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Pre-election Economic & Fiscal Update 2011

Fiscal Outlook

Introduction

Table 2.1 - Fiscal forecasts
Year ending 30 June
$billion
2011
Actual
2012
Forecast
2013
Forecast
2014
Forecast
2015
Forecast
2016
Forecast
Core Crown revenue 57.6 61.2 65.7 70.4 74.8 79.2
Core Crown expenses (70.5) (74.5) (71.6) (72.9) (75.6) (78.0)
Net surpluses/(deficits) of SOEs and CEs (5.5) 2.5 1.4 1.5 2.2 2.0
Total Crown OBEGAL (18.4) (10.8) (4.4) (0.9) 1.5 3.1
Net retained surpluses of SOEs, CEs and NZS Fund 5.1 (3.0) (1.5) (1.6) (2.3) (2.0)
Non-cash items and working capital movements 4.0 4.5 0.3 1.3 0.6 1.2
Net core Crown cash flow from operations (9.3) (9.3) (5.7) (1.3) (0.2) 2.3
Net purchase of physical assets (1.5) (2.1) (1.6) (1.4) (1.4) (1.6)
Advances and capital injections (2.5) (1.9) (2.2) (2.2) (2.5) (2.2)
Forecast for future new capital spending - (0.2) (0.5) (0.7) (0.8) (0.9)
Balance sheet funding of new capital spending - - 0.1 0.6 0.8 0.8
Core Crown residual cash deficit (13.3) (13.6) (9.9) (5.0) (4.1) (1.6)
Opening net debt 26.7 40.1 53.8 63.2 67.8 71.3
Core Crown residual cash deficit 13.3 13.6 9.9 5.0 4.1 1.6
Other valuation changes in financial assets and financial liabilities 0.1 0.1 (0.5) (0.4) (0.5) (0.4)
Closing net debt 40.1 53.8 63.2 67.8 71.3 72.5
As a percentage of GDP 20.0% 25.4% 28.5% 28.9% 29.0% 28.2%

A glossary and longer time series for these variables is provided on pages 113 and 117 respectively.

Source: The Treasury

While core Crown expenses[1] are expected to exceed core Crown revenue for the majority of the forecast period, the gap between them reduces, due in part to the expenditure constraints announced at the last Budget Update. As a result, core Crown revenue begins to exceed expenses by the year ending 30 June 2016.

When forecast surpluses from State-owned enterprises (SOEs) and Crown entities are added, total Crown operating deficits are forecast to persist for the first three years of the forecasts with the total Crown operating balance before gains and losses (OBEGAL) moving into surplus in the year ending June 2015.

Core Crown operating cash flows represent the cash impact of the operating deficit (or surplus). These cash flows exclude the surpluses retained by SOEs, Crown entities and the New Zealand Superannuation (NZS) Fund and non-cash items such as depreciation. Core Crown operating cash flows remain in deficit but decline for most of the period, reaching an operating cash surplus in the year ending June 2016 (a year later than the operating surplus).

When the forecast capital investments are included (eg, purchasing assets, making advances to students), cash deficits decline over the forecast from $13.6 billion in the year ending June 2012 to $1.6 billion by the year ending June 2016.

These cash deficits are funded by an increase in net debt which is forecast to rise from 20.0% of GDP at June 2011 and stand at 28.2% at June 2016 (after peaking at 29.0% in 2015).

Notes

  • [1]Core Crown expenses represent the operating expenses of government entities listed on page 77 but exclude expenses of State-owned enterprises and Crown entities. Losses are also excluded.
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