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Budget Policy Statement 2017

Annex

Long-term Fiscal Objectives and Short-term Fiscal Intentions

The Government's long-term objectives relate to the next 10 years. These long-term objectives have not been amended since the Fiscal Strategy Report 2016 (FSR).

Table A1 - Long-term fiscal objectives

Budget Policy Statement 2017

Debt

Manage total debt at prudent levels.

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

Operating balance

Return to an operating surplus sufficient to meet the Government's net capital requirements, including contributions to the NZ 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 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 demographic change expected in the mid-2020s.

The Government's short-term fiscal intentions (in Table A2 below) include changes since the FSR 2016 reflecting revisions to the Treasury's fiscal forecasts. These forecasts include the impact of the Government's proposed budget allowances, including the increase in the capital allowances for Budgets 2017 to 2020.

The 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. That is, they aim to:

  • reduce total debt to prudent levels and achieve and maintain levels of total net worth so as to provide a buffer against adverse economic shocks
  • ensure that on average total operating expenses do not exceed total operating revenues
  • take into account the impact of fiscal policy on monetary policy
  • prudently manage the fiscal risks facing government
  • have regard for present and future generations, and
  • ensure the Crown's resources are managed effectively and efficiently.

More detailed information about the principles of responsible fiscal management can be found at: www.treasury.govt.nz/publications/guidance/publicfinance/fiscalpolicyframework/

Table A2 - Short-term fiscal intentions

Budget Policy Statement 2017

Fiscal Strategy Report 2016

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 28.8 per cent of GDP in 2019/20.

Net core Crown debt (excluding NZ Superannuation Fund and advances) is forecast to be 22.2 per cent of GDP in 2018/19, 20.3 per cent of GDP in 2019/20 and 18.8 per cent 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 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.

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 2016/17, rising to 1.2 per cent of GDP in 2017/18 and 2.7 per cent of GDP in 2020/21.  This is consistent with the long-term objective for the operating balance.

The operating balance is forecast to be 3.8 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.

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 29.6 per cent of GDP in 2016/17 to 27.7 per cent of GDP in 2020/21.

Total Crown expenses are forecast to be 35.5 per cent of GDP in 2020/21. 

This assumes new operating allowances of $1.5 billion per annum in Budgets 2017 to 2020.

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 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

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 38.4 per cent of GDP in 2020/21. 

Core Crown revenues are forecast to be 30.6 per cent of GDP in 2020/21.

Core Crown tax revenues are forecast to be 28.3 per cent of GDP in 2020/21.

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.

Net worth

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 40.7 per cent of GDP in 2020/21.

Total Crown net worth is forecast to be 42.5 per cent of GDP in 2020/21.

Net worth

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.

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