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Measuring Government Workshop on New Zealand’s National Accounts and Financial Statistics 13 June 2011 © The Treasury Two viewpoints: 1) The statistics needed to measure the role and impact of government in the economy 2) The statistics needed to measure the financial performance of the government Two viewpoints are linked – much of the data needed for (1) comes from (2) and the viewpoints are complements 2 © The Treasury Types of analysis under (1) • Presenting government fully within a complete set of national accounts (financial flows, asset and liability positions across sectors) • Better measures of the real activity of government (real output of government non-market services – both for GDP and productivity) • Alternative household income and consumption measures that better reflect the impact of government services and income transfers • Measuring the effectiveness of government in delivering outputs/outcomes 3 © The Treasury Types of analysis under (2) • Public Finance Act 1989 and NZ Generally Accepted Accounting Practice (GAAP) • System of National Accounts (SNA): mainly in the context of macro forecasts, recent Institutional Sector Accounts, OECD reporting • Government Finance Statistics (GFS): IMF staff reports to transition to GFS2001 – underscored by GFC and fiscal challenges • Past Treasury efforts to bridge the ga(a)p – over-reliance on bottom-up methods 4 © The Treasury Reporting frameworks: entities Core Crown GAAP GFS SNA 5 Crown entities State owned enterprises Local government Total Crown Historical and forecast Central government Forecast Central government Historical Historical Historical Captured in GDP rather than general government Historical © The Treasury Reporting frameworks: differences • GAAP has an underlying recognition and measurement framework, audited, independent standard setting – strong accountability focus • SNA and GFS have strong economic focus and presentation/indicators can help decision-making • GFS and SNA report gains & losses elsewhere (Statement of Other Economic Flows, Financial Account) • Statistics NZ publish Local authority data quarterly and annually then transform into SNA and GFS 6 © The Treasury Reporting frameworks and indicators • GAAP: operating balance; operating balance before gains and losses; residual cash, net debt; net worth • SNA: net lending (or financial balance in OECD) • GFS: net operating balance; net lending (fiscal balance in Australia); cash surplus, net financial worth; net worth Net lending subtracts net purchases of non-financial assets from net operating balance (ie, government S – I) No net lending counterpart in GAAP 7 © The Treasury Treasury’s GFS reporting • Aim to assist IMF analysis (Article IV and Fiscal Monitor) • Use GAAP as underlying basis but use GFS presentation in terms of statements and indicators • GFS Statement of Other Economic Flows – some issues still to work through • GFS cash surplus/(deficit) smaller than residual cash as it excludes financial asset flows and includes Crown Entities • GFS net financial worth is different to net debt as it includes wider set of assets and liabilities (NZSF, ACC, EQC) 8 © The Treasury Comparison between GFS and GAAP indicators 2010 2011 2012 2013 2014 2015 Actual Forecast Forecast Forecast Forecast Forecast Net operating balance (3,461) (10,061) (5,405) (1,304) 2,105 4,035 Fiscal Balance (Net lending/borrowing) (5,367) (12,265) (7,092) (2,672) 560 2,726 Cash surplus/(deficit) (5,362) (12,465) (11,321) (5,858) (1,674) Net worth 93,955 84,518 77,225 75,875 78,167 82,754 636 9,616 12,334 11,587 8,309 $million GFS Net financial worth (11,005) (72) GAAP Operating balance before gains and losses (6,315) (16,728) (9,741) (4,097) (719) Residual cash (9,000) (14,951) (13,482) (8,951) (5,393) (4,051) Net worth 94,988 85,519 78,272 76,939 79,251 83,853 Net debt 26,738 41,502 54,872 63,619 68,989 72,875 9 1,297 © The Treasury Reconciliation between GAAP and GFS operating balance 2010 2011 2012 2013 2014 2015 Actual Forecast Forecast Forecast Forecast Forecast $m $m $m $m $m $m Operating balance per GAAP Remove gains/losses and net surpluses from associates and joint ventures (4,509) (9,437) (7,293) (1,350) 2,292 4,587 (1,806) (7,291) (2,448) (2,747) (3,011) (3,290) Operating balance before gains and losses (OBEGAL) (6,315) (16,728) (9,741) (4,097) (719) (43) (30) (419) (434) (465) (560) Remove SOE portion of OBEGAL (incl. eliminations) Remove ETS expenses 1,297 80 1,232 692 400 415 422 2,104 2,288 2,575 2,622 2,790 2,833 - 2,689 1,372 222 181 181 Tertiary institutions included on a line-by-line basis 208 209 206 205 205 205 Reserve Bank (equity accounted) 501 275 (94) (220) (298) (340) 4 4 (2) (4) (3) Remove impairments and write-offs on financial assets Remove recognition of large provisions Other adjustments Net operating balance per GFS 10 (3,461) (10,061) 4 (5,405) (1,304) 2,105 4,035 © The Treasury Next steps • Ongoing efforts internationally to harmonise GFS and public sector GAAP • Treasury has improved translation from GAAP to SNA for elements of macro forecasts (eg, public consumption) • Looking to do the same for other SNA indicators (eg, net lending) • Looking at GAAP reporting segmentation (eg, Central) • Statistics NZ is working on bottom-up GFS series – starting with Local Government (publish 2009/10 in July this year) then Central Government then SOEs • Treasury and Statistics NZ working together on GFS 11 © The Treasury