Financial Statements of the Government of New Zealand for the three months ended 30 September 2017

Transcription

1 7 November 2017 MEDIA STATEMENT Embargoed until 10.00am, Tuesday 7 November 2017 Paul Helm, Chief Government Accountant Financial Statements of the Government of New Zealand for the three months ended 30 September 2017 The Financial Statements of the Government of New Zealand for the three months ended 30 September 2017 were released by the Treasury today. The statements are compared against forecasts based on the 2017 Budget Economic and Fiscal Update (BEFU) published on 25 May The operating balance before gains and losses (OBEGAL) was close to forecast at a deficit of $90 million. OBEGAL can fluctuate from month to month as the recognition of tax revenue does not happen uniformly throughout the year (peak months tend to be April/ May), while expenditure is fairly static on a monthly basis before peaking in June. As a result, it is not unusual for OBEGAL to be a small surplus or deficit in the first part of the financial year. Core Crown tax revenue was close to forecast and $0.7 billion (3.9%) higher than the same period last year. While overall tax was as expected, source deductions were $120 million (1.6%) higher with a slightly larger than forecast seasonal peak in revenue. This variance is likely to reverse in later months. This result was largely offset by Customs and Excise duties which were $80 million less than forecast. Core Crown expenses was slightly ahead of forecast. In some cases expenditure that was expected in 2016/17 moved into 2017/18, while other spending was recognised earlier than expected. In addition to the OBEGAL deficit, net investment gains of $1.9 billion were recorded. Offsetting the net investment gains, discount rates at the end of September were slightly lower than in June. As a result, ACC recognised a valuation loss of $0.2 billion on its outstanding claims liability.

2 When gains and losses are added to the OBEGAL result, the operating balance was $1.6 billion, $1.0 billion larger than forecast. The residual cash deficit was $1.2 billion, $0.4 billion smaller than forecast. This better than expected result was largely due to higher than forecast provisional tax receipts ($0.4 billion). The residual cash deficit has resulted in core Crown net debt increasing in nominal terms to $61.1 billion at the end of September. However, the result was $3.1 billion less than forecast. The lower than expected net debt is largely due to a lower net debt position at 30 June 2017 (which was $2.8 billion less than forecast). Net worth attributable to the Crown was $11.5 billion higher than forecast at $112.1 billion. The majority of this variance relates to the 30 June 2017 position, which was $10.5 billion higher than forecast at BEFU 17. The September results are close to forecast. It is, however, too early in the financial year to extrapolate the results to form conclusions on the expected full year results. Year to date Full Year September September June Variance Variance 2018 BEFU 17 to BEFU 17 to BEFU 17 BEFU 17 Actual 1 Forecast 1 Forecast 2 $m $m $m % $m Core Crown Core Crown tax revenue 18,016 18, ,536 Core Crown revenue 19,701 19, ,760 Core Crown expenses 19,998 19,860 (138) (0.7) 80,486 Core Crown residual cash (1,202) (1,580) (1,789) Gross debt 3 87,539 90,163 2, ,078 as a percentage of GDP 32.7% 33.6% 29.8% Net debt 4 61,144 64,217 3, ,111 as a percentage of GDP 22.8% 24.0% 22.8% Total Crown Operating balance before gains and losses (90) (93) ,858 Operating balance 1, ,496 Net worth attributable to the Crown 112, ,663 11, ,566 1 Using the most recently published GDP (for the year ended 30 June 2017) of $268,101 million (Source: Statistics New Zealand). 2 Using BEFU 17 forecast GDP for the year ending 30 June 2018 of $281,801 million (Source: The Treasury). 3 Gross sovereign-issued debt excluding settlement cash and Reserve Bank bills. 4 Net core Crown debt excluding student loans and other advances. Net debt may fluctuate during the year largely reflecting the timing of tax receipts. ENDS For enquiries: Jayne Winfield Office of the Government Accountant Telephone: fiscalreporting@treasury.govt.nz 2

3 Financial Statements of the Government of New Zealand For the Three Months Ended 30 September 2017 Prepared by the Treasury 7 November (Print) (Online) This document is available on the New Zealand Treasury s website. The URL for this site is

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5 CONTENTS Commentary 2 Financial Statements Statement of Financial Performance 6 The statement outlines the operating results of the total Government (ie, the revenues and expenses of all departments + Reserve Bank + NZS Fund (core Crown), SOEs (including Air New Zealand), and Crown entities). Analysis of Expenses by Functional Classification 7 Breakdown of expenses by function for total Crown and core Crown. Statement of Comprehensive Revenue and Expense 8 The statement reports changes in net worth due to the operating balance, items of revenue or expense that are recognised directly in net worth, the effect of certain accounting changes, and corrections of errors. Statement of Changes in Net Worth 8 The statement provides a reconciliation of opening and closing net worth for the period. Statement of Cash Flows 9 The statement sets out the cash flows that result from the operating, investing and financing activities of the Government. The net cash flows from operations are reconciled to the operating balance reported in the statement of financial performance. Statement of Financial Position 11 The statement outlines the balance sheet of the total Government (ie, the assets and liabilities of the core Crown, SOEs, and Crown entities). Statement of Segments 12 The statement provides summary financial results by segement (Core Crown, SOEs and Crown entities). Statement of Borrowings 13 The statement outlines total borrowings (split by sovereign-guaranteed debt and non sovereignguaranteed debt), including the calculation of the core Crown debt indicators. Statement of Commitments 14 The statement outlines the commitments of the total Government by type and segment. Statement of Contingent Liabilities and Assets 14 The statement outlines the contingent liabilities and assets of the total Government by type and segment. Notes to the Financial Statements 15 The notes are an integral part of the financial statements, providing further explanatory material to that provided in the main statements. Officer for Enquiries Jayne Winfield (phone ) ( fiscalreporting@treasury.govt.nz) Office of the Government Accountant The Treasury (1 The Terrace), PO Box 3724, Wellington NEW ZEALAND

