Annex 2
Long-term Fiscal Objectives and Short-term Fiscal Intentions
The Government's long-term objectives are not materially different from the 2009 FSR. There has been a minor change to the wording of the net debt objective to refocus attention on the Government's longer-term aim of getting net debt below 20% of GDP.
| 2010 FSR |
|---|
DebtManage 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 then brought back to a level no higher than 20% of GDP by the early 2020s. We will work towards achieving this earlier as conditions permit. |
Operating balanceReturn 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 expensesReduce the growth in government spending to ensure operating expenses are consistent with the operating balance objective. |
Operating revenuesEnsure sufficient operating revenue to meet the operating balance objective. |
Net worthEnsure net worth remains at a level sufficient to act as a buffer to economic shocks. Over the medium term, net worth will continue to fall as the impact of the global financial crisis unfolds. 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. |
Note: the first two paragraphs of the debt objective in the 2009 FSR were the same as above. The 2009 FSR debt objective then read:
“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.”
The Government has revised its short-term fiscal intentions from those in the 2010 BPS, as set out in Table A2.2 below. The revised short-term fiscal intentions are consistent with the 2010 Budget Forecasts. The revised short-term fiscal intentions are also consistent with the revised long-term fiscal objectives and the principles of responsible fiscal management and reflect the Government's view of prudent debt over time.
| 2010 FSR | 2010 BPS |
|---|---|
DebtGross sovereign-issued debt (including Reserve Bank settlement cash and Reserve Bank bills) is forecast to be 35.3% of GDP in 2013/14. Core Crown net debt (excluding NZS Fund and advances) is forecast to be 26.5% in 2013/14. |
DebtGross 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 balanceBased on the operating allowance for the 2010 Budget, the operating deficit is forecast to be 3.5% of GDP in 2010/11. The operating deficit is forecast to be 0.3% of GDP in 2013/14. This decrease is consistent with the long-term objective for the operating balance. |
Operating balanceBased 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. |
ExpensesTotal Crown expenses are forecast to be 42.4% of GDP in 2013/14. Core Crown expenses are forecast to be 32.4% 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). |
ExpensesTotal 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). |
RevenuesTotal Crown revenues are forecast to be 41.1% of GDP in 2013/14. Core Crown revenues are forecast to be 30.7% of GDP in 2013/14. Core Crown tax revenues are forecast to be 27.5% of GDP in 2013/14. |
RevenuesTotal 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 worthTotal Crown net worth is forecast to be 34.8% of GDP in 2013/14. Core Crown net worth is forecast to be 10.7% of GDP in 2013/14. |
Net worthTotal 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. |
