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The fiscal outlook sees revenue growing at a slightly faster rate than the economy over the next five years, while expenses decline in comparison as fiscal constraint applied in recent Budgets is forecast to take effect. As a result, operating deficits narrow over the next two years before the Crown returns to surplus in 2014/15.

Compared to the Budget Update, a weaker economic outlook has resulted in reductions in tax revenue across the forecast period. However, lower inflation and interest rate forecasts have meant that benefit and finance costs are also expected to decline, partially offsetting the reduction in revenue. As a result, the fiscal outlook is broadly similar to that forecast at the Budget Update. More detailed information about the return to surplus can be found on page 32.

The Canterbury Earthquake Recovery Fund remains at $5.5 billion based on the current estimate of the Crown's share of the costs. Policy decisions to date are expected to fully utilise the Fund (refer page 30).

With a return to surplus forecast, net worth is expected to begin to recover but remains below the levels that existed prior to the global financial crisis.

Net debt continues to increase in nominal terms across the forecast period, but peaks as a percentage of GDP in 2014/15 and 2015/16 at 29.5%. While operating cash flows are expected to be positive by 2015/16, over the five-year forecast period cash deficits total $10.0 billion. When capital payments of $17.4 billion over the period to 2016/17 (eg, purchasing assets and issuing student loans) are included, residual cash deficits continue across all periods of the forecasts (Table 2.2).

There are risks to these forecasts, particularly in relation to the uncertainty of the economic outlook and the cost of the Canterbury rebuild to the Crown. Both the Specific Fiscal Risks and the Risks and Scenarios chapters discuss these risks.

Table 2.2 - Reconciliation between OBEGAL and net debt
Year ended 30 June
$billions
2012
Actual
2013
Forecast
2014
Forecast
2015
Forecast
2016
Forecast
2017
Forecast
Core Crown revenue 60.6 62.9 67.8 71.8 75.0 78.3
Core Crown expenses (69.1) (72.0) (71.8) (73.7) (75.6) (78.0)
Net surpluses/(deficits) of SOEs and CEs (0.7) 1.8 2.0 2.0 2.0 1.7
Total Crown OBEGAL (9.2) (7.3) (2.0) 0.1 1.4 2.0
Net retained surpluses of SOEs, CEs and NZS Fund 0.4 (1.7) (2.1) (2.0) (2.1) (1.8)
Non-cash items and working capital movements 1.6 1.9 0.6 0.7 1.0 1.3
Net core Crown cash flow from operations (7.2) (7.1) (3.5) (1.2) 0.3 1.5
Net purchase of physical assets (1.3) (1.7) (2.2) (1.8) (1.4) (1.4)
Advances and capital injections (2.1) (2.3) (2.0) (2.2) (2.9) (2.0)
Forecast for future new capital spending (0.2) (0.7) (0.9) (0.8) (1.0)
Proceeds from Government share offers 1.5 1.5 1.5 1.5
Core Crown residual cash deficit (10.6) (9.8) (6.9) (4.6) (3.3) (2.9)
Opening net debt 40.1 50.7 60.0 66.7 70.7 73.5
Core Crown residual cash deficit 10.6 9.8 6.9 4.6 3.3 2.9
Other valuation changes in financial assets and financial liabilities (0.5) (0.2) (0.6) (0.5) (0.5)
Closing net debt 50.7 60.0 66.7 70.7 73.5 75.9
As a percentage of GDP 24.3% 27.8% 29.2% 29.5% 29.5% 29.3%

Source: The Treasury

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