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Budget 2017 Home Page Budget Economic and Fiscal Update 2017

Key judgements and assumptions

The fiscal forecasts are based on assumptions and judgements developed from the best information available at the time they were prepared. Actual events are likely to differ from these assumptions and judgements, while uncertainty around the forecast assumptions and judgements increases over the forecast period. Key risks to these forecasts can be found in the Risks and Scenarios and Specific Fiscal Risks chapters.

The forecasts incorporate Government decisions and other circumstances known to the Government and advised to the Treasury up to 3 May 2017.

In addition to the key assumptions underpinning the economic forecasts (refer page 7), the following key judgements and assumptions supporting the fiscal forecasts were made:

  • Tax policy changes enacted and announced by the Government (refer pages 21 to 22) will take place as planned and will affect tax revenue and receipts.
  • Any future new spending or revenue reductions will be limited to the operating and capital allowances set by the Government. For further details of these allowances, see note 9 of the Forecast Financial Statements.
  • Departments will continue to spend less than the upper limits of approved spending (referred to as appropriations). A top-down adjustment is made to compensate for this. The adjustment will be higher at the front end of the forecast period as departments’ appropriations (and therefore expenses) tend to be higher in these years, reflecting the flexibility departments have around transferring underspends to later years.
  • The Government has committed $1.0 billion of funding to assist high growth councils facing financial constraints to finance roads and water infrastructure (referred to as the Housing Infrastructure Fund). The fund has been forecast to be allocated based on the timing outlined in initial bids received.
  • The Government and Auckland Council signed a Heads of Agreement for the City Rail Link (CRL). This agreement sets out the Crown’s in-principle agreement to fund 50% of the costs of the CRL and outlines arrangements for the establishment of a Special Purpose Vehicle to deliver the CRL. These fiscal forecasts assume the Government’s share of costs will be met from existing budget allowances.
  • The Government has committed to reinstating State Highway 1 between Picton and Christchurch. The forecasts assume the costs associated with the reinstatement will be capital expenditure and met from existing budget allowances.
  • Forecast returns on the large investment portfolios managed by the Accident Compensation Corporation (ACC) and the NZS Fund are based on their expectations of long-term benchmark rates of return for their respective portfolios.
  • Finance costs on new bond issuances are based on the five-year rate from the main economic forecasts and adjusted for differing maturities.
  • Significant valuations (eg, student loan portfolio, ACC claims liability and the Government Superannuation Fund retirement liability) are based on underlying assumptions (eg, discount rates, salary increases and inflation) made at the time the valuations were prepared.
  • No revaluations of property, plant and equipment are projected beyond the current year. Only valuations that have already been completed are included in these forecasts.
  • KiwiRail freight assets continue to be valued on a commercial basis (refer to the Specific Fiscal Risks chapter for risks to the valuation methodology).
  • Contributions to the NZS Fund are assumed to resume in the 2020/21 financial year. Table 2.2 sets out the estimated contribution to the fund if contributions were to start earlier (2017/18). For more information refer to the Treasury website for the NZS Fund model.
Table 2.2 - NZS Fund contributions
Year ending 30 June
Estimated contribution1 1.8 1.8 1.9 1.9
Estimated contribution2 2.4 2.5 2.7 2.7
Forecast contribution - - - 2.2


  1. Calculations of estimated contributions if they were to resume in 2017/18 (under the policy to lift the age of eligibility for New Zealand Superannuation (NZS) to 67 years by 2040/41).
  2. Calculations of estimated contributions if they were to resume in 2017/18 (under the current age of eligibility for NZS of 65 years).

Further information on the underlying economic assumptions used in these fiscal forecasts can be found on page 48.

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