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Budget 2015 Home Page Fiscal Strategy Report - Budget 2015

Annex 1

Short-term Fiscal Intentions and Long-term Fiscal Objectives

The Government's short-term fiscal intentions are substantially unchanged since the Budget Policy Statement. There are minor changes to the intentions reflecting the revisions to the fiscal forecasts, largely reflecting the weaker outlook for inflation (see Table A1.1). These revised fiscal intentions are consistent with the Government's long-term fiscal objectives (see Table A1.2) and the BEFU forecasts.

Table A1.1 - Short-term fiscal intentions
Fiscal Strategy Report 2015 (May 2015) Budget Policy Statement 2015 (Dec 2014)

Debt

Gross sovereign-issued debt (including Reserve Bank settlement cash and Reserve Bank bills) is forecast to be 31.4 per cent of GDP in 2018/19.

Net core Crown debt (excluding NZS Fund and advances) is forecast to be 22.9 per cent in 2018/19, 20.9 per cent of GDP in 2019/20 and 19.7 per cent of GDP in 2020/21.

Debt

Gross sovereign-issued debt (including Reserve Bank settlement cash and Reserve Bank bills) is forecast to be 31.0 per cent of GDP in 2018/19.

Net core Crown debt (excluding NZS Fund and advances) is forecast to be 22.5 per cent in 2018/19.

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.

The operating balance (before gains and losses) is forecast to be -0.3 per cent of GDP in 2014/15. The operating balance (before gains and losses) is then forecast to be 0.1 per cent of GDP in 2015/16 and 1.3 per cent of GDP in 2018/19. This is consistent with the long-term objective for the operating balance.

The operating balance is forecast to be 2.3 per cent of GDP in 2018/19.

Operating balance

Our intention is to return the operating balance (before gains and losses) to surplus in 2014/15.

The operating balance (before gains and losses) is forecast to be -0.2 per cent of GDP in 2014/15, and 0.2 per cent of GDP in 2015/16.  This is consistent with the long-term objective for the operating balance.

The operating balance is forecast to be 0.8 per cent of GDP in 2014/15.

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 per cent of GDP by 2015/16.

Core Crown expenses are forecast to be 29.2 per cent of GDP in 2018/19.

Total Crown expenses are forecast to be 37.7 per cent of GDP in 2018/19.

This assumes a new operating allowance of $1 billion in Budget 2016, $2.5 billion in Budget 2017 and $1.5 billion from Budget 2018.  

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 per cent of GDP by 2015/16.

Core Crown expenses are forecast to be 29.0 per cent of GDP in 2018/19.

Total Crown expenses are forecast to be 37.7 per cent of GDP in 2018/19. 

This assumes new operating allowances over the Parliamentary term of $1 billion in Budgets 2015 and 2016, and $2.5 billion in Budget 2017.

Revenues

Total Crown revenues are forecast to be 39.2 per cent of GDP in 2018/19. 

Core Crown revenues are forecast to be 30.6 per cent of GDP in 2018/19.

Core Crown tax revenues are forecast to be 28.2 per cent of GDP in 2018/19.

Revenues

Total Crown revenues are forecast to be 39.3 per cent of GDP in 2018/19. 

Core Crown revenues are forecast to be 30.4 per cent of GDP in 2018/19.

Core Crown tax revenues are forecast to be 27.9 per cent of GDP in 2018/19.

Net worth

Total Crown net worth is forecast to be 34.6 per cent of GDP in 2018/19.

Total net worth attributable to the Crown is forecast to be 32.8 per cent of GDP in 2018/19.

Net worth

Total Crown net worth is forecast to be 36.8 per cent of GDP in 2018/19.

Total net worth attributable to the Crown is forecast to be 35.0 per cent of GDP in 2018/19.

The Government's long-term objectives relate to the next 10 years. These are unchanged from the 2014 Fiscal Strategy Report.

Table A1.2 - Long-term fiscal objectives

Fiscal Strategy Report 2015

Debt

Manage total debt at prudent levels.

We will reduce net debt to a level no higher than 20 per cent of GDP by 2020. We will work towards achieving this earlier as conditions permit.

Beyond 2020, we intend to maintain net debt within a range of around 10 per cent to 20 per cent of GDP over the economic cycle.

Operating balance

Return to an operating surplus sufficient to meet the Government's net capital requirements, including contributions to the NZS 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 below 30 per cent 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. Consistent with the debt and operating balance objectives, we will start building up net worth ahead of the full fiscal impact of the demogra

These short-term intentions and long-term objectives are consistent with each other and with the principles of responsible fiscal management as set out in the Public Finance Act 1989.

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