Surplus down 80%

Brian Fallow writes in the NZ Herald that the surplus for the six months to December 2007 was only $815 million, compared to $4.2 billion a year ago for the same six month period.

Not all of this is due to the falling sharemarkets. There has been an extra $2.5 billion of spending – no wonder inflation and interest rates remain high.

But personally I don’t get too worried about the headline surplus figure as it can be buffered up or down from stuff like revaluations.  The most useful figure is the one known as OBEGAL (formerly OBERAC) which is the Operating Balance Excluding Gains And Losses.  This represents the underlying surplus when you basically ignore one offs.

Looking at the actual financial statements, the budgeted OBEGAL was $2.549b and the actual is $2.529 so there is nothing (yet) to panic about. The $1.7 billion downwards change in the headline operating surplus is mainly due to low investment returns which can reverse ($1.0 billion) and a change in assumptions about ACC liabilities (0.7 billion) which is a one off.

The NZ Super Fund has made a $230 million loss instead of a budgeted $470 million surplus.  This will get some people nervous if private KiwiSaver funds do much the same.  No matter how much you talk about long-term savings, no one likes looking at a financial statement and seeing the fund has lost them money over a period.