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7 Commentary

8 COMMENTARY These financial statements reflect the financial position (service potential and financial capacity) as at 30 September 2017, and the financial results of operations and cash flows for the period ended on that date. The September results are reported against forecasts based on the 2017 Budget Economic and Fiscal Update (BEFU 17), published on 25 May Comparison against forecast The lower than expected debt and higher net worth positions at 30 June 2017 have carried forward into September. Excluding those opening balance impacts, the September results are close to forecast. It is, however, too early in the financial year to extrapolate the results to form conclusions on the expected full year results. Table 1 Key indicators for the three months ended 30 September 2017 compared to BEFU 17 Year to date Full Year September September June Variance Variance 2018 BEFU 17 to BEFU 17 to BEFU 17 BEFU 17 Actual 1 Forecast 1 Forecast 2 $m $m $m % $m Core Crown Core Crown tax revenue 18,016 18, ,536 Core Crown revenue 19,701 19, ,760 Core Crown expenses 19,998 19,860 (138) (0.7) 80,486 Core Crown residual cash (1,202) (1,580) (1,789) Gross debt 3 87,539 90,163 2, ,078 as a percentage of GDP 32.7% 33.6% 29.8% Net debt 4 61,144 64,217 3, ,111 as a percentage of GDP 22.8% 24.0% 22.8% Total Crown Operating balance before gains and losses (90) (93) ,858 Operating balance 1, ,496 Net worth attributable to the Crown 112, ,663 11, , Using the most recently published GDP (for the year ended 30 June 2017) of $268,101 million (Source: Statistics New Zealand). Using BEFU 17 forecast GDP for the year ending 30 June 2018 of $281,801 million (Source: The Treasury). Gross sovereign-issued debt excluding settlement cash and Reserve Bank bills. Net core Crown debt excluding student loans and other advances. Net debt may fluctuate during the year largely reflecting the timing of tax receipts. Core Crown tax revenue was close to forecast. While overall tax was as expected, source deductions were $120 million (1.6%) more than expected with a slightly larger than forecast seasonal peak in revenue. This variance is likely to reverse in later months. This result was largely offset by Customs and Excise duties which were $80 million less than forecast. Core Crown expenses was slightly ahead of forecast. In some cases expenditure that was expected in 2016/17 moved into 2017/18, while other spending was recognised earlier than expected. The operating balance before gains and losses (OBEGAL) was also close to forecast at a $90 million OBEGAL deficit. OBEGAL can fluctuate from month to month as the recognition of tax revenue does not happen uniformly throughout the year (peak months tend to be April/May), while expenditure is fairly static on 2 Financial Statements of the Government of New Zealand three months ended 30 September 2017

9 a monthly basis before peaking in June. As a result, it is not unusual for OBEGAL to be a small surplus or deficit in the first part of the financial year. In addition to an OBEGAL deficit, net investment gains of $1.9 billion were recorded. This result was $1.2 billion larger than expected as changes in market prices are not forecast. Offsetting the net investment gains, discount rates at the end of September were slightly lower in June. As a result, ACC recognised a valuation loss of $0.2 billion on its outstanding claims liability. When gains and losses are added to the OBEGAL result, the operating balance was $1.6 billion, $1.0 billion larger than forecast. The residual cash deficit was $1.2 billion, $0.4 billion smaller than forecast. This better than expected result was largely due to higher than forecast provisional tax receipts ($0.4 billion). The residual cash deficit has resulted in core Crown net debt increasing in nominal terms to $61.1 billion at the end of September. However, the result was $3.1 billion less than forecast. The lower than expected net debt was largely due to a lower net debt position at 30 June 2017 (which was $2.8 billion less than forecast). This positive variance has carried forward into the current financial year. Net worth attributable to the Crown was $11.5 billion higher than forecast at $112.1 billion. Similar to debt indicators, the majority of this variance relates to the 30 June 2017 position, which was $10.5 billion higher than forecast at BEFU 17. Comparison against the prior year actuals Table 2 Key indicators for the three months ended 30 September 2017 compared to prior year actuals Year to date Full Year September September June Variance Variance 2017 Prior Year to 2016 to 2016 Prior Year Actual 1 Actual 2 Actual 1 $m $m $m % $m Core Crown Core Crown tax revenue 18,016 17, ,644 Core Crown revenue 19,701 19, ,782 Core Crown expenses 19,998 18,918 (1,080) (5.7) 76,339 Core Crown residual cash (1,202) (810) (392) (48.4) 2,574 Gross debt 3 87,539 88, ,141 as a percentage of GDP 32.7% 35.1% 32.5% Net debt 4 61,144 63,124 1, ,480 as a percentage of GDP 22.8% 25.1% 22.2% Total Crown Operating balance before gains and losses (90) 222 (312) (140.5) 4,069 Operating balance 1,566 2,315 (749) (32.4) 12,317 Net worth attributable to the Crown 112,116 91,600 20, , Using the most recently published GDP (for the year ended 30 June 2017) of $268,101 million (Source: Statistics New Zealand). Using prior year published GDP (for the three months ended 30 September 2016) of $251,760 million (Source: The Treasury). Gross sovereign-issued debt excluding settlement cash and Reserve Bank bills. Net core Crown debt excluding student loans and other advances. Net debt may fluctuate during the year largely reflecting the timing of tax receipts. Financial Statements of the Government of New Zealand three months ended 30 September

10 Core Crown tax revenue was $0.7 billion (3.9%) higher than the same period last year. The growth has come mainly from PAYE (growth in employment and wage rates) and GST (growth in domestic consumption). In nominal terms core Crown expenses increased by $1.1 billion from the same time last year to $20.0 billion. The increase in expenses was largely due to the new spending announced in Budget 2017 as well as an increase in New Zealand superannuation expenses. The OBEGAL deficit of $90 million compares with a surplus of $222 million over the same period last year. The residual cash deficit of $1.2 billion was $0.4 billion higher than at the same time last year. Net capital payments were $1.1 billion for the three months ended 30 September (a $0.2 billion increase from the same period last year, largely in the transport sector). Capital payments can be volatile, dependent on the timing of projects. Core Crown net debt was $2.0 billion smaller than this time last year largely reflecting the residual cash surplus recorded for the year ended 30 June 2017, partially offset by the residual cash deficit in the first three months of this financial year. Net worth attributable to the Crown was $20.5 billion higher than September 2016 at $112.1 billion, largely reflecting year end property valuations and the operating balance recorded for the 2016/17 financial year. 4 Financial Statements of the Government of New Zealand three months ended 30 September 2017

