Reserve Bank says earlier underspending will enable it to lift spending next year

The RBNZ's budget shows it expects to spend $69 million in the year ending June 30, 2019. Photo: Lynn Grieveson

The Reserve Bank of New Zealand, which is tasked with maintaining a sound and efficient financial system for the country, keeping prices stable, and supplying the currency, expects to spend more than its agreed funding allows for next year as it takes advantage of earlier underspending.

The RBNZ's budget shows it expects to spend $69 million in the year ending June 30, 2019, which is $7.7 million above the $61.3 million set out in a funding agreement between the finance minister and the Reserve Bank governor specifying how much of the bank's income it can use to meet operating expenses each year. The bank, headed by Governor Adrian Orr, intends to cover the shortfall from under-spending in earlier years, it said in its Statement of Intent 2018-2021 released today.

The bank's five-year funding agreement through to 2020 was inked under the previous Governor Graeme Wheeler, and last year's budget showed he expected to undershoot the funding agreement for the first three years, with spending in the current 2018 year expected to come in $7 million under budget at $59.3 million. The bank's latest statement published today notes that for the first two years of the funding agreement, aggregate under-expenditure was $22.6 million.

"The accumulated under-spending in the early years of the funding agreement was due to the capitalisation of staff time on major projects, higher than budgeted profits for (settlement system) NZClear, and the slower than forecast rate of the replacement of Series 6 bank notes with the more expensive Series 7 bank notes," the bank said.

"The bank is planning to stay within the aggregate funding levels agreed for the full five years of the funding agreement, with expenditure in the latter half of the period exceeding the annual levels specified in that agreement."

The bank, which has more than $27 billion in assets, expects net investment income of $275.9 million in the 2019 year and projects an operating surplus of $206.9 million. Its budget last year forecast a surplus of $195.7 million for the current year ending June 30, 2018.