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Budget 2008 Home Page Budget Economic and Fiscal Update 2008

2 Fiscal Outlook

Introduction

The fiscal position has strengthened over recent times. Operating and cash surpluses over the past few years have led to a build up of financial assets and to a lowering of debt (as a percentage of GDP).

Looking forward, growth in nominal GDP is forecast to slow resulting in a corresponding slowing in tax revenue growth. Additionally, Budget 2008 introduces personal tax cuts which results in core Crown revenue falling as a percentage of GDP. This is the main contributor to a reduction in OBEGAL and cash surpluses becoming deficits. These cash deficits are met by reducing financial assets accumulated in recent years and borrowing consistent with the debt objective of around 20% of GDP.

This chapter outlines the key trends for each of the indicators along with a comparison to the forecasts provided in the Half Year Update and should be read in conjunction with the financial statements (chapter 5) and the executive summary on pages 1 to 22. The chapter covers the fiscal results for the forecast period (2007/08 to 2011/12). The long-term fiscal outlook can be found on pages 42 to 64.

Each section in the chapter follows the five components of the fiscal strategy (outlined on page 45):

  • Revenue and expenses
  • Surpluses
  • Cash position
  • Debt, and
  • The New Zealand Superannuation Fund (NZS Fund).

Table 2.1 – Fiscal indicators[2]
Year ended 30 June 2007 2008 2009 2010 2011 2012
$ million Actual Forecast Forecast Forecast Forecast Forecast
Revenue and expenses            
Core Crown revenue excl NZS Fund 58,482 61,814 61,787 63,552 66,284 69,004
Core Crown expenses 54,003 57,364 61,883 63,890 67,016 69,943
Surpluses            
Total Crown OBEGAL 5,860 5,227 1,318 1,004 493 154
Total Crown OBEGAL excl NZS Fund retained revenue 6,250 5,219 1,354 1,048 543 207
Total Crown operating balance 8,023 2,559 3,105 3,009 2,779 2,734
Cash position            
Core Crown residual cash 2,877 908 (3,478) (3,302) (3,447) (3,457)
Debt            
GSID (excl Settlement Cash) 30,647 31,763 32,498 32,251 35,974 35,499
Net core Crown debt (incl NZS Fund financial assets) (7,467) (11,254) (11,337) (11,787) (12,348) (12,970)
Net core Crown debt 4,109 1,846 4,578 7,272 10,145 13,193
NZS Fund            
NZS Fund net worth 12,973 14,461 17,721 21,152 24,947 29,011
Nominal GDP 168,106 180,137 185,478 192,125 201,802 211,800
% of GDP            
Revenue and expenses            
Core Crown revenue excl NZS Fund 34.8 34.3 33.3 33.1 32.8 32.6
Core Crown expenses 32.1 31.8 33.4 33.3 33.2 33.0
Surpluses            
Total Crown OBEGAL 3.5 2.9 0.7 0.5 0.2 0.1
Total Crown OBEGAL excl NZS Fund retained revenue 3.7 2.9 0.7 0.5 0.3 0.1
Total Crown operating balance 4.8 1.4 1.7 1.6 1.4 1.3
Cash position            
Core Crown residual cash 1.7 0.5 (1.9) (1.7) (1.7) (1.6)
Debt            
GSID (excl Settlement Cash) 18.2 17.6 17.5 16.8 17.8 16.8
Net core Crown debt (incl NZS Fund financial assets) (4.4) (6.2) (6.1) (6.1) (6.1) (6.1)
Net core Crown debt 2.4 1.0 2.5 3.8 5.0 6.2
NZS Fund            
NZS Fund net worth 7.7 8.0 9.6 11.0 12.4 13.7

Source: The Treasury

Core Crown vs Total Crown

The Fiscal Outlook chapter refers to both core Crown and total Crown results.

Core Crown includes Ministers, Departments, Offices of Parliament, the NZS Fund and the Reserve Bank of New Zealand.

Total Crown includes the Core Crown, State-Owned Enterprises and Crown Entities.

Notes

  • [2]An historical trend series of the above indicators is available on page 188. The glossary on pages 184 to 187 includes a definition of these indicators.
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