By Gareth Vaughan
Wednesday's inaugural Crown investment statement will provide more transparent insight into the Government's balance sheet than ever before, and suggest the adoption of key performance indicators for what's expected from the Crown balance sheet, Secretary to the Treasury Gabriel Makhlouf says.
Makhlouf told interest.co.nz the investment statement would feature a lot of rich information that probably hasn't been seen before.
"You'll certainly see an insight into the Crown's balance sheet that's brought together and probably at its most transparent than ever before. You'll see what I've been told is leading edge, world best practice," Makhlouf said.
To be released on Wednesday, the investment statement stems from last year's amendment of the Public Finance Act, with Treasury now required to report to Parliament at least every four years with an investment statement on the Crown’s balance sheet of assets and liabilities. There's more detail on it here.
Makhlouf said the investment statement will reflect the changing shape of the Crown's balance sheet as the Government's assets become more financial based, including the investments of the NZ Super Fund and ACC, as opposed to being dominated by property, plant and equipment.
"Which means what it's signalling is we have to think differently about what's the best way of managing it."
"And I suppose you're going to see a challenge being put in front of government agencies and government which is we need to have a much better understanding of what's on our individual balance sheets, what our assets are, what the liabilities are. And then collectively for the Crown, and this will be the Treasury responsibility, what's the best way of managing those assets and liabilities? What's the best way of managing risk?" Makhlouf said.
There will also be specific recommendations.
"We've got some specific recommendations and we've got what we're calling areas of focus, which are areas that need more work. And the specific recommendations tend to focus around getting agencies to get on top of their individual balance sheets."
"But in particular we're recommending that government sets key performance indicators (KPIs), and perhaps targets as to what it expects from its balance sheet. What it expects from capital. We're not necessarily saying anything specific, we're just saying the Government should consider setting objectives," said Makhlouf.
"To give you context currently we know that the Government has set as an objective returning to surplus in 2014-2015, (and) reducing net debt to 20% of GDP by 2020."
"We don't say anything about what we want the balance sheet to look like other than net debt. So one of our recommendations is actually we ought to be a bit more explicit, have a few more KPIs around what we're expecting from the balance sheet. It might be, for example, the Government may decide it wants to recycle a certain proportion of capital over time, it might want to set some expectations about how the balance sheet could grow or otherwise. So it's those sorts of recommendations we're making."
"I would hope that one of the things that will happen is every year governments in their fiscal strategy report will actually comment about the balance sheet specifically and give the New Zealand public a sense of what it expects from the Crown's balance sheet," Makhlouf added.
He also suggested the investment statement would take New Zealand's "world leading" transparency in government to a new level.
"I'm also expecting a lot of interest from countries around the world as they see the next step in the evolution in New Zealand of transparency in economic policy making. I think they're very interested in what we've done and they'll be keen to come and talk to us about what we've done, and they'll be keen to follow next steps and how we follow it up."
Makhlouf told interest.co.nz in a Double Shot interview last year he was aiming to change the public's perception of Treasury and help make New Zealand's public servants "an exemplar for the world" again as they were in the 1980s.
Below is a breakdown of the Crown's $244.4 billion of assets and $174.4 billion of liabilities from its 2013 financial statements. There's more detail here.
*PPE is property, plant and equipment.
This article was first published in our email for paying subscribers on Friday morning. See here for more details and to subscribe.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.