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Budget 2017 Home Page Budget Economic and Fiscal Update 2017

Fiscal Outlook


  • The Crown's fiscal position has improved over the past five years with an operating balance before gains and losses (OBEGAL) surplus being recorded in both the previous two fiscal years. The current year's results to 31 March continue to be ahead of previous forecast levels as tax revenue continues to be higher than expected in the Half Year Update.
  • These steadily improving fiscal results are expected to continue, reflecting a growing nominal economy which drives growth in tax revenue.
  • Budget 2017 sees the introduction of a Family Incomes Package that both reduces tax revenue and increases social assistance expenditure such as Working for Families, with the 2019 June year being the first full year of these changes. Page 21 to 22 provides an overview of the package.
  • New operating spending in Budget 2017 has increased since the 2017 Budget Policy Statement (BPS) was released in December 2016. New operating spending averages $1.8 billion per year over the next four years (compared to $1.5 billion previously forecast). Future operating allowances have also been increased with new operating spending set at $1.7 billion for Budget 2018, increasing by 2% each year onwards.
  • New capital spending was increased to $4.0 billion (compared to $3.0 billion in the BPS). The capital allowance for Budget 2018 has been set at $2.0 billion and $2.5 billion for Budgets 2019-21.
  • Direct costs relating to the Kaikōura earthquake are not expected to be significantly different to the $2 billion - $3 billion range discussed in the Half Year Update with the majority of costs (excluding Earthquake Commission (EQC) claims costs) being funded through budget allowances or from insurance proceeds.
  • While the 2016/17 OBEGAL surplus is expected to be similar to the previous year, surpluses are forecast to continue to rise across the forecast period, reaching $7.2 billion by 2020/21 (2.2% of GDP).
  • Core Crown expenditure, as a percentage of GDP, is expected to be 28.8% in 2016/17 before falling across the forecast period to be 27.5% in 2020/21.
  • Contributions to the New Zealand Superannuation Fund (NZS Fund) are forecast to resume in 2020/21 when net debt is forecast to fall below 20% of GDP, with $2.2 billion expected to be contributed in that year.
  • Capital spending (excluding contributions to the NZS Fund) by the core Crown is estimated to be $28.4 billion over the forecast period. This compares to capital spending of $18.4 billion in the previous five years (excluding the proceeds from the partial share sales), largely reflecting the increase in capital allowances and increased capital spending on transport and education assets.
  • Net core Crown debt is expected to decline as a percentage of nominal GDP over the forecast period, to stand at 19.3% by 2020/21. Core Crown residual cash is broadly neutral over the forecast period, with cash deficits in the next two years mostly offset by cash surpluses at the end of the forecast period. Net core Crown debt, in nominal terms, increases in the first three years of the forecast before beginning to decline to be $62.8 billion by 2020/21.
  • The Crown's net worth is expected to increase over the forecast period, reaching $133.0 billion by 2020/21, surpassing pre-2009 nominal levels. This growth is the result of continued forecast surpluses across the forecast period. While as a percentage of nominal GDP net worth also rises, it is not yet expected to regain its peak of 55.6% in 2007/08 by the end of the forecast period.
  • Total assets are forecast to grow by $38.6 billion to stand at $331.3 billion by 2020/21 largely reflecting the increased capital spend. Liabilities fall in nominal terms, with borrowings decreasing in the later part of the forecast period. Total liabilities are expected to stand at $192.6 billion at the end of 2020/21, with borrowings making up $109.9 billion of that balance.
  • OBEGAL is expected to be lower in most years than the recent Half Year Update with the cost of the Family Incomes Package and increases in operating expenses being partially offset by tax revenue from continued economic growth. The impact of the Family Incomes Package and increased capital spending means the net debt forecasts have also increased since the last forecast. Page 44 provides more detailed discussion on the comparison to the Half Year Update.
  • 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 ending 30 June 2016


Core Crown revenue 76.1 80.8 83.8 87.5 92.5 96.8
Core Crown expenses 73.9 77.5 80.5 83.5 86.2 89.2
Total Crown OBEGAL1  1.8 1.6 2.9 4.1 6.1 7.2
Core Crown residual cash  (1.3) 0.1  (1.8) (1.6) 1.7 1.4
Net core Crown debt2 61.9 62.3 64.1 65.7 64.2 62.8
Net worth attributable to the Crown 89.4 100.0 105.6 112.6 112.1 133.0

% of GDP

Core Crown revenue 30.1 30.0 29.7 29.5 29.7 29.8
Core Crown expenses 29.2 28.8 28.6 28.1 27.7 27.5
Total Crown OBEGAL1 0.7 0.6 1.0 1.4 2.0 2.2
Core Crown residual cash  (0.5) -  (0.6) (0.5) 0.5 0.4
Net core Crown debt2 24.4 23.2 22.8 22.1 20.6 19.3
Net worth attributable to the Crown 35.3 37.2 37.5 37.9 39.2 40.9


  1. Operating balance before gains and losses.
  2. Net core Crown debt excluding the NZS Fund and advances.

Source: The Treasury

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