The Treasury

Global Navigation

Personal tools

Government
Publication

Budget 2005 Home Page Half-Year Economic & Fiscal Update 2005

Fiscal Sensitivities

The scenarios above indicate the sensitivity of fiscal aggregates to changes in economic conditions. Table 3.5 provides some “rules of thumb” on the sensitivities of the fiscal position to changes in specific variables.

Table 3.5 –Fiscal sensitivity analysis
($ million) June years 2006 2007 2008 2009 2010
  Forecast Forecast Forecast Forecast Forecast
1% Lower Nominal GDP Growth per Annum          
 Revenue (470) (985) (1,505) (2,030) (2,755)
 Expenses (mainly debt servicing) 15 60 135 240 380
Impact on the Operating Balance (485) (1,045) (1,640) (2,270) (3,135)
Revenue Impact of a 1% Decrease in the Growth Rates of:          
 Wages and salaries (205) (430) (670) (935) (1,225)
 Taxable business profits (110) (250) (385) (520) (725)
One Percentage Point Lower Interest Rates          
 Interest income (9) (23) (32) (38) (40)
 Expenses (75) (161) (199) (225) (263)
Impact on the Operating Balance 66 138 167 187 223
One Percentage Point Lower Real Interest Rates          
 ACC liability (SOE and Crown entity surpluses) (700)        
 GSF liability (expenses) (1,900)        
Impact on the Operating Balance (2,600)        

The forecasts of capital contributions to the New Zealand Superannuation (NZS) Fund are sensitive to the expected net after-tax annual return on the NZS Fund, which in turn depends on the expected gross rate of return assumed on the Fund’s assets:

Table 3.6 – New Zealand Superannuation Fund contributions sensitivity analysis
Variable Marginal Change
(%age points)
Effect on Net Return After Tax
(%age points)
Effect on Capital Contribution ($ billion)
      2006/07 2007/08 2008/09 2009/10
Expected gross rate of return -1% -0.71% +0.203 +0.218 +0.236 +0.255

A +1% change in the gross rate of return would have symmetrical negative effect on the required capital contribution track across these years.

Page top