11 Financial Statements

12 STATEMENT OF FINANCIAL PERFORMANCE For the three months ended 30 September 2017 Year 3 months to 30 Jun to 30 Sep Current Year Actual vs Forecast Annual Actual Actual Note Actual Forecast Variance Forecast Revenue 74,973 17,132 Taxation revenue 2 17,809 17, ,872 5,081 1,308 Other sovereign revenue 2 1,345 1, ,057 Total Revenue Levied through the 80,054 18,440 Crown's Sovereign Power 19,154 19, ,929 16,871 4,212 Sales of goods and services 4,662 4, ,994 3, Interest revenue and dividends (6) (0.6) 3,724 3, Other revenue 947 1,024 (77) (7.5) 3,700 Total revenue earned through 24,173 6,031 the Crown's operations 6,566 6, , ,227 24,471 Total revenue (excluding gains) 25,720 25, ,347 Expenses 25,264 6,279 Transfer payments and subsidies 4 6,422 6, ,462 22,599 5,573 Personnel expenses 5,838 5,794 (44) (0.8) 23,003 5,175 1,170 Depreciation and amortisation 1,211 1, ,306 37,194 9,113 Other operating expenses 10,183 10,069 (114) (1.1) 40,257 4,162 1,016 Finance costs 5 1,110 1, ,224 5, Insurance expenses , Forecast new operating spending Top-down expense adjustment - (135) (135) (100.0) (1,000) 99,812 24,092 Total expenses (excluding losses) 25,674 25,562 (112) (0.4) 103,091 Minority interests share of operating (346) (157) balance before gains/(losses) (136) (126) (10) (7.9) (398) 4,069 Operating balance before gains/(losses) 222 (excluding minority interests) (90) (93) ,858 Net gains/(losses) on financial 6,330 1,935 instruments 1, , ,538 Net gains/(losses) on non-financial 1, instruments 7 (255) (18) (237) - (88) Less minority interests share of total gains/(losses) (11) (6) (5) (83.3) (26) 7,678 2,022 Total gains/(losses) 1, ,424 Net surplus/(deficit) from associates and joint ventures ,317 2,315 Operating balance (excluding minority interests) 1, ,496 The accompanying notes and accounting policies are an integral part of these statements. 6 Financial Statements of the Government of New Zealand three months ended 30 September 2017

13 ANALYSIS OF EXPENSES BY FUNCTIONAL CLASSIFICATION For the three months ended 30 September 2017 Year 3 months to 30 Jun to 30 Sep Current Year Actual vs Forecast Annual Actual Actual Actual Forecast Variance Forecast Total Crown expenses 30,599 7,458 Social security and welfare 7,557 7, ,577 15,645 3,890 Health 4,125 4, ,389 14,112 3,565 Education 3,716 3,643 (73) (2.0) 14,741 3, Core government services 1,029 1, ,572 4,161 1,002 Law and order 1,069 1,053 (16) (1.5) 4,435 9,360 2,154 Transport and communications 2,249 2,241 (8) (0.4) 9,637 8,452 1,797 Economic and industrial services 2,215 2,198 (17) (0.8) 7,949 2, Defence (35) (6.4) 2,286 2, Heritage, culture and recreation (24) (3.8) 2,391 1, Primary services ,986 1, Housing and community development , Environmental protection , GSF pension expenses (7) (11.7) Other (73) (135.2) 406 4,162 1,016 Finance costs 1,110 1, , Forecast new operating spending Top-down expense adjustment - (135) (135) (100.0) (1,000) 99,812 24,092 Total Crown expenses excluding losses 25,674 25,562 (112) (0.4) 103,091 Below is an analysis of core Crown expenses by functional classification. Core Crown expenses include expenses incurred by the Crown, Departments and the Reserve Bank, but not Crown entities and SOEs. Year 3 months to 30 Jun to 30 Sep Current Year Actual vs Forecast Annual Actual Actual Actual Forecast Variance Forecast Core Crown expenses 25,294 6,336 Social security and welfare 6,500 6, ,247 16,223 4,034 Health 4,282 4,269 (13) (0.3) 17,096 13,281 3,360 Education 3,488 3, ,985 3, Core government services 1,015 1, ,843 3, Law and order 1,021 1,004 (17) (1.7) 4,119 2, Transport and communications (69) (14.9) 2,329 2, Economic and industrial services ,001 2, Defence (35) (6.4) 2, Heritage, culture and recreation Primary services Housing and community development (43) (27.2) Environmental protection (1) (0.5) 1, GSF pension expenses (8) (14.5) Other (73) (135.2) 406 3, Finance costs , Forecast new operating spending Top-down expense adjustment - (135) (135) (100.0) (1,000) 76,339 18,918 Core Crown expenses excluding losses 19,998 19,860 (138) (0.7) 80,486 The accompanying notes and accounting policies are an integral part of these statements. Financial Statements of the Government of New Zealand three months ended 30 September

