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Budget 2016 Home Page Fiscal Strategy Report - Budget 2016

Contributions to the New Zealand Superannuation Fund

Contributions to the NZS Fund are projected to resume in 2020/21 when net debt falls below 20 per cent of GDP.

This delay in contributions will not affect New Zealanders' entitlement to New Zealand Superannuation, either now or in the future. Low debt is equally as important as NZS Fund assets in meeting some of the future fiscal pressures from population ageing.

Table A1.3 shows the contributions that would be required if they started again in 2016/17.

Table A1.3 - New Zealand Superannuation Fund calculations ($billions)
Year ended 30 June 2017 2018 2019 2020
Calculations of annual contributions if they were to resume in 2016/17 2.1 2.4 2.6 2.6

Fiscal projections and assumptions

Fiscal projections out to 2030 are made using the final forecast year (2020) as a base (Table A1.4). These are constructed using the Fiscal Strategy Model. The main changes to fiscal projections, since the Fiscal Strategy Report 2015, reflect changes to economic and fiscal forecasts, including changes to the outlook for nominal GDP, and the profiles for the operating and capital allowances. The only other significant change to assumptions since the Fiscal Strategy Report 2015 is a reduction in the long-run stable assumption for the annual rate of return on Government 10-year bonds. After reviewing this assumption, the Treasury elected to reduce it from a nominal annual return of 5.5 per cent to 5.3 per cent at the recent 2015 Half Year Update.

The full set of modelling assumptions is outlined on the Treasury website at www.treasury.govt.nz/government/fiscalstrategy/model. Key assumptions include:

  • non-welfare spending growth is largely determined by operating allowances
  • operating allowances are $1.6 billion in Budget 2016, and $1.5 billion across the remainder of the forecast period, then growing at a rate of 2 per cent per annum for subsequent Budgets
  • new capital spending allowances are $1.4 billion in Budget 2016, and $0.9 billion across the remainder of the forecast period, then growing at a rate of 2 per cent per annum for subsequent Budgets, and
  • the economy is assumed to grow at trend growth rates with no economic cycles three years after the forecast period.
Table A1.4 - Summary of fiscal projections, as percentages of nominal GDP
Year ending 30 June 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2030
  Forecasts Projections
Core Crown revenue 30.1 30.3 30.0 30.3 30.6 30.5 30.7 30.8 30.9 30.9 30.9 31.0
Core Crown expenses 29.7 29.9 29.1 28.5 28.3 28.1 28.0 27.9 27.7 27.6 27.4 26.5
Total Crown revenue 39.1 38.9 38.6 38.7 38.8 38.8 39.0 39.1 39.2 39.2 39.2 39.3
Total Crown expenses 38.6 38.5 37.5 36.8 36.4 36.3 36.2 36.1 35.9 35.8 35.6 34.6
Total Crown OBEGAL[1] 0.3 0.3 0.9 1.7 2.2 2.3 2.6 2.8 3.0 3.2 3.4 4.5
Total Crown operating balance[2] -1.0 1.2 1.8 2.6 3.2 3.2 3.5 3.8 4.1 4.4 4.6 5.8
Gross soverign-issued debt 37.6 39.0 35.3 31.9 30.4 28.9 27.1 25.1 22.8 20.3 17.6 4.4
Net core Crown debt[3] 24.9 25.6 25.0 23.1 20.8 19.3 17.5 15.5 13.2 10.6 7.9 -5.2
Total Crown net worth 35.7 35.7 35.6 36.6 38.4 40.0 41.9 43.9 46.2 48.7 51.3 63.8
Net worth attributable to the Crown 33.4 33.4 33.5 34.5 36.4 38.0 40.0 42.1 44.4 46.9 49.5 62.1

Source: The Treasury

  1. Operating balance (before gains and losses).
  2. Excludes minority interests.
  3. Excludes financial assets of the NZS Fund and core Crown advances.
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