The Treasury

Global Navigation

Personal tools

Government
Publication

Budget 2012 Home Page Budget Economic and Fiscal Update 2012

Fiscal Forecast Assumptions

The fiscal forecasts are based on assumptions and judgements developed from the best information available on 8 May 2012, when the forecasts were finalised. Actual events are likely to differ from some of these assumptions and judgements. Furthermore, uncertainty around the forecast assumptions and judgements increases over the forecast period. The Canterbury earthquakes add further uncertainty to the economic and fiscal forecasts.

The fiscal forecasts are prepared on the basis of underlying economic forecasts. Such forecasts are critical for determining revenue and expense estimates. For example:

  • A nominal GDP forecast is needed in order to forecast tax revenue.
  • A forecast of CPI inflation is needed because social assistance benefits are generally indexed to inflation.
  • Forecasts of interest rates are needed to forecast finance costs, interest income and discount rates.

A summary of the key economic forecasts that are particularly relevant to the fiscal forecasts is provided in the table below (on a June-year-end basis to align with the Government's balance date).

Table 2.18 - Summary of key economic forecasts used in fiscal forecasts
June years 2011/12 2012/13 2013/14 2014/15 2015/16
PREFU forecasts Budget forecasts Budget forecasts Budget forecasts Budget forecasts Budget forecasts
Real GDPa (ann avg % chg) 2.8 1.8 2.9 3.3 3.1 2.8
Nominal GDPb ($m) 211,773 207,987 217,870 231,787 244,028 255,567
CPI (annual avg % change) 3.2 2.3 2.2 2.5 2.4 2.4
Govt 10-year bonds (ann avg %) 4.5 4.1 4.2 4.7 5.1 5.3
5-year bonds (ann avg %) 3.6 3.6 3.8 4.2 4.8 5.0
90-day bill rate (ann avg %) 2.9 2.8 3.1 3.7 4.2 4.4
Unemployment rate (ann avg %) 6.0 6.4 5.8 5.3 5.0 4.7
Employment (ann avg % change) 1.7 1.1 1.4 1.6 1.5 1.4
Current account (% of GDP) -2.2 -4.1 -5.1 -5.9 -6.4 -6.5

Notes:

  1. Production measure
  2. Expenditure measure

Source: The Treasury

Page top