporary as the spending is still due to occur this year.

“And the operating balance also encompasses investment gains by Crown financial institutions such as the New Zealand Superannuation Fund, the Government Superannuation Fund and the Accident Compensation Corporation. These funds are to protect the future security of New Zealanders both in retirement and in the event of an accident. They will not be appropriated by the government for other uses.

“Significant confusion surrounds the way the government accounts work. I hope by focussing more on the cash position, which is closer to the way households and individuals work in managing their finances and determining their discretionary spending, to shine a little more light on the subject,” Dr Cullen said.

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