14 STATEMENT OF COMPREHENSIVE R EVENUE AND EXPENSE For the three months ended 30 September 2017 Year 3 months to 30 Jun to 30 Sep Current Year Actual vs Forecast Annual Actual Actual Actual Forecast Variance Forecast 12,636 2,460 Operating Balance (including minority interest) 1, ,920 Other comprehensive revenue and expense 8,923 (23) Revaluation of physical assets Transfers to/(from) reserves (38) 32 (70) (218.8) 21 (Gains)/losses transferred to the 62 (40) statement of financial performance (7) 39 (53) Other movements ,071 (84) Total other comprehensive revenue and expense (18) (48.6) 31 21,707 2,376 Total comprehensive revenue and expense 1, ,951 Attributable to: minority interest ,166 2,234 - the Crown 1, ,522 21,707 2,376 Total comprehensive revenue and expense 1, ,951 STATEMENT OF CHANGES IN NET WORTH For the three months ended 30 September 2017 Year 3 months to 30 Jun to 30 Sep Current Year Actual vs Forecast Annual Actual Actual Actual Forecast Variance Forecast 95,521 95,521 Opening net worth 116, ,923 10, ,923 12,636 2,460 Operating balance (including minority interest) 1, ,920 8,923 (23) Net revaluations Transfers to/(from) reserves (38) 32 (70) (218.8) 28 (Gains)/losses transferred to the 62 (40) Statement of Financial Performance (1) 39 (53) Other movements ,707 2,376 Total comprehensive revenue and expense 1, ,951 (756) (377) Transactions with minority interests (123) (156) (432) 116,472 97,520 Closing net worth 118, ,533 11, ,442 The accompanying notes and accounting policies are an integral part of these statements. 8 Financial Statements of the Government of New Zealand three months ended 30 September 2017

15 STATEMENT OF CASH FLOWS For the three months ended 30 September 2017 Year 3 months to 30 Jun to 30 Sep Current Year Actual vs Forecast Annual Actual Actual Actual Forecast Variance Forecast Cash Flows from Operations Cash was provided from 73,099 16,796 Taxation receipts 17,443 17, ,563 4,515 1,343 Other sovereign receipts 1,409 1, ,484 16,948 4,275 Sales of goods and services 4,946 4, ,473 3, Interest and dividends receipts (23) (2.6) 3,285 4, Other operating receipts 915 1,077 (162) (15.0) 3, ,875 24,167 Total cash provided from operations 25,560 24, ,977 Cash was disbursed to 25,293 6,479 Transfer payments and subsidies 6,717 6, ,512 62,836 15,934 Personnel and operating payments 17,458 17, ,838 4, Interest payments , Forecast new operating spending Top-down expense adjustment - (135) (135) (100.0) (1,000) 92,308 23,103 Total cash disbursed to operations 24,822 25, ,456 9,567 1,064 Net cash flows from operations 738 (236) ,521 Cash Flows from Investing Activities Cash was provided from/(disbursed to) (6,209) (1,750) Net (purchase)/sale of physical assets (1,684) (1,779) (8,429) Net (purchase)/sale of shares and other 889 (1,149) securities (4,363) (299) (4,064) - 5,389 (748) (134) Net (purchase)/sale of intangible assets (167) (180) (814) (989) (112) Net (issue)/repayment of advances 129 (705) (1,196) (148) 17 Net acquisition of investments in associates 35 (70) (15) - - Forecast new capital spending (446) - - Top-down capital adjustment (126) (100.0) 840 (7,205) (3,128) Net cash flows from investing activities (6,050) (2,907) (3,143) (108.1) (4,671) Net cash flows from 2,362 (2,064) operating and investing activities (5,312) (3,143) (2,169) (69.0) 1,850 Cash Flows from Financing Activities Cash was provided from/(disbursed to) Issues of circulating currency ,328 1,281 Net issue/(repayment) of Government bonds 1,217 1,313 (96) (7.3) (4,729) Net issue/(repayment) of foreign currency 2,048 (218) borrowing 1, ,767 - (940) Net issue/(repayment) of other New Zealand (1,810) (379) dollar borrowing (1,165) 875 (2,040) (233.1) 2,627 (656) (261) Dividends paid to minority interests (153) (130) (23) (17.7) (492) 1, Net cash flows from financing activities 1,724 2,107 (383) (18.2) (3,364) 3,537 (1,612) Net movement in cash (3,588) (1,036) (2,552) (246.3) (1,514) 15,617 15,617 Opening cash balance 18,732 17,495 1, ,495 Foreign-exchange gains/(losses) on (422) (88) opening cash ,732 13,917 Closing cash balance 15,564 16,482 (918) (5.6) 15,984 The accompanying notes and accounting policies are an integral part of these statements. Financial Statements of the Government of New Zealand three months ended 30 September

16 STATEMENT OF CASH FLOWS (CONTINUED) For the three months ended 30 September 2017 Year 3 months to 30 Jun to 30 Sep Current Year Actual vs Forecast Annual Actual Actual Actual Forecast Variance Forecast Reconciliation Between the Net Cash Flows from Operations and the Operating Balance 9,567 1,064 Net Cash Flows from Operations 738 (236) ,521 Items included in the operating balance but not in net cash flows from operations Gains/(losses) 6,330 1,935 Net gains/(losses) on financial instruments 1, , ,538 Net gains/(losses) on non-financial 1, instruments (255) (18) (237) - (88) Less minority interests share of net (27) (12) gains/(losses) ,678 2,022 Total gains/(losses) 1, ,424 Other Non-cash Items in Operating Balance (5,175) (1,170) Depreciation and amortisation (1,211) (1,253) (5,306) (753) (113) Cost of concessionary lending (104) (139) (801) Impairment of financial assets 50 - (excluding receivables) - (6) (126) Decrease/(increase) in defined benefit retirement plan liabilities (14) (12.3) 548 (1,047) 726 Decrease/(increase) in insurance liabilities (88) Other (81) (101) (184) (6,195) (538) Total other non-cash Items (532) (789) (5,724) Movements in Working Capital 1,170 (546) Increase/(decrease) in receivables (751) 27 (778) (232) Increase/(decrease) in accrued interest (353) (97) (256) (263.9) 1, (18) Increase/(decrease) in inventories (23) 2 (25) - (11) Increase/(decrease) in prepayments 2 34 (32) (94.1) (7) (46) (74) Decrease/(increase) in deferred revenue (30) (27) (3) (11.1) (20) (377) 579 Decrease/(increase) in payables/provisions 911 1,019 (108) (10.6) 789 1,267 (233) Total movements in working capital (244) 958 (1,202) (125.5) 2,275 12,317 2,315 Operating balance (excluding minority interests) 1, ,496 The accompanying notes and accounting policies are an integral part of these statements. 10 Financial Statements of the Government of New Zealand three months ended 30 September 2017

