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Financial Statements of the Government of New Zealand for the Year Ended 30 June 2020

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Financial Statements of the Government of New Zealand for the Year Ended 30 June 2020 B.11 Financial Statements of the Government of New Zealand for the year ended 30 June 2020 24 November 2020 EMBARGO: Contents not for communication in any form before 2pm on Tuesday 24 November 2020 B.11 Financial Statements of the Government of New Zealand for the year ended 30 June 2020 © Crown Copyright Reserved 2703-2000 (ISSN Online) This work is licensed under the Creative Commons Attribution 4.0 International licence. In essence, you are free to copy, distribute and adapt the work, as long as you attribute the work to the Crown and abide by the other licence terms. To view a copy of this licence, visit https://creativecommons.org/licenses/by/4.0/ Please note that no departmental or governmental emblem, logo or Coat of Arms may be used in any way which infringes any provision of the Flags, Emblems, and Names Protection Act 1981. Attribution to the Crown should be in written form and not by reproduction of any such emblem, logo or Coat of Arms. Internet The URL for this document on the Treasury’s website at November 2020 is https://treasury.govt.nz/publications/year-end/financial-statements-2020 Contents Ministerial Statement 1 Statement of Responsibility 2 Commentary on the Financial Statements 3 Fiscal Overview 4 Fiscal Strategy 6 Fiscal Indicators 8 Financial Statements Summary 11 Revenue 15 Expenses 17 Operating Balance 19 Total Crown Balance Sheet 22 Year End Results Compared to Budget 2020 26 Historical Financial Information 28 Independent Audit Report of the Controller and Auditor-General 31 Audited Financial Statements of the Government of New Zealand 41 Statement of Financial Performance 42 Analysis of Expenses by Functional Classification 43 Statement of Comprehensive Revenue and Expense 44 Statement of Changes in Net Worth 45 Statement of Cash Flows 46 Statement of Financial Position 49 Statement of Segments 50 Notes to the Financial Statements 52 Note 1: Basis of Reporting 52 Note 2: Key Assumptions and Judgements 58 Note 3: Impact of the COVID-19 pandemic 62 Note 4: Sovereign Revenue 65 Note 5: Sales of Goods and Services 68 Note 6: Investment and Finance Income/(Expense) 69 Note 7: Other Revenue 70 Note 8: Transfer Payments and Subsidies 71 Note 9: Personnel Expenses 72 Note 10: Other Operating Expenses 73 Note 11: Net Gains/(Losses) on Non-Financial Instruments 74 Note 12: Insurance 74 Note 13: Receivables 82 Note 14: Marketable Securities, Deposits and Derivatives in Gain 85 Note 15: Share Investments and Investments in Controlled Enterprises 86 Note 16: Advances 87 Note 17: Property, Plant and Equipment 91 Financial Statements of the Government of New Zealand – B.11 i Note 18: Equity Accounted Investments 105 Note 19: Payables 106 Note 20: Borrowings 107 Note 21: Retirement Plan Liabilities 110 Note 22: Provisions 114 Note 23: Minority Interests 119 Note 24: Capital Objectives and Fiscal Policy 120 Note 25: Commitments 121 Note 26: Contingent Liabilities and Contingent Assets 122 Note 27: Financial Instruments 133 Note 28: Restatement of Comparative Figures 147 Note 29: Related Parties 151 Note 30: Events Subsequent to Balance Date 152 Supplementary Statements 153 Statement of Unappropriated Expenditure 153 Statement of Expenses or Capital Expenditure Incurred in Emergencies 163 Statement of Trust Money 163 Additional Financial Information 167 Fiscal Indicator Analysis 168 Operating balance before gains and losses 169 Core Crown Residual Cash 170 Debt 171 Information on State-owned Enterprises and Crown Entities 172 Glossary of Terms 175 ii B.11 – Financial Statements of the Government of New Zealand List of Tables Table 1 – Key fiscal indicators 6 Table 2 – Progress at 30 June 2020 against the Government’s short-term fiscal intentions set at Budget 2020 7 Table 3 – 2020 results compared to the Pre-election Update 14 Table 4 – Breakdown of revenue 15 Table 5 – Increase in core Crown tax revenue 15 Table 6 – Breakdown of expenses 17 Table 7 – Movement in core Crown expenses 17 Table 8 – Net worth 22 Table 9 – Composition of the total Crown balance sheet 23 Table 10 – Cash proceeds from debt programme 25 Table 11 – Comparison to Budget 2020 26 Table 12 – Core Crown tax revenue compared to Budget 2020 26 List of F igures Figure 1 – Components of OBEGAL by segment 8 Figure 2 – Operating balance (excluding minority interests) 8 Figure 3 – Core Crown residual cash 9 Figure 4 – Net debt 9 Figure 5 – Core Crown tax revenue by month 10 Figure 6 – Core Crown expenses by month 10 Figure 7 – Core Crown tax revenue and nominal GDP growth 12 Figure 8 – Core Crown revenue and core Crown expenses 12 Figure 9 – Operating balance (excluding minority interests) 13 Figure 10 – Net worth 13 Figure 11 – Core