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Budget 2011 Home Page Budget Economic and Fiscal Update 2011

Additional Fiscal Indicators

Economic and Fiscal Update Additional Information.[1]

The Treasury estimates two summary fiscal indicators: the cyclically-adjusted balance (CAB) and the fiscal impulse indicator. The fiscal impulse indicator uses the change in a cash-based version of the cyclically-adjusted balance. The cyclically-adjusted balance indicator is subject to uncertainty because it uses estimated variables and is sensitive to new information, particularly regarding the output gap. Further information on the methodology behind the indicators can be found in Treasury Working Papers 02/30 and 10/08.[2] At this Economic and Fiscal Update, there are somekey changes to the information provided:

  1. The significant "one-off" impact on expenses of the Canterbury earthquake is removed from estimates of the cyclically-adjusted balance. This is to give a better indication of the underlying fiscal position. Earthquake expenditure is not removed when calculating the fiscal impulse indicator, since it is expected to add to demand pressure along with other government expenditure.
  2. The fiscal impulse is shown for both the core Crown and combined core Crown and Crown entity segments. Previously, only estimates for the core Crown were published. The core Crown indicator mostly reflects changes in receipts and expenditure which are impacted by Budget decisions, whereas the core Crown plus Crown entity indicator provides a better indication of the total impact of central government activities.
  3. To quantify uncertainty, sensitivity analysis is performed for both the cyclically-adjusted balance and fiscal impulse indicators. A confidence interval for the cyclically-adjusted balance estimate is also reported.
  4. The effect of the terms of trade on the underlying fiscal position is estimated.

Notes

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