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Fiscal Outlook

  • Core Crown tax revenue is forecast to increase gradually as a share of GDP from 27.9% in the 2015/16 fiscal year to 28.4% in 2019/20. Actual tax revenue for 2014/15 was higher than forecast in the Budget Update partly owing to higher nominal GDP. However, tax revenue forecasts over the next four years are lower than in the Budget Update reflecting lower forecasts for nominal GDP growth and interest rates.
  • Core Crown expenses are expected to increase from $72.4 billion in 2014/15 to $86.2 billion in 2019/20 reflecting increases in social assistance spending, operating allowances and finance costs. Social assistance spending is expected to be slightly higher than previously forecast for 2016/17 and 2017/18 owing to a softer labour market outlook. Forecasts of future operating allowances are unchanged at $1.0 billion for Budget 2016, $2.5 billion for Budget 2017 and $1.5 billion for Budget 2018, while $1.5 billion is allocated for Budget 2019. As a share of GDP, core Crown expenses are forecast to reduce gradually from 30.6% of GDP in 2015/16 to 29.1% in 2019/20 (Figure 3).
Figure 3 - Core Crown revenue and expenses
Figure 3 - Core Crown revenue and expenses   .
Source:  The Treasury
  • Following a surplus of $0.4 billion in 2014/15, OBEGAL is forecast to show a deficit of $0.4 billion in 2015/16. Surpluses are expected to return thereafter and rise throughout the remaining forecast period (Figure 4). The changes to OBEGAL forecasts compared with the Budget Update are almost entirely owing to lower tax revenues. The cyclically adjusted balance, which adjusts OBEGAL for the cyclical position of the economy, is expected to remain in surplus throughout the forecast horizon.
Figure 4 - OBEGAL, core Crown residual cash and net core Crown debt
Figure 4 - OBEGAL, core Crown residual cash and net core Crown debt.
Source:  The Treasury
  • The Government is forecast to generate operating cash flows from core Crown operations of $14.3 billion over the five years to June 2020, which are not sufficient to cover the net capital spending forecast of $24.7 billion. However, core Crown residual cash is forecast to return to surplus in the 2018/19 fiscal year as forecast in the Budget Update. Net capital spending is expected to be $0.7 billion more than previously forecast over the four years to June 2019, largely because of an increase in the Budget 2016 capital allowance of $1.0 billion. Capital allowances of $0.9 billion are forecast in Budget 2017 before growing at a rate of 2.0% per year for subsequent budgets.
  • Net core Crown debt is expected to peak at 27.7% of GDP in 2016/17, before gradually declining to stand at 24.0% of GDP by 2019/20 (Table 1). Forecast net debt is higher than in the Budget Update across the forecast horizon.
  • Net worth attributable to the Crown is expected to increase over the forecast period, reaching $107.2 billion by the year ending June 2020, which is similar to the level before the global financial crisis. The rate of increase is expected to be muted over the next two years before rising thereafter in line with increases in forecast operating surpluses.
  • Forecasts show the Crown's total assets increasing by $35.3 billion and liabilities increasing by $14.3 billion over the five years ending June 2020. The largest increase occurs in social assets (including schools, hospitals and other properties, and student loans) followed by financial assets and commercial assets. The increase in liabilities is driven by borrowings to fund cash shortfalls, and the increase in commercial liabilities.
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