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Budget 2014 Home Page Budget Economic and Fiscal Update 2014

Fiscal Outlook

Overview

Table 2.1 - Fiscal indicators
Year ended
30 June
2013
Actual
2014
Forecast
2015
Forecast
2016
Forecast
2017
Forecast
2018
Forecast

$billions

           
Total Crown OBEGAL1  (4.4)  (2.4) 0.4 1.3 2.4 3.5
Core Crown residual cash  (5.7)  (3.9)  (4.3)  (1.8) (0.1) 0.7
Net core Crown debt2 55.8 59.4 63.6 65.3 65.5 64.9
Net worth attributable to the Crown 68.1 70.0 73.1 77.3 82.7 89.5

% of GDP

           
Total Crown OBEGAL1  (2.1)  (1.1) 0.2 0.5 0.9 1.3
Core Crown residual cash  (2.7)  (1.7)  (1.8)  (0.7) (0.0) 0.3
Net core Crown debt2 26.2 25.8 26.4 25.9 24.9 23.8
Net worth attributable to the Crown 32.0 30.4 30.3 30.6 31.5 32.8

Notes:

  1. Operating balance before gains and losses.
  2. Net core Crown debt excluding the New Zealand Superannuation Fund (NZS Fund) and advances.

Source: The Treasury

  • Core Crown tax revenue is expected to increase across the forecast period and by 2017/18 is expected to be $18.9 billion higher than 2012/13, reflecting the growth in the nominal economy, as discussed in the EconomicOutlookchapter.
  • The 2013/14 tax forecast has been revised downwards owing to weakness in the current year's results to date. However, this weakness is expected to dissipate by 2014/15 owing to higher growth in the drivers of tax revenue that year.
  • The Budget 2014 operating allowance averaged $1.0 billion per annum, with the Government's decision to set future allowances at $1.5 billion per annum from Budget 2015 (growing at 2% per annum per Budget). When an increase in social assistance spending is added, core Crown expenses are expected to rise by $11.1 billion by the end of the forecast period. This increase is slower than growth in the nominal economy so by the end of the forecast period core Crown expenses fall to below 30% of GDP.
  • These forecasts show that the Government is expected to achieve its fiscal objective of a return to surplus in 2014/15 with an OBEGAL surplus of $0.4 billion. Beyond 2014/15 these surpluses are expected to increase by between $0.9 and $1.1 billion each year and by 2017/18, the OBEGAL surplus is expected to reach $3.5 billion.
  • In nominal terms, net core Crown debt increases before falling in 2017/18 as residual cash returns to surplus. As a share of GDP, net core Crown debt declines after 2015, falling to 23.8% by the end of 2017/18.
  • The Government Share Offer programme has concluded, with gross proceeds of $4.7 billion available for the Future Investment Fund.
  • The Crown's balance sheet continues to strengthen, enabling buffers to be built to sustain government services in the event of future shocks.
  • In preparing these fiscal forecasts, key assumptions have been made on the performance of the economy and new operating allowances. As with all assumptions, there is inherent uncertainty and a change in any one assumption could negatively or positively impact the Crown's forecast surpluses and net core Crown debt position. The Risks and Scenarios and the Specific Fiscal Risks chapters outline the key risks to the Crown achieving these forecasts.
Table 2.2 - Reconciliation between OBEGAL and net core Crown debt
Year ending 30 June
$billions
2013
Actual
2014
Forecast
2015
Forecast
2016
Forecast
2017
Forecast
2018
Forecast
Core Crown revenue 64.1 67.8 72.5 76.9 80.8 84.7
Core Crown expenses (70.3) (71.6) (73.1) (76.0) (78.7) (81.5)
Net surpluses/(deficits) of SOEs and CEs 1.8 1.4 1.0 0.4 0.3 0.3
Total Crown OBEGAL (4.4) (2.4) 0.4 1.3 2.4 3.5
Net retained surpluses of SOEs, CEs and NZS Fund (1.2) (1.2) (0.9) (0.3) (0.2) (0.2)
Non-cash items and working capital movements 1.1 1.4 1.6 1.9 2.4 1.7
Net core Crown cash flow from operations (4.5) (2.2) 1.1  2.9  4.6  5.0 
Net purchase of physical assets (1.2) (2.0) (2.2) (2.0) (2.1) (1.8)
Advances and capital injections (1.7) (2.0) (3.5) (2.1) (1.9) (1.6)
Forecast for future new capital spending - (0.3) (0.6) (0.7) (0.9)
Proceeds from government share offers 1.7 2.3  0.6  -   -   -  
Core Crown residual cash balance (5.7) (3.9) (4.3) (1.8) (0.1) 0.7
Opening net core Crown debt 50.7 55.8 59.4 63.6 65.3 65.5
Core Crown residual cash deficit/(surplus) 5.7 3.9 4.3 1.8 0.1 (0.7)
Valuation changes in financial instruments (0.6) (0.3) (0.1) (0.1) 0.1 0.1
Closing net core Crown debt 55.8 59.4 63.6 65.3 65.5 64.9
As a percentage of GDP 26.2% 25.8% 26.4% 25.9% 24.9% 23.8%

Source: The Treasury

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