Crown tax revenue 15 Figure 12 – Core Crown expenses 18 Figure 13 – Composition of core Crown expenses 18 Figure 14 – Operating balance (excluding minority interests) 19 Figure 15 – Discount rates 19 Figure 16 – Illustration of the initial fiscal impacts of the LSAPs programme 21 Figure 17 – Net worth 22 Figure 18 – Movements in PPE by asset classes 24 Figure 19 – Increase in borrowings by types 24 Figure 20 – Core Crown tax revenue variance to Estimated Actuals 26 Figure 21 – Core Crown expenses variance to Estimated Actuals 27 Financial Statements of the Government of New Zealand – B.11 iii Ministerial Statement The Crown accounts for the year to 30 June (2019/20) reflect the Government’s decision to go hard and early to cushion the blow of COVID-19 for business and households while making sure New Zealanders were supported with investments in critical public services like health and education, and investing in infrastructure to future-proof the economy, boost productivity and create jobs. The 2019/20 accounts also show how New Zealand’s economy has been stronger-than-expected during the COVID-19 pandemic, with a lower deficit, higher tax take and lower net debt than forecast by the Treasury at the 2020 Budget. The world is experiencing a 1-in-100 year economic shock as a result of COVID-19 and New Zealand is well-placed to handle the impacts. Careful management of the Government books meant we went into this global pandemic running Budget surpluses, and with some of the lowest net debt in the world. New Zealand will continue to have a strong balance sheet and low debt compared to other countries, putting us in a strong position to recover and rebuild from COVID-19. The Crown accounts show the operating balance before gains and losses (OBEGAL) was a deficit of $23.1 billion (7.5% of GDP) in 2019/20. While the deficit was expected due to the impact of COVID-19, it was $5.2 billion better than what the Treasury forecast in Budget 2020, due to a stronger-than-expected economy and careful management of Government spending. Core Crown tax revenue of $85.1 billion was $2.8 billion higher than forecast in the Budget. This reflects the stronger-than-expected economy as New Zealand got on top of COVID-19 quickly and opened up the economy to give the recovery a head start. Core Crown expenditure was $5.2 billion lower than forecast at $114.0 billion. An increase in expenditure from the previous year was due to COVID-related expenses, including the Wage Subsidy Scheme, which had paid out $12.1 billion to businesses to protect 1.7 million jobs by 30 June 2020. The COVID Response and Recovery Fund (CRRF) was also created during the 2019/20 year. At 30 June, $26.0 billion had been allocated from the CRRF to support the early COVID response. The Government will continue to monitor spending carefully to ensure value for money as we recover and rebuild from the impacts of COVID-19. Net core Crown debt was 27.0% of GDP at 30 June, below the 30% forecast in the May Budget. Net debt across advanced economies around the world heading into COVID-19 was above 80% of GDP, with countries like the UK recently crossing 100%. During the 2019/20 year, the Government borrowed at record low interest rates for long-term infrastructure investments to future-proof the economy, boost productivity and create jobs. Total Crown infrastructure investment was $9.1 billion during the year, $0.5 billion higher than the previous year, and up $3.0 billion from 2017. Core Crown capital investment was $9.4 billion during the year, including $1.5 billion invested into the Super Fund to help cover future retirement costs. The core Crown residual cash deficit was $23.7 billion, compared to a forecast deficit of $32.0 billion at the Budget. This meant the net debt position was less than forecast. The COVID-19 pandemic will continue to have an ongoing impact on the global and New Zealand economies for a number of years. The 2019/20 Crown accounts show the Government is in a strong position to continue to use the strength of its balance sheet to support businesses and households through this 1-in-100 year shock, and position the economy to recover and rebuild from COVID-19. Hon Grant Robertson Minister of Finance 5 November 2020 Financial Statements of the Government of New Zealand – B.11 1 Statement of Responsibility These financial statements have been prepared by the Treasury in accordance with the provisions of the Public Finance Act 1989. The financial statements comply with New Zealand generally accepted accounting practice and with Public Benefit Entity Accounting Standards (PBE standards) for the public sector. The Treasury is responsible for establishing and maintaining a system of internal control designed to provide reasonable assurance that the transactions recorded are within statutory authority and properly record the use of all public financial resources by the Crown.
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