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.
| ($ 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:
| 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.
