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Half Year Economic and Fiscal Update 2010

Statement of Specific Fiscal Risks

Context of the specific fiscal risks

The Statement of Specific Fiscal Risks sets out all government decisions, contingent liabilities or contractual obligations known to the government and subject to specific materiality requirements that may have a material effect on the economic or fiscal outlook[9].

The risks outlined in this chapter, should they eventuate, would only have an effect on the operating balance and/or net debt to the extent that they were not funded from within budget allowances, by reprioritising existing expenditure or through third-party revenue.

Policy options for many risks require further development, and the quantum of the risk is often uncertain. Consequently, the final cost or saving may differ from the amounts disclosed in this chapter.

Categories of risk

Previously, risks were grouped according to whether or not they were quantified. To improve the presentation of the information, they are now categorised to help explain the impact the risk would have if it were to occur. The categories of risk are explained and listed below.

  • Pending policy decisions affecting revenue: Changes to tax policy or ACC levies could reduce or increase Government income from taxes or levies.
  • Pending policy decisions affecting expenses: Costs of policy proposals could increase or decrease depending on decisions taken and they are risks to the extent that they cannot be managed within baselines or budget allowances.
  • Pending capital decisions: Capital investment decisions are risks to the extent that they cannot be managed within balance sheets or budget allowances.
  • Matters dependent on external factors: The liability of the Government for costs is sometimes dependent on external factors such as the outcome of negotiations or international obligations.

Summary table

The matters listed below are disclosed as specific fiscal risks because they meet the rules for disclosure outlined in the next section. Full descriptions of the risks listed below are set out following the rules for disclosure.

Summary table
Specific fiscal risks as at 22 November 2010 Status Value of risk

Pending policy decisions affecting revenue

ACC - Levies and Non-earners' Account Changed Unquantified
Revenue - Income-sharing Tax Credits New $500m per annum by 2014/15
Revenue - Potential Tax Policy Changes Changed Unquantified
Risk to Third Party Revenue Unchanged Unquantified

Pending policy decisions affecting expenses

Corrections - Community Probation Services Capacity Changed $25m per annum operating expenditure and $20m capital expenditure
Education - Early Childhood Education Funding Changed Unquantified
Education - Operating Funding for New Schools New Unquantified
Education - Inflation Adjustment for School Operating Funding Unchanged Unquantified
Education - Repairing Leaky Schools Unchanged Unquantified
Finance - Electricity Reforms Changed Unquantified
State Sector Employment Agreements Unchanged Unquantified
Housing - Housing Shareholders' Advisory Group New Unquantified
Justice - Review of the Legal Aid System Unchanged Unquantified
Revenue - Child Support Unchanged Unquantified
Revenue - Redesigning Business Processes at Inland Revenue Unchanged Unquantified

Pending capital decisions

Corrections - Prison Capacity Changed $600m capital expenditure and $90m per annum operating expenditure
Communications - Broadband Investment Initiative Changed $1,010m
Education - Broadband Investment: Schools Changed $205m
Education - School Property Changed $1,950m
Finance - Crown Overseas Properties Unchanged $150m
Housing - Weathertight Homes Changed Unquantified
Justice - Auckland Region Property Strategy Changed $150m over three years
Police - Digital Radio Network Full Implementation Changed $170m capital expenditure and $5m rising to $30m per annum operating expenditure 
Transport - Support for New Zealand Railways Corporation (KiwiRail) Changed $950m

Matters dependent on external factors

Canterbury Earthquake - Land New Unquantified
Canterbury Earthquake - Local Authorities New Unquantified
Climate Change - ETS and International Climate Change Obligations Unchanged Unquantified
Climate Change - Finance for Developing Countries Changed Unquantified
Defence Force - Future Operationally Deployed Forces Activity Unchanged $30m per annum
Defence Force - Sale of Skyhawks and Aermacchi Trainers Changed Unquantified
Energy - Crown Revenue from Petroleum Royalties New Unquantified
Finance - Original Crown Retail Deposit Guarantee Scheme Changed Unquantified
Finance - Extended Crown Retail Deposit Guarantee Scheme New Unquantified
Finance - Government Commitments to International Financial Institutions Unchanged Unquantified
Health - Caregiver Employment Conditions Changed $100m per annum
Health - Payment of Family Caregivers Unchanged Unquantified
Revenue - Cash Held in Tax Pools Unchanged Unquantified
Reviews of the Delivery of Public Services Unchanged Unquantified
State Services - KiwiSaver Contribution Unchanged Unquantified
Treaty Negotiations - Treaty of Waitangi Claims - Settlement Relativity Payments New Unquantified


  • [9]The Statement of Specific Fiscal Risks is a requirement set out in sections 26Q and 26U of the Public Finance Act 1989.
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