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Budget 2015 Home Page Budget Economic and Fiscal Update 2015

Fiscal Outlook

Overview

  • The fiscal outlook for the Crown is expected to continue to strengthen.
  • The strengthening outlook reflects both expenditure restraint and a growing economy which is driving growth in tax revenue. While forecasts of expenditure are largely unchanged overall, tax revenue forecasts have generally been revised down since the Half Year Update primarily owing to weaker inflation and lower interest rates.
  • Core Crown expenditure as a percentage of GDP is expected to be 30.5% in 2014/15, falling across the forecast period to be 29.2% in 2018/19.
  • The Budget 2015 operating package of about $1.0 billion a year on average over the next four years is in line with that signalled in the Budget Policy Statement. Future operating allowances remain at $1.0 billion for Budget 2016, $2.5 billion in Budget 2017 and $1.5 billion in Budget 2018.
  • In addition to the Budget 2015 package, the Government has also signalled further reductions in ACC levy rates, resulting in a structural reduction in OBEGAL of around $0.6 billion from 2016/17.
  • The total Crown OBEGAL deficit has reduced from $18.4 billion in 2010/11 to a forecast of $684 million in 2014/15, with growing OBEGAL surpluses forecast thereafter, reaching $3.6 billion in 2018/19.
  • Capital spending by the core Crown is estimated to be $24.0 billion over the forecast period. This is an increase of $1.0 billion since the Half Year Update, mainly owing to new spending decisions. Capital allowances of $0.7 billion are forecast in Budget 2016 before rising to $0.9 billion in Budget 2017 and then growing at a rate of 2.0% per year for subsequent budgets.
  • Net core Crown debt is now expected to peak at 26.3% of nominal GDP in 2015/16, before dropping to 22.9% of nominal GDP by 2018/19. Overall, forecast net core Crown debt is similar to the Half Year Update.
  • The Crown's net worth is expected to increase over the forecast period, reaching around $93.6 billion by 2018/19, following surpluses from 2015/16 as the growth in assets outpaces liabilities.
  • Within the balance sheet, total assets are forecast to be $296.3 billion by 2018/19, with financial assets (particularly the Crown's investment portfolios) forecast to increase by $12.9 billion to $87.9 billion. Liabilities begin to fall in nominal terms by the end of the forecast period as earthquake obligations are settled and the Crown begins to pay down debt. Total liabilities are expected to stand at $197.3 billion at the end of 2018/19, with borrowings making up $115.6 billion of that.
  • These forecasts are sensitive to a number of assumptions and should be read in conjunction with the Risks and Scenarios and Specific Fiscal Risks chapters.
Table 2.1 - Fiscal indicators
Year ended 30 June 2014
Actual
2015
Forecast
2016
Forecast
2017
Forecast
2018
Forecast
2019
Forecast

$billions

           
Total Crown OBEGAL1  (2.9)  (0.7) 0.2 1.5 2.0 3.6
Core Crown residual cash  (4.1)  (2.7)  (4.2)  (1.6) (0.2) 1.7
Net core Crown debt2 59.9 61.7 65.6 67.1 67.2 65.5
Net worth attributable to the Crown 75.6 74.8 77.8 82.1 87.0 93.6

% of GDP

           
Total Crown OBEGAL1  (1.3)  (0.3) 0.1 0.6 0.7 1.3
Core Crown residual cash  (1.8)  (1.1)  (1.7) (0.6) (0.1) 0.6
Net core Crown debt2 25.6 25.7 26.3 25.5 24.4 22.9
Net worth attributable to the Crown 32.3 31.2 31.1 31.2 31.6 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

Table 2.2 - Reconciliation between OBEGAL and net core Crown debt
Year ending 30 June
$billions
2014
Actual
2015
Forecast
2016
Forecast
2017
Forecast
2018
Forecast
2019
Forecast
Core Crown revenue 67.3 71.9 74.9 78.9 83.5 87.4
Core Crown expenses (71.5) (73.1) (74.9) (77.1) (80.8) (83.4)
Net surpluses/(deficits) of SOEs and CEs 1.3 0.5 0.2 (0.3) (0.7) (0.4)
Total Crown OBEGAL (2.9) (0.7) 0.2 1.5 2.0 3.6
Net retained surpluses of SOEs, CEs and NZS Fund (0.8) (0.6) (0.1) 0.4 0.7 0.4
Non-cash items and working capital movements 0.7 2.3 2.0 1.8 1.2 1.8
Net core Crown cash flow from operations (3.0)  1.0 2.1  3.7  3.9  5.8 
Net purchase of physical assets (1.9) (2.1) (2.6) (2.5) (1.6) (1.5)
Advances and capital injections (1.5) (2.2) (3.4) (2.4) (1.8) (1.7)
Forecast for future new capital spending - (0.3) (0.4) (0.7) (0.9)
Proceeds from government share offers 2.3 0.6  -   -   -  
Net core Crown capital cash flows (1.1) (3.7) (6.3) (5.3) (4.1) (4.1)
Core Crown residual cash (deficit)/surplus (4.1) (2.7) (4.2) (1.6) (0.2) 1.7
Opening net core Crown debt 55.8 59.9 61.7 65.7 67.2 67.4
Core Crown residual cash deficit/(surplus) 4.1 2.7 4.2 1.6 0.2 (1.7)
Valuation changes in financial instruments - (0.9) (0.2) (0.1) - -
Closing net core Crown debt 59.9 61.7 65.7 67.2 67.4 65.7
As a percentage of GDP 25.6% 25.7% 26.3% 25.5% 24.4% 22.9%

Source: The Treasury

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