General Fiscal Risks
The discussion up to this point has focused on the main near-term economic risks. The rest of this chapter focuses on the links between the inherent risks to the performance of the economy and the Crown's fiscal position.
Table 3.3 provides some rules of thumb on the sensitivities of the fiscal position to small changes in specific variables. For example, if for some reason nominal GDP growth is 1 % point slower than we have forecast each year up to the year ending June 2016, we would expect tax revenue to be around $3.5 billion (1.7% of GDP) lower than forecast as a result. The sensitivities are broadly symmetric; that is, if nominal GDP growth is 1% point faster each year than we expect, tax revenue would be around $3.5 billion higher than forecast instead.
Fiscal Sensitivities
|
Year ending 30 June ($millions unless stated) |
2012 Forecast |
2013 Forecast |
2014 Forecast |
2015 Forecast |
2016 Forecast |
|---|---|---|---|---|---|
1% lower nominal GDP growth per annum on |
|||||
| Tax revenue | (560) | (1,180) | (1,895) | (2,670) | (3,520) |
| (% of GDP) | (0.3) | (0.6) | (0.9) | (1.3) | (1.7) |
Revenue impact of a 1% decrease in growth of |
|||||
| Wages and salaries | (240) | (510) | (810) | (1,145) | (1,510) |
| (% of GDP) | (0.1) | (0.2) | (0.4) | (0.6) | (0.7) |
| Taxable business profits | (100) | (230) | (380) | (545) | (725) |
| (% of GDP) | (0.0) | (0.1) | (0.2) | (0.3) | (0.3) |
Impact of 1% point lower interest rates on |
|||||
| Interest income1 | (55) | (135) | (75) | (105) | (55) |
| (% of GDP) | (0.0) | (0.1) | (0.0) | (0.0) | (0.0) |
| Expenses1 | (40) | (230) | (280) | (450) | (535) |
| (% of GDP) | (0.0) | (0.1) | (0.1) | (0.2) | (0.2) |
| Overall operating balance | (15) | 95 | 205 | 345 | 480 |
| (% of GDP) | (0.0) | 0.0 | 0.1 | 0.1 | 0.2 |
Note:
- New Zealand Debt Management Office holdings only
Source: The Treasury
