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Budget Policy Statement 2012

Annex 1

Long-term fiscal objectives and short-term fiscal intentions

The Government remains committed to the long-term fiscal objectives set out in Fiscal Strategy Report 2011 - as shown below in Table A1. These long-term objectives are consistent with the principles of responsible fiscal management.

The Government's short-term fiscal intentions have been revised since Budget 2011, consistent with the revisions to the fiscal forecasts (see Table A2). The short-term intention for the operating balance has also been revised consistent with the Government's intention to return the operating balance (before gains and losses) to surplus no later than 2014/15, subject to any significant shocks. These revised fiscal intentions are consistent with the Government's long-term fiscal objectives.

Table A1 - Long-term fiscal objectives
Fiscal Strategy Report 2011

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 35% 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 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

To meet the operating balance objective, the Government will control the growth in government spending so that over time, core Crown expenses are reduced to around 30% of GDP.

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 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.

Table A2 - Short-term fiscal intentions
Budget Policy Statement 2012 Fiscal Strategy Report 2011

Debt

Gross sovereign-issued debt (including Reserve Bank settlement cash and Reserve Bank bills) is forecast to be 36.9% of GDP in 2015/16.

Core Crown net debt (excluding NZS Fund and advances) is forecast to be 28.6% in 2015/16.

Debt

Gross sovereign-issued debt (including Reserve Bank settlement cash and Reserve Bank bills) is forecast to be 37.2% of GDP in 2014/15.

Core Crown net debt (excluding NZS Fund and advances) is forecast to be 29.6% in 2014/15.

Operating balance

Our intention is to return the operating balance (before gains and losses) to surplus as soon as practical and no later than 2014/15, subject to any significant shocks.

Based on the operating allowance for the 2012 Budget, the operating balance (before gains and losses) is forecast to be -2.6% of GDP in 2012/13. The operating balance (before gains and losses) is forecast to be 0.2% of GDP in 2014/15.  This is consistent with the long-term objective for the operating balance.

The operating balance is forecast to be -1.5% of GDP in 2012/13.

Operating balance

Our intention is to return the operating balance (before gains and losses) to surplus as soon as practical and no later than 2015/16, subject to any significant shocks.

Based on the operating allowance for the 2011 Budget, the operating deficit is forecast to be 3.5% of GDP in 2011/12. The operating balance is forecast to be 1.9% of GDP in 2014/15.  This is consistent with the long-term objective for the operating balance.

The operating deficit (before gains and losses) is expected to be 4.7% in 2011/12.

Expenses

Our intention is to support a return to fiscal surplus by restraining the growth in core Crown expenses - so that they are reduced to around 30% of GDP by 2015/16.

Core Crown expenses are forecast to be 30.3% of GDP in 2015/16.

Total Crown expenses are forecast to be 39.8% of GDP in 2015/16. 

This assumes a new operating allowance of $800 million per annum for Budgets 2012 and 2013, then returning to $1.19 billion, growing at 2% for Budgets thereafter (GST exclusive).

Expenses

Our intention is to support a return to fiscal surplus by restraining the growth in core Crown expenses - so that they are reduced to around 31% of GDP by 2014/15.

Core Crown expenses are forecast to be 31.3% of GDP in 2014/15.

Total Crown expenses are forecast to be 40.5% of GDP in 2014/15. 

This assumes a new operating allowance of $800 million per annum for Budgets 2012 and 2013, then returning to $1.19 billion, growing at 2% for Budgets thereafter (GST exclusive).

Revenues

Total Crown revenues are forecast to be 40.9% of GDP in 2015/16. 

Core Crown revenues are forecast to be 30.5% of GDP in 2015/16.

Core Crown tax revenues are forecast to be 27.8% of GDP in 2015/16.

Revenues

Total Crown revenues are forecast to be 41% of GDP in 2014/15. 

Core Crown revenues are forecast to be 31% of GDP in 2014/15.

Core Crown tax revenues are forecast to be 27.8% of GDP in 2014/15.

Net worth

Total Crown net worth is forecast to be 27.5% of GDP in 2015/16. Core Crown net worth is forecast to be 8.2% of GDP in 2015/16.

Net worth

Total Crown net worth is forecast to be 34.1% of GDP in 2014/15. Core Crown net worth is forecast to be 7.9% of GDP in 2014/15.

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