17 STATEMENT OF FINANCIAL POSITION As at 30 September 2017 As at As at 30 Jun 30 Sep Current Year Actual vs Forecast Annual Actual Actual Note Actual Forecast Variance Forecast Assets 18,732 13,917 Cash and cash equivalents 8 15,564 16,482 (918) (5.6) 15,984 18,529 15,860 Receivables 8 17,025 16, ,452 Marketable securities, deposits and 50,506 53,207 derivatives in gain 8 50,718 51,238 (520) (1.0) 45,514 30,700 26,638 Share investments 8 32,557 28,990 3, ,140 28,583 28,029 Advances 8 28,684 28,703 (19) (0.1) 29,805 1,167 1,092 Inventory 1, ,079 2,578 Other assets 3,062 2, , , ,591 Property, plant and equipment 9 145, ,165 6, ,577 14,210 12,771 Equity accounted investments 1 14,322 14,428 (106) (0.7) 14,618 3,553 3,185 Intangible assets and goodwill 3,597 3, , Forecast for new capital spending Top-down capital adjustment - (251) (965) 313, ,868 Total assets 312, ,347 9, ,776 Liabilities 5,980 5,744 Issued currency 6,032 5,804 (228) (3.9) 5,932 14,794 12,566 Payables 11 12,144 12, ,479 2,224 2,252 Deferred revenue 2,253 2,093 (160) (7.6) 2, , ,780 Borrowings 112, ,220 4, ,500 42,786 41,192 Insurance liabilities 12 42,187 40,768 (1,419) (3.5) 41,219 11,006 12,335 Retirement plan liabilities 10,905 10,351 (554) (5.4) 9,917 8,541 8,479 Provisions 13 8,647 8,360 (287) (3.4) 8, , ,348 Total liabilities 194, ,814 1, , ,472 97,520 Total assets less total liabilities 118, ,533 11, ,442 Net Worth 26,456 16,221 Taxpayers' funds 14 28,046 24,148 3, ,141 Property, plant and equipment revaluation 84,164 75,582 reserve 14 84,146 76,608 7, ,526 (88) (203) Other reserves 14 (76) (93) (101) 110,532 91,600 Total net worth attributable to the Crown 112, ,663 11, ,566 Net worth attributable to 5,940 5,920 minority interest 14 5,965 5, , ,472 97,520 Total net worth 118, ,533 11, , Tertiary education institutions constitute most equity accounted investments. The accompanying notes and accounting policies are an integral part of these statements. Financial Statements of the Government of New Zealand three months ended 30 September

18 12 Financial Statements of the Government of New Zealand three months ended 30 September 2017 STATEMENT OF SEGMENTS For the three months ended 30 September 2017 Current Year Actual vs Forecast (Budget 2017) Core Crown Crown entities State-owned Inter-segment Total Crown enterprises eliminations Forecast Forecast Forecast Forecast Forecast Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget $m $m $m $m $m $m $m $m $m $m Revenue Taxation revenue 18,016 18, (207) (219) 17,809 17,792 Other sovereign revenue ,228 1, (342) (356) 1,345 1,257 Revenue from core Crown funding - - 7,093 6, (7,115) (6,945) - - Sales of goods and services ,837 3,746 (141) (140) 4,662 4,559 Interest and dividend revenue (359) (351) Other revenue (221) (219) 947 1,024 Total Revenue (excluding gains) 19,701 19,628 10,031 9,908 4,373 4,289 (8,385) (8,230) 25,720 25,595 Expenses Transfer payments and subsidies 6,423 6, (1) - 6,422 6,517 Personnel expenses 1,804 1,789 3,316 3, (9) (8) 5,838 5,794 Other operating expenses 10,847 10,751 6,425 6,372 3,058 2,959 (8,026) (7,808) 12,304 12,274 Interest expenses (123) (123) 1,110 1,112 Forecast new operating spending and top down adjustment - (135) (135) Total Expenses (excluding losses) 19,998 19,860 9,765 9,695 4,070 3,946 (8,159) (7,939) 25,674 25,562 Minority interest share of operating balance before gains/(losses) (155) (138) (136) (126) Operating Balance before gains and losses (excluding minority interests) (297) (232) (207) (279) (90) (93) Gains/(losses) and other items 1, (13) (5) 1, Operating Balance (excluding minority interests) 1, (220) (284) 1, Assets Financial assets 94,076 92,131 48,182 46,346 24,025 24,761 (21,735) (21,079) 144, ,159 Property, plant and equipment 39,565 37,075 73,200 69,730 32,843 32,361 (1) (1) 145, ,165 Investments in associates, CEs and SOEs 43,392 43,607 12,242 12, (41,543) (41,635) 14,322 14,428 Other assets 3,345 3,196 1,894 1,303 2,645 2,378 (82) (31) 7,802 6,846 Forecast adjustments - (251) (251) Total Assets 180, , , ,551 59,744 59,784 (63,361) (62,746) 312, ,347 Liabilities Borrowings 95,316 98,875 4,243 4,200 29,682 30,546 (17,211) (17,401) 112, ,220 Other liabilities 32,140 30,931 50,513 49,206 8,024 7,660 (8,509) (8,203) 82,168 79,594 Total Liabilities 127, ,806 54,756 53,406 37,706 38,206 (25,720) (25,604) 194, ,814 Net Worth 52,922 45,952 80,762 76,145 22,038 21,578 (37,641) (37,142) 118, ,533 The accompanying notes and accounting policies are an integral part of these statements.

