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Budget 2007 Home Page Half Year Economic & Fiscal Update 2007

2 Fiscal Outlook

Introduction

The fiscal position is forecast to continue to strengthen over the forecast period.

Based on strong nominal Gross Domestic Product growth forecast over the next few years and its subsequent impact on tax revenue forecasts, the fiscal outlook is stronger than what was expected at the Budget Update. This is notwithstanding the inclusion of a revenue reduction contingency of $1.5 billion effective 1 April 2009, rising to $1.7 billion by 2011/12.

This strengthening is reflected in most indicators. For example:

  • The operating balance before gains and losses (OBEGAL), while forecast to fall from $6.6 billion in 2007/08 to $3.9 billion in 2011/12, is higher in all years than forecast at the time of the Budget Update.
  • Cash deficits of $2.6 billion over the forecast period, are less than the $5.7 billion forecast at the Budget Update.
  • Gross sovereign-issued debt excluding settlement cash is forecast to increase by around $2.3 billion over the forecast period in nominal terms, but continues to fall as a percentage of GDP from 18.5% to 15.6%.

This chapter outlines the trends of the key indicators over the forecast period, before discussing the main drivers of these trends in more detail. The forecasts are then compared to those provided in the Budget Update.

The chapter also includes a description of how the fiscal indicators are derived, how they are used and a historical series.

Table 2.1 – Summary fiscal indicators[2]
  Year ended 30 June
$million 2007
Actual
2008
Actual
2009
Forecast
2010
Forecast
2011
Forecast
2012
Forecast
Core Crown revenue excluding NZS Fund revenue 58,473 62,130 63,147 65,412 68,965 72,168
Core Crown revenue 58,174 62,409 63,496 65,832 69,458 72,740
Core Crown expenses 53,977 57,137 60,537 63,106 66,632 70,034
OBEGAL 5,339 6,574 4,327 4,062 3,984 3,850
OBEGAL3 excluding NZS Fund net revenue 5,757 6,405 4,116 3,809 3,688 3,507
Operating balance 7,999 7,388 6,053 5,924 6,094 6,228
Core Crown residual cash 2,653 759 (763) (779) (851) (937)
Gross sovereign-issued debt (excl Settlement Cash) 30,890 33,303 33,034 31,779 34,566 33,172
Net core Crown debt 4,411 1,983 1,756 1,705 1,792 2,105
Net core Crown debt (incl NZS Fund) (8,112) (13,102) (16,224) (19,545) (22,990) (26,414)
% of GDP            
Core Crown revenue excluding NZS Fund revenue 35.1 34.9 33.8 33.6 34.0 34.0
Core Crown revenue 34.9 35.0 34.0 33.8 34.2 34.3
Core Crown expenses 32.4 32.1 32.4 32.4 32.8 33.0
OBEGAL 3.2 3.7 2.3 2.1 2.0 1.8
OBEGAL excluding NZS Fund net revenue 3.5 3.6 2.2 2.0 1.8 1.7
Operating balance 4.8 4.1 3.2 3.0 3.0 2.9
Core Crown residual cash 1.6 0.4 (0.4) (0.4) (0.4) (0.4)
Gross sovereign-issued debt (excl Settlement Cash) 18.5 18.7 17.7 16.3 17.0 15.6
Net core Crown debt 2.6 1.1 0.9 0.9 0.9 1.0
Net core Crown debt (incl NZS Fund) (4.9) (7.4) (8.7) (10.0) (11.3) (12.4)

[3]Source: The Treasury

New Zealand International Financial Reporting Standard (NZ IFRS) - “New GAAP”

The financial statements presented in the 2007 HYEFU have been prepared in accordance with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS). All comparatives including the 30 June 2007 are also produced on an NZ IFRS basis, which means they will differ to what was published in the Financial Statements of the Government of New Zealand for the year ended 30 June 2007 released 10 October 2007. The 30 June 2007 comparatives are provisional and have not yet been subject to audit.

With the adoption of NZ IFRS there is a series break in the graphs and tables presented in the fiscal chapter. For some indicators there is no comparable trend series.

Notes

  • [2]Detailed tables of the key indicators for the Half Year Economic and Fiscal Update and Budget Economic and Fiscal Update (BEFU) are located on pages 57 and 58.
  • [3]The operating balance before gains and losses (OBEGAL) less NZS Fund revenue represents the residual of operating revenue and expenses minus the portion of net revenue earned by the NZS Fund. The indicator does not take into account any gains and losses which are now reported in a separate section of the Statement of Financial Performance (refer page 115).
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