Budget 2019

The Fiscal Strategy

Managing our assets and liabilities

Assets and liabilities will be managed to improve wellbeing

The Crown owns $339.9 billion of assets and has $204.3 billion of liabilities as of June 2018. The difference between these numbers represents the Crown’s net worth, which is forecast to increase in dollar terms and remain broadly stable as a per cent of GDP (Figure 26).

Figure 26 – Assets, liabilities and net worth

Source: The Treasury

The Treasury’s He Puna Hao Pātiki 2018 Investment Statement showed that our social assets are ageing. The majority of schools and Housing New Zealand houses are more than 40 years old. A significant proportion of our health assets are in poor or very poor condition.

To improve the Crown asset base, the Government is focusing on asset management at a sector level. This includes work developing a National Asset Management Plan for the health sector, as well as increased investment in housing, schools and hospitals.

Capital investment will be a key focus of our Budgets. The Government will ensure that infrastructure and services are in place to support improved wellbeing and that as a country we are actively planning for our future.

Figure 27 – Net capital spending

Source: The Treasury

To this end we have announced the multi-year capital allowance will increase to $14.8 billion for Budgets 2019 to 2022. This will be used to both maintain and enhance public service delivery and infrastructure. Together with Budget 2018, this Government has set out significantly higher levels of capital investment than in previous years (Figure 27).

Consistent with our Budget Responsibility Rules, capital expenditure will be phased to ensure that projects can be delivered on time. While a significant amount has been allocated from the multi-year capital allowance in Budget 2019, it is expected to be spent over a longer timeframe than had been previously assumed in forecasts.

This investment commitment will help to build a pipeline of infrastructure projects. This pipeline will increase certainty for the construction sector, enabling it to better prepare and invest in the capacity and capability needed to deliver projects on time and on budget.

The Government is also creating the NZ Infrastructure Commission, Te Waihanga, which will enhance the long-term planning and delivery of infrastructure by providing independent expert advice to infrastructure decision-makers. This initiative is explained in the Investing in New Zealand section.

There are $70 billion of New Zealand Government Bonds (NZGB) on issue as of 30 April 2019. As outlined in the Fiscal Strategy Report 2018, this Government remains committed to maintaining a sustainable NZGB market. The Government intends to maintain levels of NZGBs on issue at not less than 20 per cent of GDP over time, even if net core Crown debt falls below 20 per cent of GDP. This ensures ongoing government access to debt funding if needed, reduces volatility in the size of borrowing programmes through time and provides wider capital market benefits.

Contributions to the NZS Fund will enhance the long-term wellbeing of New Zealanders

The Government is prioritising responsible investments that enhance the long-term wellbeing of New Zealanders.

Having restarted contributions to the NZS Fund, the Government intends to make regular contributions. These are projected to increase the size of the NZS Fund to $64 billion by 2022/23 and will help protect the Government’s ability to pay superannuation at age 65.

The Government will also support New Zealand’s early-stage capital markets by investing $300 million over four years in a new fund administered by the Guardians of New Zealand Superannuation. Alongside $60 million from NZVIF, $240 million will be redirected from NZS Fund contributions to the new fund, which will invest via NZVIF. This initiative is explained in the Building a productive nation section.

As Table 12 shows, $9.6 billion will be contributed to the NZS Fund in total over the next five years. Having restarted contributions in 2017/18, contributions will increase gradually to be in line with the contribution formula in 2023/24.24 This contrasts with the previous Government’s approach of not having made any payments in the years between 2010 and 2017, estimated by the NZS Fund25 to have cost up to $24.1 billion in lost contributions and investment returns.

Table 12 – Contributions to the NZS Fund

Year ending 30 June
$ billions
NZS Fund contributions - prescribed by formula 2.0 2.2 2.4 2.5 2.5
NZS Fund contributions - Budget Economic and Fiscal Update 2019 1.0 1.5 2.1 2.4 2.6

Source: The Treasury

Having NZS Fund contributions below the level prescribed by the contribution formula for the next four years will not change the Government’s ability to make superannuation payments in the future. Lower contributions in the short term will reduce the Government’s borrowing requirements, and consequently debt, which supports the Government’s ability to meet the future fiscal pressures of an ageing population. Contributions below those prescribed by the formula will lead to the legislated formula calculating higher contributions in future years.


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