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3 Risks and Scenarios (continued)

Fiscal Sensitivities

Table 3.1 provides some “rules of thumb” on the sensitivities of the fiscal position to changes in specific variables. It is important to note that this analysis does not take into account the fact that some tax types such as corporate tax and other persons tax have a larger variability than nominal GDP over business cycles. This difference in variability exists because firms can build up losses in the downswing of the business cycle and utilise these losses in the upswing.

Table 3.1 - Fiscal sensitivity analysis
Year ending 30 June
($million)
2009
Forecast
2010
Forecast
2011
Forecast
2012
Forecast
2013
Forecast
1% lower nominal GDP growth per annum
Revenue (549) (1,106) (1,691) (2,332) (3,040)
Addition to financing costs 18 69 158 280 436
Impact on the operating balance (567) (1,175) (1,849) (2,612) (3,475)
Revenue impact of a 1% decrease in the growth rates of:
Wages and salaries (250) (515) (795) (1,100) (1,455)
Taxable business profits (135) (275) (435) (600) (775)
One percentage point lower interest rates
Interest income (84) (26) (50) (65) (39)
Expenses (88) (148) (218) (305) (393)
Impact on the operating balance 5 122 168 240 354

The forecasts of capital contributions to the NZS Fund are sensitive to the rate of return assumed on the Fund's assets.

Table 3.2 - NZS Fund contributions sensitivity analysis
Variable Marginal
change
Effect on
net return
after tax
Effect on capital contribution
($million)
(%age points) (%age points) 2009/10 2010/11 2011/12 2012/13
Expected gross rate of return -1 -0.76 231 243 256 269

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