...operating deficits peak in the June 2011 year owing to one-off factors...
As the trend of expenses exceeding revenue continues, significant operating deficits are expected over the forecast period. The total Crown operating balance (before gains and losses) is expected to be in deficit by $6.9 billion this year (3.7% of GDP). Operating deficits are forecast to peak at $8.6 billion (4.2% of GDP) in the June 2011 year owing to:
- the tax package is broadly fiscally neutral by the end of the forecast period, as outlined on page 70. However, it has a fiscal cost in the June 2011 year (eg, social assistance benefits are compensated for the rise in the GST rate)
- underlying tax revenue is weaker in the early part of the forecast period (as previously mentioned), and
- finance costs and some one-off expenditure, including a number of expenses that have been transferred from the current year into next (such as transport spending and Treaty of Waitangi settlements).
By the June 2014 year, operating deficits are expected to fall to $3.0 billion (1.3% of GDP) as a result of a rise in tax revenue (Figure 1.8). Compared to the Half Year Update, operating deficits are expected to be smaller, reflecting the stronger economic outlook. The reduction in operating deficits has also flowed through to improvements in the residual cash and net debt position.
- Figure 1.8 - Total Crown operating balance before gains and losses
- Source: The Treasury
The total Crown operating balance including gains and losses is also in deficit across the forecast period. The deficit is forecast to be smaller when gains and losses are included because Crown financial institutions such as the New Zealand Superannuation (NZS) Fund are forecasting, on average, to make gains over the forecast period.
The underlying nature of these deficits can be measured by the cyclically-adjusted, or structural, balance, which gauges how much of the operating balance before gains and losses reflects temporary cyclical factors rather than long-lasting factors. While the cyclically-adjusted deficit is estimated to fall from 4.0% of GDP in the June 2011 year to 1.1% in the June 2014 year, the fact it remains negative means that operating deficits are largely structural.[5]
| Year ended 30 June |
2009 Actual |
2010 Forecast |
2011 Forecast |
2012 Forecast |
2013 Forecast |
2014 Forecast |
|---|---|---|---|---|---|---|
$ billion |
||||||
| Core Crown revenue | 59.5 | 56.4 | 60.3 | 64.5 | 68.5 | 72.9 |
| Core Crown expenses | 64.0 | 64.8 | 70.7 | 71.5 | 74.2 | 77.0 |
| Core Crown operating balancea | -4.5 | -8.4 | -10.4 | -7.0 | -5.7 | -4.2 |
| Total Crown operating balancea | -3.9 | -6.9 | -8.6 | -5.4 | -4.4 | -3.0 |
| Total Crown operating balance incl. gains & losses | -10.5 | -3.2 | -7.1 | -3.6 | -2.4 | -0.8 |
| Residual cash | -8.6 | -9.1 | -13.3 | -9.7 | -7.5 | -6.0 |
| Net debtb | 17.1 | 26.6 | 40.0 | 49.6 | 57.1 | 63.0 |
| Gross debtc | 43.4 | 53.8 | 67.0 | 69.7 | 71.6 | 77.8 |
| Net worth | 99.5 | 96.5 | 89.4 | 85.8 | 83.5 | 82.6 |
% of GDP |
||||||
| Core Crown revenue | 32.2 | 29.8 | 29.6 | 29.9 | 30.3 | 30.7 |
| Core Crown expenses | 34.7 | 34.2 | 34.7 | 33.1 | 32.9 | 32.4 |
| Core Crown operating balancea | -2.5 | -4.4 | -5.1 | -3.2 | -2.5 | -1.8 |
| Total Crown operating balancea | -2.1 | -3.7 | -4.2 | -2.5 | -1.9 | -1.3 |
| Total Crown operating balance incl. gains & losses | -5.7 | -1.7 | -3.5 | -1.7 | -1.1 | -0.3 |
| Residual cash | -4.7 | -4.8 | -6.5 | -4.5 | -3.3 | -2.5 |
| Net debtb | 9.3 | 14.1 | 19.6 | 23.0 | 25.3 | 26.5 |
| Gross debtc | 23.5 | 28.4 | 32.8 | 32.3 | 31.7 | 32.7 |
| Net worth | 54.0 | 50.9 | 43.9 | 39.8 | 37.0 | 34.8 |
Notes:
- Operating balance before gains and losses
- Net core Crown debt excluding the New Zealand Superannuation Fund and advances
- Gross sovereign-issued debt excluding Reserve Bank bills and settlement cash
A glossary and longer time series for these variables is provided on page 159.
Source: The Treasury
Notes
- [5]For more details, see the Additional Information on the Treasury website.
