The Treasury

Global Navigation

Personal tools

Government
Publication

Budget 2006 Home Page Half Year Economic & Fiscal Update 2006

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) Year ending 30 June 2007 2008 2009 2010 2011
  Forecast Forecast Forecast Forecast Forecast
1% Lower nominal GDP growth per annum          
 Revenue (507) (1,026) (1,559) (2,174) (2,892)
 Addition to financing costs 15 61 139 251 401
Impact on the operating balance (522) (1,087) (1,698) (2,425) (3,293)
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 (65) (59) (63) (55) (59)
 Expenses (79) (135) (156) (190) (223)
Impact on the operating balance 14 76 93 135 164

The forecasts of capital contributions to the New Zealand Superannuation (NZS) Fund are sensitive to the rate of return assumed on the Fund’s assets:

Table 3.6 – NZS Fund contributions sensitivity analysis
Variable Marginal Change
(%age points)
Effect on Net Return After Tax
(%age points)
Effect on Capital Contribution ($ billion)
2007/08 2008/09 2009/10 2010/11
Expected gross rate of return -1% -0.71% +0.200 +0.217 +0.234 +0.251
Page top