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Pre-Election Economic and Fiscal Update 2008

2 Fiscal Outlook (continued)

Operating Results

Total Crown OBEGAL (excluding the NZS Fund retained revenue)

OBEGAL is the operating balance before gains and losses for the total Crown. By excluding gains and losses, the OBEGAL gives a more direct indication of the underlying stewardship of the Government than the operating balance. The OBEGAL (excluding the NZS Fund retained revenue) is a measure of the operating balance that recognises that the NZS Fund has been set up to meet future spending pressures and as a result the returns it earns are not available to the Crown to meet current spending requirements.

OBEGAL deficits expected …

Figure 2.5 - Total Crown OBEGAL (excluding the NZS Fund retained revenue)
Figure 2.5 - Total Crown OBEGAL (excluding the NZS Fund retained revenue).
Source:  The Treasury

The OBEGAL (excluding the NZS Fund retained revenue) shifts into a deficit position in the current year of $31 million which worsens to $3.2 billion by the end of the forecast period.

As discussed earlier, slower growth in tax revenue and increases in government spending are the key factors driving the downward trend in the OBEGAL (excluding the NZS Fund retained revenue).

Table 2.5 provides a detailed reconciliation of the changes since the Budget Update, while Table 2.6 shows the changes since the Budget Update by the key drivers.

Table 2.5 - Total Crown OBEGAL (excluding the NZS Fund retained revenue) comparison to the Budget Update
Year ended 30 June
$million
2009
Forecast
2010
Forecast
2011
Forecast
2012
Forecast
OBEGAL (excluding the NZS Fund retained revenue)
Budget Update 1,354 1,048 543 207
Core Crown changes
Tax revenue (465) (813) (1,051) (819)
Benefit expenses (358) (629) (678) (543)
Education expense changes (239) (111) (208) (254)
KiwiSaver expense changes (71) (105) (197) (280)
Treaty settlements 25 (440) (130) (130)
Net finance costs (435) (284) (390) (675)
Expense transfers[1] (914) (10) (7)
Top-down adjustment[2] 1,095 40 (35) (110)
Emissions Trading Scheme expense rephasing 422 (599) (107) (120)
Technical baseline changes (54) (3) (19) (33)
Rail funding decision (148) 148
Other movements (13) 125 35 18
Core Crown OBEGAL change (1,155) (2,681) (2,787) (2,946)
Net SOE/CE change (including impact of eliminations) (230) (32) (132) (223)
Total OBEGAL (excluding the NZS Fund retained revenue) change (1,385) (2,713) (2,919) (3,169)
Pre-election Update (31) (1,665) (2,376) (2,962)
Table 2.6 - Total Crown OBEGAL (excluding the NZS Fund retained revenue) comparison to the Budget Update by key drivers
Year ended 30 June
$million
2009
Forecast
2010
Forecast
2011
Forecast
2012
Forecast
OBEGAL (excluding the NZS Fund retained revenue)
Budget Update 1,354 1,048 543 207
Economic-driven changes
    Tax revenue (465) (813) (1,051) (819)
    Benefit expenses (358) (629) (678) (543)
Total economic-driven changes (823) (1,442) (1,729) (1,362)
Changes due to policy costs
    Education expense changes (239) (111) (208) (254)
    KiwiSaver expense changes (71) (105) (197) (280)
    Treaty settlements 25 (440) (130) (130)
Total changes due to policy costs (285) (656) (535) (664)
Debt servicing change
    Net finance costs (435) (284) (390) (675)
Total debt servicing change (435) (284) (390) (675)
Other changes 158 (331) (265) (468)
Total OBEGAL (excluding the NZS Fund retained revenue) change (1,385) (2,713) (2,919) (3,169)
Pre-election Update (31) (1,665) (2,376) (2,962)

Notes:

  • [1]Expense transfers represent underspends from 2007/08 financial year which have been transferred into the forecast period.
  • [2]The top-downadjustment compensates for the fact that departments tend to use appropriations as the basis for their forecasts. Appropriations will overstate expenditure as they are upper limits.
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