19 STATEMENT OF BORROWINGS As at 30 September 2017 As at As at 30 Jun 30 Sep Current Year Actual vs Forecast Annual Actual Actual Actual Forecast Variance Forecast 64,349 65,379 Government bonds 1 64,102 66,224 2, ,591 6,471 6,620 Settlement deposits with Reserve Bank 7,517 7,183 (334) (4.6) 7,183 3,113 4,176 Derivatives in loss 3,274 3,068 (206) (6.7) 2,800 4,071 3,902 Treasury bills 3,948 3,920 (28) (0.7) 4,096 1,412 1,505 Finance lease liabilities 2,290 2,231 (59) (2.6) 2, Government retail stock ,200 30,992 Other borrowings 30,714 33,389 2, , , ,780 Total borrowings 112, ,220 4, ,500 81,395 82,797 Sovereign-guaranteed debt 81,881 85,271 3, ,805 30,411 29,983 Non sovereign-guaranteed debt 30,149 30, , , ,780 Total borrowings 112, ,220 4, ,500 Net Debt: 94,107 95,200 Core Crown borrowings 2 95,529 98,875 3, ,565 Add back NZS Fund holdings of sovereign- (1,487) (1,253) issued debt and NZS Fund borrowings (1,171) (1,958) (787) (40.2) (1,908) 92,620 93,947 Gross sovereign-issued debt 3 94,358 96,917 2, ,657 81,015 76,458 Less core Crown financial assets 4 80,785 78,956 1, ,344 11,605 17,489 Net core Crown debt 13,573 17,961 4, ,313 12,014 14,575 Add back core Crown advances 12,041 12, ,312 23,619 32,064 Net core Crown debt (incl NZS Fund) 5 25,614 30,079 4, ,625 Add back NZS Fund holdings of core Crown 35,861 31,060 financial assets and NZS Fund fin assets 6 35,530 34,138 (1,392) (4.1) 35,486 59,480 Net core Crown debt (excl NZS Fund and 63,124 advances) 7 61,144 64,217 3, ,111 Gross Debt: 92,620 93,947 Gross sovereign-issued debt 3 94,358 96,917 2, ,657 Less Reserve Bank settlement cash and (7,079) (7,131) Reserve Bank bills (8,419) (8,354) (8,179) Add back changes to DMO borrowing due 1,600 1,600 to settlement cash 8 1,600 1, ,600 87,141 88,416 Notes on borrowings: Gross sovereign-issued debt excluding Reserve Bank settlement cash and Reserve Bank bills 87,539 90,163 2, ,078 Total borrowings can be split into sovereign-guaranteed and non-sovereign-guaranteed debt. This split reflects the fact that borrowings by SOEs and Crown entities are not explicitly guaranteed by the Crown. No debt of SOEs and Crown entities is currently guaranteed by the Crown. 1. Government bonds includes $395 million of infrastructure bonds. 2. Core Crown borrowings includes unsettled purchases of securities (classified as accounts payable in the statement of financial position). 3. Gross Sovereign-Issued Debt (GSID) represents debt issued by the sovereign (the core Crown) and includes Government stock held by the New Zealand Superannuation Fund (NZS Fund), ACC and EQC. 4. Core Crown financial assets exclude receivables. 5. Net Core Crown Debt represents GSID less financial assets. This can provide information about the sustainability of the Government's accounts, and is used by some international agencies when determining the creditworthiness of a country. 6. Adding back the NZS Fund assets provides the financial liabilities less financial assets of the Core Crown, excluding those assets set aside to meet part of the future cost of New Zealand superannuation. 7. Net Core Crown Debt (excluding NZS Fund and advances) excludes financial assets which are held for public policy rather than treasury management purposes. 8. The Reserve Bank has used $1.6 billion of settlement cash to purchase reserves that were to have been funded by the NZ Debt Management Office borrowing. Therefore, the impact of settlement cash on GSID is adjusted by this amount. The accompanying notes and accounting policies are an integral part of these statements. Financial Statements of the Government of New Zealand three months ended 30 September

20 STATEMENT OF COMMITMENTS As at 30 September 2017 As at As at As at 30 Sep 30 Jun 30 Sep $m $m $m Capital Commitments State highways 6,963 6,130 5,657 Specialist military equipment Land and buildings 3,083 2,735 2,407 Other property, plant and equipment 2,126 2,108 2,582 Other capital commitments Tertiary Education Institutions Total capital commitments 13,532 12,239 11,644 Operating Commitments Non-cancellable accommodation leases 3,284 3,398 3,192 Other non-cancellable leases 2,476 2,468 2,397 Tertiary Education Institutions Total operating commitments 6,259 6,365 6,319 Total commitments 19,791 18,604 17,963 Total Commitments by Segment Core Crown 7,263 5,945 5,744 Crown entities 8,784 9,032 8,615 State-owned Enterprises 4,497 4,492 4,817 Inter-segment eliminations (753) (865) (1,213) Total commitments 19,791 18,604 17,963 STATEMENT OF CONTINGENT LIABILITIES AND ASSETS As at 30 September 2017 The accompanying notes and accounting policies are an integral part of these statements. As at As at As at 30 Sep 30 Jun 30 Sep $m $m $m Quantifiable Contingent Liabilities Uncalled capital 7,848 7,638 7,704 Guarantees and indemnities Legal proceedings and disputes Other contingent liabilities Total quantifiable contingent liabilities 8,725 8,988 8,516 Total Quantifiable Contingent Liabilities by Segment Core Crown 8,551 8,769 8,397 Crown entities State-owned Enterprises Inter-segment eliminations Total quantifiable contingent liabilities 8,725 8,988 8,516 Quantifiable Contingent Assets Core Crown Crown entities State owned enterprises Inter-segment eliminations Total quantifiable contingent assets A list of unquantifiable contingent liabilities is included on the Treasury's website 14 Financial Statements of the Government of New Zealand three months ended 30 September 2017

