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Budget 2011 Home Page Budget Economic and Fiscal Update 2011

Glossary of Terms

ACC insurance liability
The ACC insurance liability is the gross liability of the future cost of ACC claims incurred prior to balance date. The net ACC liability is the gross liability less the asset reserves held to meet these claims.
Baselines
The level of funding approved for any given spending area (eg, Vote Education). All amounts within baselines are included in the forecasts.
Consumer Price Index (CPI)
Statistics New Zealand's official index to measure the rate of change in prices of goods and services purchased by households.
Contingent assets
Contingent assets are potential assets dependent on an uncertain event occurring.
Contingent liability
Contingent liabilities are costs which the Crown will have to face if a particular uncertain and not-probable event occurs. Typically, contingent liabilities consist of guarantees and indemnities, legal disputes and claims, and uncalled capital.
Core Crown
The core Crown represents the revenues, expenses, assets and liabilities of the Crown, departments, Offices of Parliament, the Reserve Bank and the NZS Fund.
Core Crown expenses
The day-to-day spending (eg, public servants' salaries, welfare benefit payments, finance costs and maintaining national defence etc) that does not build physical assets for the Crown. This is an accrual measure of expenses and includes items such as depreciation on physical assets.
Core Crown revenue
Core Crown revenue primarily consists of tax revenue collected by the Government, but also includes investment income, sales of goods and services and other revenue.
Corporate tax
The sum of net company tax, non-resident withholding tax (NRWT) and foreign-source dividend withholding payments (FDWP).
Current account (Balance of Payments)
A measure of the flows of income between New Zealand and the rest of the world. A net inflow to New Zealand represents a current account surplus, a net outflow a deficit. The current account balance is commonly expressed as a percentage of GDP.
Cyclically adjusted or structural fiscal balance
An estimate of the fiscal balance (eg, operating balance before gains and losses) adjusted for short-term fluctuations of actual GDP around trend GDP. The estimate provides a picture of the underlying trend fiscal position and helps measure the effects of policy decisions. Because it is based on a number of assumptions and is sensitive to new information, the estimate is subject to some uncertainty.
Demographic changes
Changes to the structure of the population such as the age, gender or ethnic make-up.
Domestic bond programme
The amount and timing of additional government bonds expected to be issued in the next financial year.
Excise duties
Tax levied on the domestic production of alcohol, tobacco and light petroleum products (CNG, LPG and petrol).
Financial assets
Cash or shares (equity), a right to receive cash or shares (equity), or a right to exchange a financial asset or liability on favourable terms.
Fiscal impulse
A summary measure of how changes in fiscal policy affect aggregate demand. To isolate discretionary changes, fiscal impulse is calculated on a cyclically-adjusted basis and excludes net interest payments. To better capture the role of capital spending the indicator is derived from cash flow information.
Fiscal intentions (short term)
Under the Public Finance Act 1989, the Government is required to explicitly indicate its intentions for operating expenses and operating revenues, and the impact of its intentions on the operating balance, debt and net worth over (at least) the next three years.
Fiscal objectives (long term)
The Government's long-term goals for operating expenses, operating revenue, the operating balance, debt and net worth, as required by the Public Finance Act 1989. The objectives must be consistent with the defined principles of responsible fiscal management as outlined in the Act and must cover a period of (at least) 10 years.
Forecast new capital spending
An amount provided in the forecasts to represent the balance sheet impact of capital initiatives expected to be introduced over the forecast period.
Forecast new operating spending
An amount included in the forecasts to provide for the operating balance impact of policy initiatives and changes to demographics and other forecasting changes expected to occur over the forecast period.
Gains and Losses
Gains and losses typically arise from the revaluation of assets and liabilities, such as investments in financial assets and long-term liabilities for ACC and the Government Superannuation Fund. Gains and losses are reported directly as a movement in net worth (eg, asset revaluation reserves) or indirectly through the statement of financial performance. The impact of gains and losses on the operating balance can be volatile. The operating balance (before gains and losses) indicator can provide a more useful measure of underlying stewardship.
GDP deflator
An index of changes in the general price level in the economy. It is calculated as the ratio of nominal GDP to real GDP.
Gross domestic product (GDP)
A measure of the value of all goods and services produced in New Zealand; changes in GDP measure growth or contraction in economic activity or output. GDP can be measured as the actual dollar value of goods and services at today's prices (nominal GDP), or excluding the effects of price changes over time (real GDP).
Gross domestic product (expenditure)
The sum of total final expenditure on goods and services in the economy.
Gross national expenditure (GNE)
A measure of total expenditure on final goods and services by New Zealand residents.
Gross sovereign-issued debt (GSID)
Includes all debt issued by the sovereign (the core Crown). It therefore includes Government stock held within the Crown (eg, by the NZS Fund, ACC and EQC).
Labour force participation rate
Measures the percentage of the working-age population in work or actively looking for and available for work.
Labour productivity
Measures output per unit of labour input (where labour inputs might be measured as hours worked or the number of people employed).
Line-by-line consolidation
A term used to refer to the general approach to the presentation of the Crown financial statements. It means that the individual line items for revenues, expenses, assets and liabilities in the Crown financial statements include all departments, Offices of Parliament, the Reserve Bank, State-owned enterprises, Crown entities and other entities controlled by the Government.
Marketable securities
Assets held with financial institutions. These assets are held for both cash flow and investment purposes, and include any funds the Government has invested in the International Monetary Fund.
