The Treasury

Global Navigation

Personal tools

Treasury
Publication

Budget 2016 Home Page Budget Economic and Fiscal Update 2016

Core Crown Expenses

Nominal core Crown expenditure increases...

Core Crown expenses are expected to grow by $12.5 billion over the forecast period from $72.4 billion in 2014/15 to $84.8 billion in 2019/20 (refer Figures 2.3 and 2.4). This nominal growth is largely attributable to Budget decisions and new spending set aside for future Budgets. Budget 2015 and Budget 2016 have added around $3.4 billion to expenses with $4.5 billion set aside for future Budgets. In addition, social assistance spending is forecast to increase by $4.1 billion, an average increase of $0.8 billion per year.

Figure 2.3 - Core Crown expenses
Figure 2.3 - Core Crown expenses.
Source: The Treasury
Figure 2.4 - Increase in core Crown expenses relative to 2014/15 actuals
Figure 2.4 - Increase in core Crown expenses relative to 2014/15 actuals.
Source: The Treasury

...reflecting new budget spending...

The Budget 2016 operating allowance averages $1.6 billion in each year of the forecast (excluding 2015/16) before reducing to $1.5 billion in Budget 2017 and remaining at this level for the rest of the forecast period. While the Budget 2016 net allowance is $1.6 billion, this includes a mixture of revenue and expenditure initiatives. The impact of the Budget 2016 changes is an increase in core Crown expenses beyond 2015/16 around $1.9 billion per year (Figure 2.5). Refer page 35 for further details of the Budget 2016 package.

Figure 2.5 - Impact of Budget 2016 and future Budget operating allowances on core Crown expenses
Source: The Treasury

For forecasting purposes, Budget allowances are assumed to be all operating expenditure. However, these allowances can be used for a combination of revenue and expense initiatives when allocated. New operating spending will be allocated to department baselines when Budget decisions are made.

...and increasing social assistance...

In addition to new Budget spending, social assistance spending is expected toincrease by $4.1 billion across the forecast period. New Zealand superannuation (NZS) payments account for $3.3 billion of this increase (Figure 2.6). NZS recipient numbers are forecast to increase from 665,000 in 2014/15 to 794,000 by the end of the forecast horizon. This growth in the number of recipients accounts for around 60% of the increase in NZS costs, with the remaining increase largely owing to indexation of entitlements to wage growth (Figure 2.7). By the end of the forecast period, NZS is around 54% of total social assistance spending (compared to 49% for 2014/15).

Figure 2.6 - Social assistance spending
Figure 2.6 - Social assistance spending.
Source: The Treasury
Figure 2.7 - Growth of NZS expenses
Figure 2.7 - Growth of NZS expenses.
Source: The Treasury

Other (non-NZS) welfare expenditure grows by $0.7 billion over the five-year forecast period with the largest growth relating to the income-related rents subsidy ($0.3 billion) driven by increases in tenancy places and market rents. While most welfare expenditure grows, expenditure on the Jobseeker Support and Emergency Benefit decreases by $0.1 billion across the forecast period, with expenditure on this benefit peaking in 2016/17.

...although as a percentage of nominal GDP, core Crown expenses reduce

Core Crown expenses peaked in 2011 and are continuing to decline as a share of GDP. Core Crown expenses are forecast to grow at a slower rate than the nominal economy, falling from 30.0% of GDP in 2014/15 to stand at 28.3% of GDP at the end of the forecast period (Figure 2.3).

2016 Budget new operating spending

The purpose of this box is to explain how the new operating spending allocated in Budget 2016 is incorporated in the fiscal forecasts. Details on individual initiatives can be found in the Summary of Initiatives in Budget 2016 document.

The 2016 net operating package totals $6.7 billion across the forecast period, an annual average of $1.6 billion (excluding spending in 2015/16). The package includes revenue initiatives that increase revenue by $1.2 billion and spending which increases expenditure by $7.9 billion (refer Table 2.3).

Table 2.3 - Impact of operating package
Year ending 30 June
$millions
2016
Forecast
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast
5-year
Total
Gross spending 230 1,976 2,152 2,086 2,243 8,687
Savings and revenue initiatives (45) (139) (344) (580) (853) (1,961)
Budget 2016 net operating spending 185 1,837 1,808 1,506 1,390 6,726
Increase in core Crown revenue - 60 88 431 610 1,189
Increase in core Crown expenses 185 1,897 1,896 1,937 2,000 7,915
Reduction in OBEGAL 185 1,837 1,808 1,506 1,390 6,726

Source: The Treasury

Revenue policy initiatives include increases in tobacco excise and changes to the Emissions Trading Scheme (ETS) (removal of the “one for two” policy).

Core Crown expenses increase by around $1.9 billion a year (excluding 2015/16) from the Budget 2016 operating package compared to additional spending of around $1.4 billion per year in Budget 2015. Expenditure is spread across a number of functional areas as outlined in Table 2.4 below. The core Crown expense tables in Chapter 6 outline the total core Crown expenditure on each of these areas after these increases.

Table 2.4 - 2016 Budget increase in core Crown expenses by functional classification[6]
Year ending 30 June
$millions
2016
Forecast
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast
5-year
Total
Social security and welfare 3 139 186 193 156 677
Health 3 597 569 573 581 2,323
Education (including tertiary) 73 142 148 172 293 828
Core government services 35 289 210 190 147 871
Law and order 65 239 279 246 246 1,075
Defence - 33 90 90 90 303
Transport and communications - 11 11 11 10 43
Economic and industrial services - 66 89 101 123 379
Heritage, culture and recreation 2 38 31 31 31 133
Primary services (1) 30 29 25 24 107
Housing and community - 42 32 31 32 137
Environmental protection 21 20 52 82 101 276
Other - 3 - - - 3
Forecast new operating spending[7] (16) 248 170 192 166 760
185 1,897 1,896 1,937 2,000 7,915

Source: The Treasury

Notes

  • [6]The breakdown by functional classification above is based on a framework developed by the OECD. Therefore the categorisation may be different to the initiatives by vote as presented in the Summary of Initiatives in Budget 2016 document. For example, the Health functional classification above includes some expenditure outside of Vote Health, such as spending for the Health Research Council which is included in Vote Business, Science and Innovation in the Summary of Initiatives in Budget 2016 document.
  • [7]The amounts classified as “forecast new operating spending” represent centrally held contingencies that have yet to be allocated to a particular departmental baseline.
Page top