Additional Fiscal Indicators (continued)
Treasury's summary fiscal indicators
Based on the 2010 BEFU Forecasts, the estimate of fiscal impulse for the 2010 fiscal year has decreased from an expansionary 2.2% of GDP at the 2009 HYEFU Forecasts to 2% of GDP. This change largely reflects the stronger economy and the tax changes.
Using the CAB for the purpose of assessing the impact of the economy on the fiscal position is arguably less problematic than using it to assess discretionary policy changes and aggregate demand effects. Notwithstanding that the CAB is influenced by non-policy related structural effects, it does give a perspective on the sustainability of the fiscal position, particularly when supplemented with medium-term fiscal projections contained in the Fiscal Strategy Report.
Because it provides a clearer view of underlying fiscal performance, the operating balance before gains and losses is used in the CAB indicator (see Figure 1 below).
Output in the 2009 HYEFU Forecasts was below potential across the forecast period, with the gap closing in 2014. Now the output gap troughs at -1.5% and the CAB indicates a structural deficit in 2013 of around 1.6% of GDP compared to around 2.4% at the time of the HYEFU forecasts.
- Figure 1 - Operating balance before gains and losses and cyclically-adjusted indicator
- Source: The Treasury
Figure 2 - Fiscal impulse
- Source: The Treasury
