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Budget 2016 Home Page Fiscal Strategy Report - Budget 2016

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 stronger outlook for economic activity and changes to Budget allowances (see Table A1.1). These revised fiscal intentions are consistent with the Government's long-term fiscal objectives (see Table A1.2) and the Treasury's Budget Update forecasts.

Table A1.1 - Short-term fiscal intentions
Fiscal Strategy Report 2016 (May 2016) Budget Policy Statement 2016 (Dec 2015)

Debt

Our intention is to reduce net debt to around 20 per cent of GDP in 2020.

Gross sovereign-issued debt (including Reserve Bank settlement cash and Reserve Bank bills) is forecast to be 30.4 per cent of GDP in 2019/20.

Net core Crown debt (excluding NZS Fund and advances) is forecast to be 23.1 per cent of GDP in 2018/19, 20.8 per cent of GDP in 2019/20 and is projected to be 19.3 per cent of GDP in 2020/21.

Debt

Our intention is to reduce net debt to around 20 per cent of GDP in 2020.

Gross sovereign-issued debt (including Reserve Bank settlement cash and Reserve Bank bills) is forecast to be 33.5 per cent of GDP in 2019/20.

Net core Crown debt (excluding NZS Fund and advances) is forecast to be 25.6 per cent of GDP in 2018/19, 24.0 per cent of GDP in 2019/20 and 21.9 per cent of GDP in 2020/21.

Operating balance

Our intention is to maintain rising operating surpluses (before gains and losses) so that net core Crown debt begins to reduce in dollar terms (subject to any significant shocks to the economy).

The operating balance (before gains and losses) is forecast to be 0.3 per cent of GDP in 2015/16. The operating balance (before gains and losses) is then forecast to be 0.3 per cent of GDP in 2016/17 and 2.2 per cent of GDP in 2019/20. This is consistent with the long-term objective for the operating balance.

The operating balance is forecast to be 3.2 per cent of GDP in 2019/20.

Operating balance

Our intention is to maintain rising operating surpluses (before gains and losses) so that net core Crown debt begins to reduce in dollar terms (subject to any significant shocks to the economy).

The operating balance (before gains and losses) is forecast to be -0.2 per cent of GDP in 2015/16, rising to 0.1 per cent of GDP in 2016/17 and 1.7 per cent of GDP in 2019/20.  This is consistent with the long-term objective for the operating balance.

The operating balance is forecast to be 2.6 per cent of GDP in 2019/20.

Expenses

Our intention is to support fiscal surpluses by restraining the growth in core Crown expenses and managing these to below 30 per cent of GDP.

Core Crown expenses are forecast to fall from 29.7 per cent of GDP in 2015/16 to 28.3 per cent of GDP in 2019/20.

Total Crown expenses are forecast to be 36.4 per cent of GDP in 2019/20. 

This assumes a new operating allowance of $1.5 billion in Budget 2017 and for the remainder of the forecast period, growing at 2 per cent thereafter. 

Expenses

Our intention is to support fiscal surpluses by restraining the growth in core Crown expenses and reducing these to below 30 per cent of GDP.

Core Crown expenses are forecast to fall from 30.6 per cent of GDP in 2015/16 to 29.1 per cent of GDP in 2019/20.

Total Crown expenses are forecast to be 37.3 per cent of GDP in 2019/20. 

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, growing at 2 per cent thereafter.

Revenues

Our intention is to support fiscal surpluses by growing revenue in dollar terms, although maintaining it at broadly the same proportion of GDP.

Total Crown revenues are forecast to be 38.8 per cent of GDP in 2019/20. 

Core Crown revenues are forecast to be 30.6 per cent of GDP in 2019/20.

Core Crown tax revenues are forecast to be 28.2 per cent of GDP in 2019/20.

Revenues

Our intention is to support fiscal surpluses by growing revenue in dollar terms, although maintaining it at broadly the same proportion of GDP.

Total Crown revenues are forecast to be 39.2 per cent of GDP in 2019/20. 

Core Crown revenues are forecast to be 30.7 per cent of GDP in 2019/20.

Core Crown tax revenues are forecast to be 28.4 per cent of GDP in 2019/20.

Networth

Our intention is to strengthen the Crown's balance sheet as a buffer against future adverse shocks.

Total net worth attributable to the Crown is forecast to be 36.4 per cent of GDP in 2019/20.

Total Crown net worth is forecast to be 38.4 per cent of GDP in 2019/20.

Networth

Our intention is to strengthen the Crown's balance sheet as a buffer against future adverse shocks.

Total net worth attributable to the Crown is forecast to be 36.2 per cent of GDP in 2019/20.

Total Crown net worth is forecast to be 38.2 per cent of GDP in 2019/20.

The Government's long-term objectives relate to the next 10 years. There have been minor amendments since the 2016 Budget Policy Statement to make them more robust to future developments and thus enhance their durability.

Table A1.2 - Long-term fiscal objectives
Fiscal Strategy Report 2016

Debt

Manage total debt at prudent levels.

Manage net debt within a range of 0 per cent to 20 per cent of GDP.

Operating balance

Deliver operating balances sufficient to meet the Government's net capital requirements, including contributions to the NZS Fund, and ensure consistency with the debt objective.

Operating expenses

Control the growth in government spending so core Crown expenses are 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, the Crown will build up net worth ahead of the full fiscal impact of the demographic change expected in the mid-2020s.

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. More detailed information on the principles can be found at www.treasury.govt.nz/publications/guidance/publicfinance/fiscalpolicyframework/.

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