Short-term fiscal intentions
Our intention is to return the total Crown operating balance (before gains and losses) to a surplus no later than 2015/16. Current forecasts show that a meaningful surplus will be achieved in 2014/15. The deficit is expected to peak at $16.7 billion or 8.4% of GDP in 2010/11. Since the Half Year Update in December 2010, we have experienced a series of shocks, including the costs associated with the second Canterbury earthquake. These one-off costs impact on the operating balance (before gains and losses) in the 2010/11 year. In the following year, the deficit then almost halves to $9.7 billion or 4.7% of GDP, illustrating the one-off nature of many of these expenses.
Although the total Crown operating balance (before gains and losses) includes SOE and Crown entity revenue and expenses, it is core Crown revenue and expenses that are most directly under the control of the Government. Table 2 outlines the controlled growth in core Crown expenses over the next four years.
| Year ended 30 June $billion |
2011 Forecast |
2012 Forecast |
2013 Forecast |
2014 Forecast |
2015 Forecast |
|---|---|---|---|---|---|
| Movements in expenditure | |||||
New spending |
|||||
| Budget 2010 decisions | 1.4 | 1.2 | 1.2 | 1.2 | 1.2 |
| Budget 2011 decisions | - | 0.4 | (0.1) | (0.4) | (0.3) |
| Budget 2012 allowance | - | - | 0.8 | 0.8 | 0.8 |
| Budget 2013 allowance | - | - | - | 0.8 | 0.8 |
| Budget 2014 allowance | - | - | - | - | 1.2 |
Existing policies |
|||||
| Increases in New Zealand Superannuation costs | 0.5 | 1.3 | 1.9 | 2.6 | 3.4 |
| Increase in other social assistance | 0.5 | 0.7 | 0.7 | 0.7 | 0.8 |
| Emissions Trading Scheme | 1.2 | 0.6 | 0.3 | 0.3 | 0.3 |
| Debt impairments | 0.2 | 0.5 | 0.5 | 0.6 | 0.7 |
| Finance costs | 0.8 | 1.4 | 2.0 | 2.4 | 2.9 |
Short-term expenses |
|||||
| Canterbury earthquakes | 2.5 | 1.5 | 0.3 | 0.2 | 0.2 |
| Weathertight homes | 0.7 | - | - | - | - |
| Deposit Guarantee Scheme | 0.3 | - | - | - | - |
| Other movements | 0.7 | 1.4 | 1.0 | 0.9 | 1.1 |
| Increase in core Crown expenses | 8.8 | 9.0 | 8.6 | 10.1 | 13.1 |
| Baseline expenses (June 2010) | 64.0 | 64.0 | 64.0 | 64.0 | 64.0 |
| Core Crown expenses | 72.8 | 73.0 | 72.6 | 74.1 | 77.1 |
Core Crown expenses are forecast to increase by $4.3 billion over the next four years. Some areas of expenditure will continue to increase, such as NZS, health care and education. The Government is committed to ensuring that operating expenses grow more slowly than the economy. Our intention is to support a return to surplus by controlling the growth in operating expenses, so that core Crown expenses fall as a percentage of GDP to around 31% of GDP by 2014/15. This is a similar share to that in 2006/07, and slightly higher than the average of core Crown expenses in the first half of the 2000s.
