Mind the gap

The Finance and Expenditure Committee of the House released its report this month on the financial statements of the Government for the year ended 30 June 2011.

The operating deficit before gains and losses increased by $12.1 billion to $18.4 billion for the year ended 30 June 2011 – a deterioration from the deficit of $4.5 billion a year earlier. The Crown’s net worth stood at $80.9 billion at 30 June 2011, compared with $95.0 billion a year earlier. Core Crown net debt was $40.1 billion, representing 20% of GDP.

To offset these figures, in part, total state asset proceeds of approximately $6 billion are anticipated in the Crown’s financial forecasts.

As the report notes, the financial position was affected significantly by the Canterbury earthquakes, which increased Crown expenses by $9.1 billion over the year and by the government’s financial assistance package for the repair of leaky homes; estimated a cost $567 million.

Departmental expenditure for the Treasury totalled $65.788 million in 2010-11; an increase of 1.2% from the previous year. The increase reflects the fact that, as well as working intensively to assess the impact of the earthquakes and to support the recovery arrangements, the Treasury acquired a larger commercial role in response to the financial crisis with the receivership of South Canterbury Finance and the support package for AMI Insurance.

The report records Treasury having explained that the forecast financial statements reflected the government’s decision that new capital spending will be funded from within the Crown’s balance sheet, without increasing overall spending. New capital spending of $900 million is envisaged in each budget from 2011, spread across 5 years.

We await the report back from the Committee’s upcoming hearing on the Government’s more recent Budget Policy Statement.

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