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Budget 2013 Home Page Budget Economic and Fiscal Update 2013

Statement of Specific Fiscal Risks

Summary Table

The matters listed below are disclosed as specific fiscal risks because they meet the rules for disclosure outlined after this Statement. Full descriptions of the risks listed below are set out in the next section. Where quantification is possible, this is included in the description of the risk.

Specific fiscal risks as at 29 April 2013
Specific fiscal risks as at 29 April 2013 Status [12]

Potential policy decisions affecting revenue

 
ACC - Levies Unchanged
ACC - Review of Funding Policy Changed
Revenue - Income-sharing Tax Credits Unchanged
Services Funded by Third Party Revenue Unchanged

Potential policy decisions affecting expenses (expected to be funded from reprioritisation or Budget allowances)

 
ACC - Work-related Gradual Process Disease and Infection Unchanged
Canterbury Earthquake Recovery - Christchurch City Council/Crown Cost Sharing Changed
Canterbury Earthquake Recovery - Christchurch Central Recovery Plan New
Defence Force - Funding Track Evaluation New
Government Response to Wai 262 Unchanged
Health - Payment of Family Caregivers Changed
Housing - Reform of Social Housing Unchanged
Revenue - KiwiSaver Auto-enrolment Unchanged
Revenue - Transformation and Technology Renewal Changed
Social Development - Vulnerable Children White Paper Unchanged
Social Development - Welfare Reform Costs Changed
Social Development - Welfare Reform Forecast Benefit Savings Unchanged
State Sector Employment Agreements Unchanged

Potential capital decisions (expected to be funded from the existing Crown balance sheet, including the Future Investment Fund)

 
Departmental Capital Intentions Unchanged
Earthquake Strengthening for Crown-owned Buildings Unchanged
Finance - Crown Overseas Properties Unchanged
Justice - Christchurch Justice and Emergency Services Precinct New
Primary Industries - Investment in Water Infrastructure Changed
Transport - Support for KiwiRail Changed

Matters dependent on external factors

 
ACC - Non-earners' Account Unchanged
Canterbury Earthquake Recovery - Residential Red Zone Unchanged
Communications - Potential Impairment in the Value of Broadband Investment Unchanged
Defence Force - Potential Rationalisation, Revaluation and Disposal of NZDF Assets Unchanged
Energy - Crown Revenue from Petroleum Royalties Unchanged
Environment - Post-2012 International Climate Change Obligations Changed
Finance - EQC Unchanged
Finance - Goodwill on Acquisition Unchanged
Finance - Government Commitments to International Finance Institutions Unchanged
Finance - New Zealand Aluminium Smelters Contract New
Finance - Sale of Part of the Crown's Shareholding in Certain Companies Changed
Finance - Solid Energy New
Finance - Southern Response Earthquake Services Support Package Unchanged
Health - Litigation in the Disability Support and Aged Care Sectors New
Housing - Divestment of Housing Unchanged
Revenue - Cash Held in Tax Pools Unchanged
Treaty Negotiations - Treaty Settlement Forecast Unchanged
Treaty Negotiations - Relativity Clause Unchanged

Potential Policy Decisions Affecting Revenue

ACC - Levies (Unchanged)

Levy rates for the Work, Earners' and Motor Vehicle accounts are set by Cabinet following a public consultation process. Claims experience, ACC performance and economic assumptions (particularly discount rates) can impact insurance expenditure, both in the current year and the estimated future liability. If any of these factors differ from what is forecast the revenue collected may be more or less than required to cover the costs of claims, resulting in unplanned savings or costs that could have a corresponding impact on the operating balance.

ACC - Review of Funding Policy (Changed)

The Government is undertaking a review of ACC's funding policy. An estimate of the cost of adopting a lower funding target band midpoint has been included in the fiscal forecasts. If levy rates differ from those assumed in the forecasts, this would impact Crown revenue and Crown assets, with a flow-on impact to the operating balance.

Revenue - Income-sharing Tax Credits (Unchanged)

The Government has introduced legislation to establish an income-sharing tax credit. If passed as introduced, the legislation will allow couples with children under the age of 18 to pool their earnings for income tax purposes if they meet certain criteria. If implemented, the changes will reduce tax revenues by $500 million per year once the scheme is fully operational. The Finance and Expenditure Committee has recommended that the significant fiscal cost of the package be addressed before the Bill proceeds further.

Services Funded by Third Party Revenue (Unchanged)

A wide range of government services are funded through third party fees and charges. Demand for these services can vary, leading to a direct effect on revenue received. There is a risk the Government may need to provide additional funding if revenue collected is lower than the total costs of providing the service. There is also a risk that changes will be required to the way government services are delivered, which could result in costs to the Crown.

Notes

  • [12]Unchanged - risks that have not materially changed since the previous Economic and Fiscal Update. Changed - risks that have changed substantively from the previous Economic and Fiscal Update. New - risks that have not been disclosed in the previous Economic and Fiscal Update.
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