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Budget 2015 Home Page Budget Economic and Fiscal Update 2015

Core Crown Expenses

Core Crown expenses as a percentage of nominal GDP reduces...

Growth in core Crown expenses is forecast to be at a slower rate than growth in the nominal economy, falling from 30.5% of GDP in 2013/14 to 29.2% of GDP at the end of the forecast period (Figure 2.3).

Figure 2.3 - Core Crown expenses
Figure 2.3 - Core Crown expenses.
Source: The Treasury

...although nominal spending increases

Nominal growth in core Crown expenses of $11.9 billion over the forecast period from $71.5 billion in 2013/14 to $83.4 billion in 2018/19 is largely attributable to new spending in the Budget 2015 operating package, new operating allowances in future budgets and increased social assistance spending (as shown in Figure 2.4).

Figure 2.4 - Increase in core Crown expenses
Figure 2.4 - Increase in core Crown expenses.
Source: The Treasury

New operating allowances have been set at $1.0 billion for Budget 2016, rising to $2.5 billion in Budget 2017 before reducing to $1.5 billion in Budget 2018.

The combined new spending totals $6.4 billion by 2018/19 (Figure 2.5). For forecasting purposes, the allowances beyond Budget 2015 are assumed to be all expenditure. However, these allowances can be used for a combination of revenue and expense initiatives when allocated.

Figure 2.5 - Budget 2015 and future Budget allowances impact on expenses
Figure 2.5 - Budget 2015 and future Budget allowances impact on expenses.
Source: The Treasury

New operating spending will be allocated to department baselines as budget decisions are made. As a result, most functional expense areas (eg, health, education) in the Treasury tables remain flat beyond 2015/16 across the forecast period because specific decisions on where to allocate new spending have yet to be decided. Therefore comparisons are difficult at a functional level.

The following table summarises the impact of the Budget 2015 package on core Crown expenses.

Table 2.5 - Summary of changes in revenue and expenses arising from Budget 2015 operating package
Year ending 30 June
$millions
2015
Forecast
2016
Forecast
2017
Forecast
2018
Forecast
2019
Forecast
Core Crown revenue  -  85  211  357  357
Core Crown expenses  42 1,038 1,251 1,355 1,388
OBEGAL impact  42  953 1,040  998 1,031

Composition of core Crown expense increase:

         
Child hardship package  -  78  271  264  263
Health  -  406  435  417  402
Education  -  111  120  108  104
Other Social Sector 7  159  109  110  117
Business Growth Agenda  29  131 74 94 96
Canterbury Earthquake Recovery Authority  68  97 6 3 2
Defence 3 28 79 92 92
KiwiSaver kick-start (17)  (175) (126) (106) (107)
Other  -  117 100 82 92
Reprioritisation (48) (92) (121) (94) (79)
Contingencies  -  178  304  385  406
Increase in core Crown expenses  42 1,038 1,251 1,355 1,388

Source: The Treasury

Apart from new budget spending, social assistance spending is expected to increase by $3.9 billion across the forecast period. New Zealand superannuation payments grow by $3.5 billion with costs linked to wage growth and increasing recipient numbers (Figure 2.6). As a percentage of total social assistance spending, New Zealand superannuation is expected to rise from about 39% in 2008/09 to around 53% a decade later.

Figure 2.6 - Social assistance spending
Figure 2.6 - Social assistance spending.
Source: The Treasury

Apart from superannuation, other welfare expenditure grows by $0.4 billion over the five-year forecast horizon, including income-related rents subsidy, family tax credits and sole parent support. Overall working-age beneficiary numbers are expected to decline in every year, led by drops in Jobseeker Support and Sole Parent Support. In later years these reductions are largely offset by inflation-based rate indexation. The largest single year growth occurs between 2015/16 and 2016/17, with the introduction of the Child hardship package, particularly impacting Sole Parent Support.

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