A higher than expected New Zealand dollar and strong demand for government debt, has pushed the Crown's gross debt in the ten months to April 4.2% higher than Treasury expected in its latest set of forecasts.
Overall, the Government's financial statements for the ten months to April 30 were close to the latest forecasts released in the May 19 Budget, Treasury said this morning. Core Crown revenue in the ten month period stood at NZ$46.4 billion (0.2% below forecast), with Core Crown tax revenue at NZ$42.3 billion (also 0.2% lower than anticipated).
Core Crown expenses of NZ$56.3 billion were 0.9% or NZ$525 million below forecast, with most departments continuing to report some under expenditure against their forecasts, Treasury said.
The operating balance deficit before gains and losses, at NZ$10.9 billion, was 3.6% smaller than expected largely as a result of the lower than forecast expenses.
"The deficit is forecast to grow by NZ$5.8 billion in the next two months to NZ$16.7 billion by 30 June. The growth in the deficit is largely a result of sharp increases in forecast expenses, most notably earthquake related costs, the weathertight homes assistance package and costs associated with the ETS [Emissions Trading Scheme]. There is some risk in both the timing and quantum of these expenses," Treasury said in a release.
Treasury said gross Crown debt was NZ$2.9 billion or 4.2% higher than forecast due to a number of factors, the most significant of which were:
- Considerable valuation movements as a result of higher than forecast exchange rates. The New Zealand exchange rate has been at or near record highs recently which caused derivative liabilities to be NZ$824 million greater than expected and also contributed to derivative asset values being significantly above forecast, which required increased collateral of NZ$759 million to hedge this risk
- Treasury bills’ issuance also remaining ahead of forecast (by $751 million) due to stronger than anticipated demand.
"At NZ$71.6 billion or 36.8% of GDP, gross debt was NZ$19.6 billion higher than the same time last year. As a result of the higher debt position, finance costs for the ten months ended 30 April 2011 were $559m higher than in the same period last year," Treasury said.
"The movements in gross debt were net debt neutral meaning that at 30 April 2011, net debt was close to forecast at NZ$41.5 billion, or 21.3% of GDP."
9 Comments
" Gross debt NZD 71.6 Billion'
"Net debt NZD 41.5 Billion"
I remain intrigued that the net debt figure is always quoted to somehow make the gross debt figure more acceptable in terms of NZ'ers abilty to pay down this liabilty in addition to the private sector liabilty of ~NZD 180.00bn.
Where is the NZD 30.1 billion difference lent ?
NZD 9.838bn is lent to the banks via the RBNZ at a carry loss, presumably to prepay the looming maturity of the NZD 8.906bn 6.00%.15-Nov-2011 government notes.
NZD ~11.0bn to student loans.
The balance I know not where. Foreign reserves?.
The point being, I believe, is that none of the loans lessen the debt liabilities of working New Zealanders, unless their is proof of absolute foreign debtors. By this I mean foreign reserves not funded by local borrowings. Negative carry foreign reserves hardly unloads our debt.
Hence the per capita liabilties (private +state) of non-beneficiary tax paying citizens is unpayable at current median income levels.
Stephen, you are forgeting the growth we are going to get. I think using the term 'unpayable liabilities', could frighten the horses. Then we are going to sell of the half the generation capacity, Ok to ourselves but still its a start. A positive mental attitude has been proven to have beneficial outcomes and this is the present governments policy regards debt levels.
In a report published on Monday entitled A House Built on Sand?, Open Europe has calculated that the ECB has a total exposure of about €444bn (£397bn) to "struggling eurozone economies".
The bank is now "23 to 24 times levered" as a result of bailing out Greece, Ireland, Portugal and Spain.
got to love those bankers
http://www.spiegel.de/international/europe/0,1518,766856,00.html
European Banks Dump Junk Bonds on ECB
One item on the list of eligible securities of the European Central Bank (ECB) is a Portuguese bond from the year 1943. It will be roughly 8,000 years before this money is due for repayment on Dec. 31, 9999.
But this bizarre bond is now extremely valuable for a Portuguese bank, because the document can be submitted to the ECB as collateral in return for a fresh loan in euros. Since the international capital markets are practically closed to banks from Portugal, Greece and the other ailing economies in the euro zone, the financial institutions in these countries desperately need such cash injections from the ECB.
Many of the submitted securities are not really secure -- and it is difficult to say what they are actually worth. As a result, the ECB is slowly degenerating from the guardian of the euro to the bad bank of the euro system, where Europe's banks can dump their junk bonds.
This is meant to be a great report on the EU by the BBC, I havent had time to listen yet
http://downloads.bbc.co.uk/podcasts/radio/worldbiz/worldbiz_20110526-20…
Gareth Morgan over at the NZ Harold doesn't seem to be as sanguine as Wild Bill & the Treasury are about our debt :
... " Bubbles on beer budget poor life choice ! "
www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10730596
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