Core Crown expenses are expected to grow in absolute terms, but fall as a share of the economy...
Core Crown expenses, which represent the operating spending of the Government excluding State-Owned Enterprises and Crown entities, are forecast to rise from $64.8 billion in the June 2010 year to $77.0 billion in the June 2014 year. This rise is expected to be driven by:
- Benefit payments are forecast to increase from $21.4 billion in the June 2010 year to $24.6 billion in the June 2014 year. The forecast increase in benefit payments over the next four years is owing to: growth in New Zealand Superannuation (NZS) recipient numbers of around 20,000 per annum (Figure 1.7), which on average adds an extra $320 million each year; indexation of social assistance benefit types increases expenses by around $1.7 billion over the next four years; offsetting some of the increase in benefit payments, a decline in Unemployment Benefit and Emergency Benefit recipient numbers from 79,000 to 60,000 as the unemployment rate falls from 7.0% in the June 2010 year to 4.6% in the June 2014 year.
- Finance costs are forecast to increase from $2.4 billion in the June 2010 year to $4.5 billion in the June 2014 year owing to the flow-on impact to debt servicing costs from the forecast increase in debt.
- The operating allowance for new spending allocated in Budget 2010 adds around $1.1 billion to expenses in the June 2011 year, primarily in the health and education sectors.[4] The operating allowance grows at 2% per annum thereafter (eg, $1.12 billion in the June 2012 year) and so adds a further $3.4 billion to expenses by the June 2014 year.
- Figure 1.7 - NZS recipient numbers
- Source: Ministry of Social Development
Although expenses rise in absolute terms, they decline as a share of the economy over time. This decline partly reflects the recovery in the economy. It also reflects the decision in Budget2009 to reduce annual operating allowances for new spending to $1.1 billion (growing at 2% per annum after 2010/11). Core Crown expenses are forecast to rise from 34.2% of GDP to 34.7% in the June 2011 year and then fall to 32.4% by the June 2014 year.
