The Treasury

Global Navigation

Personal tools

Government
Publication

Budget Policy Statement 2017

The Government's books have turned around markedly

Before the 2009 Budget, the Treasury projected that if the Government had maintained the fiscal track it inherited net debt would exceed 60 per cent of GDP by the early 2020s. Following the Canterbury earthquakes, the Government’s annual deficit peaked at $18.4 billion in 2010/11 – around half of which was directly attributable to the earthquakes.

This was unsustainable, so the Government focused on improving public sector productivity and getting better results from existing spending. Substantial improvements in public services have been achieved, in part because of, rather than in spite of, tight financial constraints.

By carefully managing the public finances and addressing the underlying drivers of demand for public services, the Government delivered on its plan to get back to surplus in 2014/15 and remain there, achieving a $1.8 billion surplus in 2015/16.

The Treasury's latest forecast for stronger nominal GDP flows through to a higher tax take over the forecast period, with tax revenue expected to be $7.7 billion higher over the four years to 2020 compared with Budget 2016.

A number of factors broadly offset the increase in tax revenue, including higher social assistance expenses, higher new spending allowances for capital, weaker than expected ACC results, higher net finance costs and the $1 billion initial estimate of net fiscal costs from the Kaikōura earthquakes.

Figure 2 - Operating balance (before gains and losses)
Figure 2 - Operating balance (before gains and losses).
Source: The Treasury
Figure 3 - Net core Crown debt
Figure 3 - Net core Crown debt   .
Source: The Treasury

After accounting for the $1 billion cost of the recent earthquakes, the Treasury forecasts a $473 million OBEGAL surplus in 2016/17, rising to $8.5 billion in 2020/21 (Figure 2).

Although OBEGAL surpluses continue, in dollar terms net debt is still forecast to increase by a further $4.5 billion over the next two years, owing to the Government's capital investment programme.

The forecasts show net debt as a proportion of GDP has peaked and is forecast to fall to 18.8 per cent of GDP in 2020/21. Crown net worth is forecast to continue to increase in line with the reduction in net debt.

Table 3 - Summary of the Treasury's fiscal forecasts
Year ending 30 June
$billions
2016
Actual
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast
2021
Forecast
OBEGAL
Half Year Update 1.8 0.5 3.3 5.4 6.8 8.5
Budget Update   0.7 2.5 5.0 6.7  
Change   (0.2) 0.8 0.4 0.1  
Residual cash
Half Year Update (1.3) (2.2) (2.1) 1.4 3.0 2.6
Budget Update   (4.2) (2.1) 2.0 3.9  
Change   2.0 0.0 (0.6) (0.9)  
Net worth attributable to the Crown
Half Year Update 89.4 93.0 99.1 107.4 117.3 129.3
Budget Update   86.6 91.6 99.2 108.9  
Change   6.4 7.5 8.2 8.4  
Net debt
Half Year Update 61.9 64.4 66.4 65.0 62.1 59.6
Budget Update   66.3 68.3 66.3 62.3  
Change   (1.9) (1.9) (1.3) (0.2)  
Net debt (% of GDP)
Half Year Update 24.6 24.3 23.8 22.2 20.3 18.8
Budget Update   25.6 25.0 23.1 20.8  
Change   (1.3) (1.2) (0.9) (0.5)  

Source: The Treasury

Page top