Monetary conditions
Aggregate monetary conditions measure the degree to which short-term interest rates and the exchange rate either support or restrict economic growth.
Monetary policy
The Reserve Bank implements its monetary policy decisions by adjusting its Official Cash Rate (OCR) in an effort to maintain stability in general level of prices within a defined annual CPI target range.
Tightening monetary policy means raising the OCR in order to moderate aggregate demand pressures and reduce inflationary pressures. Easing monetary policy has the reverse effect.
Net core Crown cash flow from operations
Operating balance (before gains and losses) less retained items (eg, net surplus of State-owned enterprises, Crown entities and NZS Fund net revenue) less non-cash items (eg, depreciation).
Net core Crown debt
Represents GSID less core Crown financial assets (excluding advances and financial assets held by the NZS Fund). Advances and financial assets held by the NZS Fund are excluded as these assets are less liquid and/or they are made for public policy reasons rather than for the purposes associated with government financing. Net core Crown debt provides information about the sustainability of the Government's accounts, and is used by some international rating agencies when determining the creditworthiness of a country.
Net international investment position (NIIP)
Measures the net value of New Zealand's international assets and liabilities at a point in time.
Net worth
Total assets less total liabilities (also referred to as the Crown balance). The change in net worth in any given forecast year is largely driven by the operating balance.
Net worth excluding social assets
A measure that provides the Government with an idea of how its assets which earn a financial return match its liabilities. The measure consists of the financial assets of the core Crown and Crown entities, all assets of State-owned enterprises (excluding the physical assets of KiwiRail), and total liabilities.
New Zealand equivalents to International Financial Reporting Standards (NZ IFRS)
These standards are approved by the Accounting Standards Review Board in New Zealand. They are based on requirements of the international financial reporting standards issued by the International Accounting Standards Board, adjusted where appropriate for entities that are not profit oriented.
Operating balance
The residual of revenues less expenses plus surpluses from State-owned enterprises and Crown entities. It includes gains and losses not reported directly as a movement against net worth.
Operating balance before gains and losses
The impact of gains and losses on the operating balance can be volatile so the operating balance before gains and losses can provide a more useful measure of underlying stewardship.
Output gap
The difference between actual and potential GDP. Potential GDP is the level of output an economy can sustain without acceleration of inflation.
Productivity
The amount of output (eg, GDP) per unit of input.
Projections
Projections of the key fiscal indicators beyond the five-year forecast period. The projections are based on long-run economic and fiscal assumptions. For example, the projections assume no economic cycle and constant long-run interest, inflation and unemployment rates.
Public Private Partnership (PPP)
No single widely accepted definition for the term PPP exists. However, most descriptions characterise a PPP as an arrangement between a public sector entity and a private sector entity to deliver a public sector asset (normally infrastructure or a public facility) and/or service. In this way, PPP arrangements offer an alternative to traditional public sector procurement methods used to accomplish a public duty or responsibility.
Residual cash
The level of money the Government has available to repay debt or, alternatively, needs to borrow in any given year. Residual cash is alternatively termed “Cash available/(shortfall to be funded)”.
Residual cash is equal to net core Crown cash flow from operations excluding NZS Fund activity less core Crown capital commitments (eg, contributions to NZS Fund, purchase of assets, loans to others).
Settlement cash
This is the amount of money deposited with the Reserve Bank by registered banks. It is a liquidity mechanism used to settle wholesale obligations between registered banks and provides the basis for settling most of the retail banking transactions that occur every working day between corporates and individuals.
Specific fiscal risks
A category of government decisions or circumstances which may have a material impact on the fiscal position. They are not included in the main forecasts because their fiscal impact cannot be reasonably quantified, the likelihood of realisation is uncertain and/or the timing is uncertain.
System of National Accounts (SNA)
SNA is a comprehensive, consistent and flexible set of macroeconomic accounts which meets the needs of government and private sector analysts, policy-makers and decision-takers.
Tax revenue
The accrual, rather than the cash (“tax receipts”) measure of taxation. It is a measure of tax due at a given point in time, regardless of whether or not it has actually been paid.
Top-down adjustment
An adjustment to expenditure forecasts to reflect the extent to which departments use appropriations (upper spending limits) when preparing their forecasts. As appropriations apply to the core Crown only, no adjustment is required to State-owned enterprises or Crown entity forecasts.
Total borrowings
Total borrowings represent the Government's debt obligations to external parties. Total borrowings can be split into sovereign-guaranteed debt and non-sovereign-guaranteed debt. Non-sovereign-guaranteed debt represents the debt obligations of State-owned enterprises and Crown entities that are not explicitly guaranteed by the Crown.
Tradable/non-tradable
There is no official definition of the tradable sector. In this document the tradable sector is the part of the economy particularly exposed to foreign competition. It includes primary, manufacturing and tourism industries. Non-tradable output is estimated as a residual of total real GDP.
Trade weighted index (TWI)
A measure of movements in the New Zealand dollar against the currencies of our major trading partners. The currencies comprise the US dollar, the Australian dollar, the Japanese yen, the euro and the UK pound.
Unit labour costs
The wages and other costs associated with employment per unit of output.
Year ended
Graphs and tables use different expressions of the timeframe. For example, 2010/11 or 2011 will generally mean “year ended 30 June” unless otherwise stated.
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