Hon Dr Michael Cullen
Minister of Finance
11 October 2006 Media Statement
Financial statements consistent with fiscal strategy
The financial statements for the fiscal year ended June 30 underscore the government's progress in building a robust
fiscal platform to meet the challenges of today and over the long term, Finance Minister Michael Cullen said today.
"The government’s strategy is to strengthen the underlying fiscal position in order to better position society to cope
with known future challenges, such as the anticipated ageing in the profile of our population as this century
progresses.
"The financial statements released today show our prudent fiscal management is paying dividends.
"It is particularly pleasing that on the cusp of entering that period in our history when the profile of our population
significantly changes that we do so with the government’s gross debt level being close to our long term target and the
government’s net financial asset position strengthening further thanks to the build-up in the assets of the New Zealand
Superannuation Fund," Dr Cullen said.
The statements show gross sovereign-issued debt easing to 22.6 per cent of GDP at June 30, down from 23.3 per cent a
year earlier, in line with the government’s objective to reduce debt to around 20 per cent of GDP over the long term.
The government’s net financial asset position strengthened, standing equivalent to 1.3 per cent of GDP, the first set of
full-year accounts in which a government in New Zealand has recorded a positive net financial asset position.
"The government has achieved these positive financial results while at the same time significantly lifting New Zealand’s
future prospects with policies and investments designed to raise our economic potential, enhance the security and
well-being of working families and strengthen our sense of national identity.
"With persistent consumer price inflation an issue across the world, in large part due to the significant rise in global
energy prices in the past year or so, the full-year accounts also underline the benefit of the government adopting a
neutral fiscal stance in the 12 months just ended.
"The country has learned through bitter historic experience that fiscal policy does not exist in isolation of the wider
macroeconomic environment and that responsible governments must be sensitive to ensure that their fiscal stance does not
complicate the job of the central bank," Dr Cullen said.
"Recent comments by Standard & Poor's certainly reinforce the wisdom of our fiscal strategy. It stressed strongly that our government’s strong fiscal
profile was a very important counter weight to the country’s current account deficit.
"The accounts show that while the economy has indeed been slowing, it was more resilient in the first six months of 2006
than many had anticipated at the start of the year.
"As a result the government's accounts are in a healthier position than expected at Budget time. However, the additional
cash surplus is not confirmation in itself of any permanent strengthening in the government's fiscal position.
"It would be most unwise to make long term decisions on the basis of one set of figures. This government is always
mindful of ratings agencies’ consistent warnings that any unjustified weakening in the fiscal position would jeopardise
our credit rating to the detriment of households’ and businesses’ mortgage lending costs.
"It is also important to remember this is just a snap shot of the government's finances. We will have a better idea of
the path forward when Treasury publishes its next set of economic and fiscal forecasts in late December.
"This is a result we can be proud of. It is important that we maintain our prudent fiscal approach so that we can
continue to make sound decisions and investments to further enhance economic growth and prosperity into the future," Dr
Cullen concluded.
The statements are available at: http://www.treasury.govt.nz/financialstatements/year/jun06/
ENDS