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Budget 2017 Home Page Fiscal Strategy Report - Budget 2017

Fiscal Forecasts and Projections

For Budget 2017, fiscal forecasts have been prepared for the period 2016/17 to 2020/21 (Table 3). Medium-term projections have been prepared through to 2030/31.

Table 3 - Summary of the fiscal outlook
Actual
2016
Forecast
2017 2018 2019 2020 2021
$billions, year ended 30 June
Total Crown OBEGAL 1.8 1.6 2.9 4.1 6.1 7.2
Core Crown residual cash (1.3) 0.1 (1.8) (1.6) 1.7 1.4
Net core Crown debt1 61.9 62.3 64.1 65.7 64.2 62.8
Net worth attributable to the Crown 89.4 100.0 105.6 112.6 122.1 133.0
Core Crown expenses 73.9 77.5 80.5 83.5 86.2 89.2
Core Crown revenue 76.1 80.8 83.8 87.5 92.5 96.8
% of GDP, year ended 30 June            
Total Crown OBEGAL 0.7 0.6 1.0 1.4 2.0 2.2
Core Crown residual cash (0.5) 0.0 (0.6) (0.5) 0.5 0.4
Net core Crown debt 24.4 23.2 22.8 22.1 20.6 19.3
Net worth attributable to the Crown 35.3 37.2 37.5 37.9 39.2 40.9
Core Crown expenses 29.2 28.8 28.6 28.1 27.7 27.5
Core Crown revenue 30.1 30.0 29.7 29.5 29.7 29.8

Note:

  1. Net core Crown debt excluding the NZS Fund and advances.

Source: The Treasury

Core Crown revenue is now expected to fall to just below 30 per cent of GDP over the forecast period, largely as the result of the Family Incomes Package, reversing the increase forecast at the time of the Half Year Update.

Core Crown expenses are rising in dollar terms (Figure 7) but falling as a share of GDP, having reduced from 33.6 per cent of GDP in 2008/09 to 29.2 per cent of GDP in 2015/16. They are expected to continue to decline as a share of GDP, meeting the Government's long-term objective to maintain core Crown expenses below 30 per cent of GDP (Figure 8).

Figure 7 - Core Crown expenses
Figure 7 - Core Crown expenses.
Source: The Treasury
Figure 8 - Core Crown revenue and expenses
Figure 8 - Core Crown revenue and expenses   .
Source: The Treasury

The operating balance before gains and losses (OBEGAL) is forecast to rise from 2016/17 with surpluses reaching $7.2 billion (around 2.2 per cent of GDP) by the end of the forecast period (Figure 9). A residual cash surplus is forecast from 2019/20 (Figure 10).

Figure 9 - Total Crown operating balance (before gains and losses)
Figure 9 - Total Crown operating balance (before gains and losses)   .
Source: The Treasury
Figure 10 - Core Crown residual cash
Figure 10 - Core Crown residual cash.
Source: The Treasury

OBEGAL surpluses are projected to continue to rise, and are at levels sufficient to meet net capital requirements, including NZS Fund contributions.

Net debt has peaked as a share of GDP and is now on a downward trajectory. It is forecast to decline to 19.3 per cent of GDP by 2020/21 in line with the Government's short-term debt intention (Figure 12). Contributions to the NZS Fund are expected to resume in 2020/21.

Beyond 2020/21, projections show net debt continuing to fall and surpluses growing. The projections assume increases in operating and capital allowances beyond 2020/21 so that operating expenses stabilise as a share of GDP at the end of the forecast period and net debt is within the target range of 10 per cent to 15 per cent between 2025 and 2027.

If these projections come to pass, the Government intends to use the fiscal headroom, reflected in these higher allowances, to keep adding investment to infrastructure and public services as required, and also adjusting the tax and transfer system to increase the rewards for hard work.

Forecasts and projections are uncertain. The Government's strategy is to take a medium-term approach to economic and fiscal management, looking through any temporary ups and downs and focusing on the overall path of the Crown's finances.

Figure 11 - Net worth attributable to the Crown
Figure 11 - Net worth attributable to the Crown.
Source: The Treasury
Figure 12 - Net core Crown debt
Figure 12 - Net core Crown debt.
Source: The Treasury
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