21 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: Accounting Policies Reporting Entity These financial statements are the consolidated financial statements for the Government reporting entity as specified in Part III of the Public Finance Act This comprises: Ministers of the Crown Government departments Offices of Parliament New Zealand Superannuation Fund the Reserve Bank of New Zealand State-owned Enterprises (SOEs) Crown entities (excluding tertiary education institutions) Air New Zealand Limited Organisations listed in Schedule 4 and 4A of the Public Finance Act 1989 Organisations listed in Schedule 5 of the Public Finance Act 1989 Legal entities listed in Schedule 6 of the Public Finance Act 1989 Other Government entities specified by legislation A schedule of the entities that are included in the Government reporting entity was set out on pages of the Financial Statements of the Government of New Zealand for the year ended 30 June 2017 published on 5 October With the exception of the 30 June 2017 comparative figures, all actual, forecast and comparative figures presented in these financial statements are unaudited. Basis of Preparation and General Accounting Policies These unaudited interim financial statements of the Government reporting entity comply with generally accepted accounting practice as defined in the Financial Reporting Act 2013 and have been prepared in accordance with Public Sector PBE Accounting Standards (PBE Standards) Tier 1, including PBE IAS 34 Interim Financial Reporting. The Government reporting entity is a public benefit entity. Public benefit entities (PBEs) are reporting entities whose primary objective is to provide goods or services for community or social benefit and where any equity has been provided with a view to supporting that primary objective rather than for a financial return to equity holders. The measurement base applied is historic cost modified by the revaluation of certain assets and liabilities, and prepared on an accrual basis, unless otherwise specified (for example, the Statement of Cash Flows). These financial statements have been prepared on a going concern basis. Specific Accounting Policies The specific accounting policies of the Crown are detailed on the Treasury s internet site: Forecasts The annual forecasts in these financial statements are for the year to 30 June 2018, based on the 2017 Budget Economic and Fiscal Update (BEFU) published on 25 May The accounting policies underlying the preparation of forecasts are the same as the specific accounting policies set out above. Financial Statements of the Government of New Zealand three months ended 30 September

22 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: Accounting Policies (continued) Comparative Figures When presentation or classification of items in the financial statements are amended or accounting policies are changed voluntarily, comparative figures have been restated to ensure consistency with the current period unless it is impracticable to do so. Variance Percentages Percentage variances between the actual and comparative balances exceeding 500% are not shown. Judgements and Estimates The preparation of these financial statements requires judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, revenue and expenses. For example, the present value of large cash flows that are predicted to occur a long time into the future, as with the settlement of ACC outstanding claim obligations and Government Superannuation retirement benefits, depends critically on judgements regarding future cash flows, including inflation assumptions and the riskfree discount rate used to calculate present values. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Further detail on the judgements and estimates used can be found on pages of the Financial Statements of the Government of New Zealand for the year ended 30 June 2017 published on 5 October Financial Statements of the Government of New Zealand three months ended 30 September 2017

23 NOTES TO THE FINANCIAL STATEMENTS Year 3 months to 30 Jun to 30 Sep Current Year Actual vs Forecast Annual Actual Actual Actual Forecast Variance Forecast NOTE 2: Sovereign Revenue Taxation Revenue Individuals 28,641 6,990 Source deductions 7,467 7, ,498 6,382 1,464 Other persons 1,527 1,555 (28) (1.8) 6,497 (1,638) (306) Refunds (314) (318) (1,686) Fringe benefit tax ,910 8,265 Total individuals 8,800 8, ,863 Corporate Tax 12,228 2,146 Gross companies tax 2,082 2,104 (22) (1.0) 12,110 (188) (42) Refunds (33) (44) (206) Non-resident withholding tax (9) (8.0) 589 (10) (3) Foreign-source dividend w/holding payments ,629 2,203 Total corporate tax 2,153 2,173 (20) (0.9) 12,493 Other Direct Income Tax 1, Resident w/holding tax on interest income , Resident w/holding tax on dividend income , Total other direct income tax ,204 48,754 10,965 Total income tax 11,466 11, ,560 Goods and Services Tax 31,259 7,419 Gross goods and services tax 7,905 7, ,354 (11,751) (2,812) Refunds (3,152) (2,945) (207) (7.0) (11,774) 19,508 4,607 Total goods and services tax 4,753 4,795 (42) (0.9) 20,580 Other Indirect Taxation 1, Road user charges ,437 1, Petroleum fuels excise (10) (2.0) 1, Alcohol excise ,003 1, Tobacco excise (79) (20.2) 1, Other customs duty Gaming duties Motor vehicle fees (4) (5.3) Approved issuer levy and cheque duty 11 (1) Energy resources levies ,711 1,560 Total other indirect taxation 1,590 1,632 (42) (2.6) 6,732 26,219 6,167 Total indirect taxation 6,343 6,427 (84) (1.3) 27,312 74,973 17,132 Total taxation revenue 17,809 17, ,872 Other Sovereign Revenue 2, ACC levies (9) (1.3) 2, Fire Service levies EQC levies Child support and working for families penalties (12) (17.4) Court fines , Other miscellaneous items ,164 5,081 1,308 Total other sovereign revenue 1,345 1, ,057 80,054 18,440 Total sovereign revenue 19,154 19, , Includes excise on domestic production and excise-equivalent duties on imports. Further information on the monthly tax outturns (revenue and receipts) can be found on the Treasury's website Financial Statements of the Government of New Zealand three months ended 30 September

24 NOTES TO THE FINANCIAL STATEMENTS Year 3 months to 30 Jun to 30 Sep Current Year Actual vs Forecast Annual Actual Actual Actual Forecast Variance Forecast NOTE 3: Interest Revenue and Dividends By type 2, Interest revenue (6) (0.8) 2, Dividends , Total interest revenue and dividends (6) (0.6) 3,724 NOTE 4: Transfer Payments and Subsidies 13,043 3,234 New Zealand superannuation 3,390 3, ,671 1, Family tax credit ,823 1, Jobseeker support and emergency benefit (1) (0.2) 1,663 1, Supported living payment (2) (0.5) 1,531 1, Accommodation assistance ,218 1, Sole parent support , Income related rent subsidy KiwiSaver subsidies Other working for families tax credits Official development assistance Student allowances Disability allowances , Other social assistance benefits ,598 25,264 6,279 Total transfer payments and subsidies 6,422 6, ,462 NOTE 5: Finance Costs 4,130 1,007 Interest on financial liabilities 1,105 1, , Interest unwind on provisions 5 - (5) ,162 1,016 Total finance costs 1,110 1, ,224 NOTE 6: Insurance Expenses 4, ACC , (28) EQC (34) (28) Southern Response (13) (13) - - (49) Other insurance expenses 36 2 (34) , Total insurance expenses ,546 NOTE 7: Net Gains and Losses on Non-Financial Instruments By type Actuarial gains/(losses) on GSF liability Actuarial gains/(losses) on ACC liability (164) - (164) - - (30) (133) Other (91) (18) (73) (405.6) (88) Net gains/(losses) on non-financial 1, instruments (255) (18) (237) - (88) 18 Financial Statements of the Government of New Zealand three months ended 30 September 2017

