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Budget Policy Statement 2010

Annex 1

Long-term Fiscal Objectives and Short-term Fiscal Intentions

The long-term fiscal objectives of the Government were set out in the 2009 FSR and are shown below in Table A1. These long-term objectives are consistent with the principles of responsible fiscal management.

The short-term fiscal intentions of the Government have been revised since Budget 2009, consistent with the change in the fiscal position (Table A2). These revised fiscal intentions are, nevertheless, part of an unchanged fiscal strategy that reflects the Government's view of prudent debt over time. The revised fiscal intentions are consistent with the Government's long-term fiscal objectives.

Table A1 - Long-term fiscal objectives
2009 Fiscal Strategy Report

Debt

Manage total debt at prudent levels. Over the short to medium term it is prudent to allow an increase in debt to deal with the current economic and fiscal shock.

However, we need to ensure that this increase is eventually reversed and that we return to a level of debt that can act as a buffer against future shocks.

We will do this by ensuring that net debt remains consistently below 40% of GDP, and is brought back to around 30% of GDP no later than the early 2020s.

Over the longer term, we consider that it is prudent to have net debt closer to 20% of GDP and we will work towards this as conditions permit.

Operating balance

Return to an operating surplus sufficient to meet the Government's net capital requirements, including contributions to the New Zealand Superannuation Fund, and ensure consistency with the debt objective.

Operating expenses

Reduce the growth in government spending to ensure operating expenses are consistent with the operating balance objective.

Operating revenues

Ensure sufficient operating revenue to meet the operating balance objective.

Net worth

Ensure net worth remains at a level sufficient to act as a buffer to economic shocks. Over the forecast horizon, net worth will continue to fall owing to the impact of the global financial crisis. Consistent with the debt and operating balance objectives, we will start building up net worth ahead of the demographic change expected in the mid-2020s.

Table A2 - Short-term fiscal intentions
2009 Fiscal Strategy Report 2010 Budget Policy Statement

Debt

Gross sovereign-issued debt (including Reserve Bank settlement cash and Reserve Bank bills) is forecast to be 45% of GDP in 2012/13.

Core Crown net debt (excluding NZS Fund and advances) is forecast to be 30.9% in 2012/13.

Debt

Gross sovereign-issued debt (including Reserve Bank settlement cash and Reserve Bank bills) is forecast to be 38.8% of GDP in 2013/14.

Core Crown net debt (excluding NZS Fund and advances) is forecast to be 29% in 2013/14.   

Operating balance

Based on the operating allowance for the 2009 Budget, the operating deficit is forecast to be 3.3% of GDP in 2009/10. The operating deficit is forecast to be 2.9% of GDP in 2012/13.  This decrease is consistent with the long-term objective for the operating balance.

Operating balance

Based on the operating allowance for the 2010 Budget, the operating deficit is forecast to be 2.6% of GDP in 2010/11. The operating deficit is forecast to be 1.2% of GDP in 2013/14.  This decrease is consistent with the long-term objective for the operating balance. 

Operating expenses

Total Crown expenses are forecast to be 48.2% of GDP in 2012/13. 

Core Crown expenses are forecast to be 36.3% of GDP in 2012/13.

This assumes a new operating allowance of $1.45 billion per annum for the 2009 Budget, and $1.1 billion per annum for Budgets thereafter, growing at 2% (GST exclusive).

Operating expenses

Total Crown expenses are forecast to be 44.5% of GDP in 2013/14. 

Core Crown expenses are forecast to be 34% of GDP in 2013/14.

This assumes a new operating allowance of $1.1 billion per annum for the 2010 Budget, growing at 2% for Budgets thereafter (GST exclusive).

Operating revenues

Total Crown revenues are forecast to be 44% of GDP in 2012/13. 

Core Crown revenues are forecast to be 32.1% of GDP in 2012/13.

Core Crown tax revenues are forecast to be 28.8% of GDP in 2012/13.

Operating revenues

Total Crown revenues are forecast to be 42.4% of GDP in 2013/14. 

Core Crown revenues are forecast to be 31.4% of GDP in 2013/14.

Core Crown tax revenues are forecast to be 28.5% of GDP in 2013/14.

Net worth

Total Crown net worth is forecast to be 34.5% of GDP in 2012/13. Core Crown net worth is forecast to be 10% of GDP in 2012/13.

Net worth

Total Crown net worth is forecast to be 35.3% of GDP in 2013/14. Core Crown net worth is forecast to be 9.6% of GDP in 2013/14.

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