[Full financial statements: fsgnz9mthsmar11media.pdf]

Summary

The Financial Statements of the Government provide a record of the Government’s financial performance over the nine months ended 31 March 2011 and its financial position as at that date.

The March results are reported against forecasts based on the 2010 Half Year Economic and Fiscal Update (HYEFU), published on 14 December 2010.

Results for the nine months ended 31 March 2011:

• Core Crown tax revenue was close to forecast at $19 million (0.1%) above forecast. The main features being:

1. revenue from source deductions was $242 million (1.6%) higher than forecast because it appears the impact of the October 2010 income tax rate cuts has not been as large as anticipated; offset by

2. GST revenue at $263 million (2.6%) below forecast. This result reflected underlying weakness in private consumption and residential investment.

• Core Crown expenses were $422 million lower than forecast. This was mainly due to underspends across a number of areas, partly offset by a $331 million revision in the estimate of recoveries relating to the deposit guarantee scheme which was not forecast.

• The Earthquake Commission’s (EQC’s) estimated net costs for the 22 February earthquake of $1.5 billion were unforecast and have adversely impacted the operating balance before gains and losses deficit (which is $1.3 billion higher than forecast).

• However, when unforecast gains are included, the operating balance deficit was $3.8 billion lower than expected at $3.3 billion. These unforecast gains primarily related to equity investments in the NZS Fund and ACC and actuarial gains on ACC and GSF liabilities.

• Gross debt was $2.5 billion higher than forecast at $66.7 billion (34.3% of GDP). March was a record month for bond issuance with $2.8 billion of bonds sold, taking the yeartodate issuance total to $13.9 billion. In response to strong demand from investors, on 30 March the NZDMO increased the 2010/11 bond programme by $1.5 billion (to $15 billion) to allow for continued issuance over the fiscal year.

• Net debt was $174 million lower than forecast at $39.4 billion, or 20.2% of GDP. Despite the higher than expected increase in gross debt, net debt was similar to forecast because the proceeds from the bond issuances were largely invested in financial assets.

• The core Crown residual cash deficit was close to forecast at $12.4 billion. The two main features being:

1. corporate tax receipts were $488 million lower than expected; offset by

2. purchases of physical assets were $435 million lower than forecast, due mainly to delays in defence and education capital projects ($175 million and $71 million respectively).

The financial impact of the AMI support package is not yet included in these financial statements. Refer the separate note to the financial statements for further information.

Further analysis of the March results follows.

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[Full financial statements: fsgnz9mthsmar11media.pdf]

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