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Economic and Fiscal Forecasts December 2008

Statement of Responsibility

The Public Finance Act 1989 does not require a half-year economic and fiscal update to be published this year because the Pre-election Update was published on 6 October 2008. Nevertheless, the Government has asked the Treasury to prepare updated forecasts to provide transparency of the fiscal outlook and to provide context for the Budget Policy Statement.

The Treasury has undertaken its standard processes in preparing the updated macroeconomic forecasts set out in this outlook, including consultation with businesses and government departments, and review by an independent panel.

The fiscal forecasts in this outlook are based on the fiscal forecasts contained in the Pre-election Update, adjusted for a number of significant events. These are set out in full on pages 49 and 50, but the key changes are:

  • the new set of macroeconomic forecasts have been used to update taxation revenue and welfare benefit expenditure forecasts
  • changes to personal taxation, KiwiSaver, research and development tax credits and the Fast Forward Fund announced by the government have been incorporated, and
  • the domestic bond programme and resulting finance costs have been updated.

Given that this update was performed so soon after the Pre-election Update, and due to the limited time available since the general election this outlook does not include:

  • the detailed forecast financial statements that are included in a full economic and fiscal update based on forecasts from all Crown reporting entities, and
  • a full statement of specific fiscal risks. Instead the section on risks to the fiscal outlook focuses on forecasting risks. It is assumed any costs arising from future decisions made by the government will be met from within existing baselines and the operating and capital allowances provided in each Budget for new spending.

This outlook includes two scenarios, indicating the sensitivity of the main forecast to economic risks. This is particularly important at present, given heightened uncertainty about the way in which the international economy will develop over the next couple of years.

On the basis of the economic and fiscal information available to it at the time the outlook was finalised, the Treasury has used its best professional judgement in supplying the Minister of Finance with this updated economic and fiscal outlook.

John Whitehead
Secretary to the Treasury

12 December 2008

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