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Budget 2007 Home Page Half Year Economic & Fiscal Update 2007

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 small changes in specific variables.

Table 3.5 – Fiscal sensitivity analysis
($million) Year ending 30 June 2008
Forecast
2009
Forecast
2010
Forecast
2011
Forecast
2012
Forecast
1% lower nominal GDP growth per annum          
 Revenue (541) (1,099) (1,737) (2,423) (3,157)
 Addition to financing costs 17 69 164 306 484
Impact on the operating balance (559) (1,168) (1,901) (2,729) (3,641)
Revenue impact of a 1% decrease in the growth rates of:          
 Wages and salaries        (245)         (520)         (830)       (1,175)       (1,550)
 Taxable business profits        (125)         (265)         (425)         (585)         (770)
One percentage point lower interest rates          
 Interest income (88) (114) (98) (123) (111)
 Expenses (62) (102) (126) (155) (178)
Impact on the operating balance (26) (12) 28 33 67

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).

Table 3.6 – NZS Fund contributions sensitivity analysis
Variable Marginal change Effect on net return after tax Effect on capital contribution
($million)
  (%age points) (%age points) 2008/09 2009/10 2010/11 2011/12
Expected gross rate of return -1% -0.76% 237 252 268 287

 

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