25 NOTES TO THE FINANCIAL STATEMENTS As at As at Current Year Actual vs Forecast 30 June 30 Sep Annual Actual Forecast Variance Forecast NOTE 8: Financial Assets and Sovereign Receivables 18,732 13,917 Cash and cash equivalents 15,564 16,482 (918) (5.6) 15,984 10,313 9,280 Tax receivables 10,624 10, ,098 8,216 6,580 Other receivables 6,401 6,624 (223) (3.4) 7,354 9,197 8,941 Student loans 9,143 9, ,210 17,795 16,947 Kiwibank mortgages 17,758 18,002 (244) (1.4) 18,902 4,730 4,231 Long-term deposits 4,637 3,502 1, ,257 1,837 1,852 IMF financial assets 1,880 1, ,806 1,591 2,141 Other advances 1,783 1, ,693 30,700 26,638 Share investments 32,557 28,990 3, ,140 4,381 4,435 Derivatives in gain 3,349 4,389 (1,040) (23.7) 4,313 39,558 42,689 Other marketable securities 40,852 41,541 (689) (1.7) 36, ,050 Total financial assets and sovereign 137,651 receivables 144, ,159 2, ,895 Financial Assets by Entity 22,554 22,973 The Treasury (Debt Management Office) 22,396 21,008 1, ,701 18,985 18,629 Reserve Bank of New Zealand 20,411 20, ,755 37,345 31,624 NZ Superannuation Fund 36,097 34,923 1, ,557 25,600 24,956 Other core Crown 26,381 25,139 1, ,451 (9,643) (9,556) Intra-segment eliminations (11,209) (9,115) (2,094) (23.0) (8,096) 94,841 88,626 Total core Crown segment 94,076 92,131 1, ,368 39,514 38,845 ACC portfolio 39,804 38, ,072 1,089 1,818 EQC portfolio (392) 10,597 9,797 Other Crown entities 10,115 9, ,366 (3,025) (2,364) Intra-segment eliminations (2,683) (2,474) (209) (8.4) (2,169) 48,175 48,096 Total Crown entities segment 48,182 46,346 1, ,877 24,876 23,698 Total State-owned Enterprises segment 24,025 24,761 (736) (3.0) 25,964 (20,842) (22,769) Inter-segment eliminations (21,735) (21,079) (656) (3.1) (21,314) 147, ,651 Total financial assets and sovereign receivables 144, ,159 2, ,895 Financial Statements of the Government of New Zealand three months ended 30 September

26 NOTES TO THE FINANCIAL STATEMENTS As at As at Current Year Actual vs Forecast 30 June 30 Sep Annual Actual Forecast Variance Forecast NOTE 9: Property, Plant and Equipment Net Carrying Value 1 By class of asset: 49,640 45,448 Land 49,622 45,327 4, ,330 34,655 31,670 Buildings 34,725 33,033 1, ,771 23,829 22,635 State highways 24,190 24,232 (42) (0.2) 26,056 15,866 15,624 Electricity generation assets 15,775 15, ,232 4,080 4,062 Electricity distribution network (cost) 4,062 4,114 (52) (1.3) 4,226 3,119 3,110 Specialist military equipment 3,085 3,139 (54) (1.7) 3,357 3,097 2,992 Specified cultural and heritage assets 3,073 3, ,033 4,112 4,125 Aircraft (excl military) 4,339 4,588 (249) (5.4) 5, ,016 Rail network 1,317 1, ,136 5,213 4,909 Other plant and equipment (cost) 5,419 5, , , ,591 Total net carrying value 145, ,165 6, ,577 Land breakdown by usage 17,845 15,635 Housing stock 17,863 15,728 2, ,751 10,892 9,748 State highway corridor land 10,888 9,828 1, ,782 5,718 5,680 Conservation estate 5,705 5, ,700 3,520 3,357 Rail network corridor land 3,523 3, ,311 5,683 4,774 Schools 5,683 4, ,833 1,237 1,697 Commercial (SOE) excluding rail 1,231 1,259 (28) (2.2) 1,259 4,745 4,557 Other 4,729 4, ,694 49,640 45,448 Total land 49,622 45,327 4, ,330 Schedule of Movements Cost or Valuation 149, ,806 Opening balance 160, ,678 3, ,678 7,781 2,513 Additions 2,200 2, ,573 (2,209) (485) Disposals 20 (123) (594) 5, Net revaluations (59) 5 (64) - - (7) 32 Other (142) (99.3) (178) 160, ,894 Total cost or valuation 162, ,741 4, ,479 Accumulated Depreciation and Impairment 15,307 15,307 Opening balance 16,081 18,506 (2,425) (13) 18,506 (949) (41) Eliminated on disposal 93 (6) 99 - (128) (2,504) - Eliminated on revaluation (46) 4, Depreciation expense and impairment losses 1,033 1,074 (41) (3.8) 4,563 (171) 39 Other (21) 2 (23) ,081 16,303 Total accumulated depreciation and impairme 17,186 19,576 (2,390) (12.2) 22, , ,591 Total property, plant and equipment 145, ,165 6, , Using a revaluation methodology unless otherwise stated. 20 Financial Statements of the Government of New Zealand three months ended 30 September 2017