The Treasury

Global Navigation

Personal tools

Treasury
Publication

Pre-election Economic and Fiscal Update 2014

Fiscal Outlook

Overview

Table 2.1 - Fiscal indicators
Year ended 30 June 2013
Actual
2014
Forecast
2015
Forecast
2016
Forecast
2017
Forecast
2018
Forecast
$billions            
Total Crown OBEGAL1  (4.4)  (2.6) 0.3 0.8 1.9 3.0
Core Crown residual cash  (5.7)  (4.2)  (4.6)  (2.9) (0.4) (0.3)
Net core Crown debt2 55.8 59.9 64.3 67.0 67.5 67.9
Net worth attributable to the Crown 68.1 74.4 77.4 81.0 85.9 92.0
% of GDP            
Total Crown OBEGAL1  (2.1)  (1.1) 0.1 0.3 0.7 1.1
Core Crown residual cash  (2.7)  (1.8)  (1.9)  (1.1) (0.2) (0.1)
Net core Crown debt2 26.2 25.9 26.8 26.7 25.8 25.0
Net worth attributable to the Crown 32.0 32.2 32.2 32.3 32.8 33.9

Notes:

  1. Operating balance before gains and losses.
  2. Net core Crown debt excluding the NZ Superannuation Fund and advances.

Source: The Treasury

  • The Treasury forecasts an OBEGAL surplus of $297 million in the 2014/15 fiscal year. Beyond 2014/15, annual surpluses are expected to increase by between $500 million and $1.1 billion each year of the forecast and, by 2017/18, the OBEGAL surplus is expected to reach $3.0 billion.
  • Core Crown tax revenue continues to grow across the forecast period and is expected to reach $77.1 billion by 2017/18.
  • Beyond 2013/14, core Crown expenses are expected to rise by $10.2 billion by the end of the forecast period. This rise is largely owing to operating allowances[1] (which contribute $6.0 billion) and increases in social assistance spending of $3.7 billion. This forecast growth in core Crown expenses is slower than growth in the nominal economy so by the end of the forecast period core Crown expenses are expected to fall to 30.0% of GDP.
  • In nominal terms, net core Crown debt is forecast to increase, reaching $67.9 billion in 2017/18 while the residual cash position remains in deficit across the forecast period. As a share of GDP, net core Crown debt is expected to decline, falling to 25.0% by June 2018 (Table 2.2).
  • The Crown's balance sheet strengthens across the forecast period with net worth attributable to the Crown reaching $92.0 billion by 2017/18 (compared to $74.4 billion in 2013/14).
  • Compared to the Budget Update, core Crown tax revenue forecasts have been revised downwards owing to the changes in macroeconomic conditions. Weaker tax forecasts, both revenue and receipts, result in surpluses that are expected to be smaller than the Budget Update in each of the four years across the forecast period and a larger cash shortfall. As a result, debt repayments now commence a year later (the first year outside the forecast period) once residual cash surpluses are achieved.
  • In preparing these fiscal forecasts, key assumptions have been made on the performance of the economy as well as new operating allowances. As with all assumptions, there is inherent uncertainty and a change in any one assumption could negatively or positively impact forecasts for the Crown's fiscal indicators. The Risks and Scenarios and the Specific Fiscal Risks chapters outline the key risks to the Crown achieving these forecasts.
Table 2.2 - Reconciliation between OBEGAL and net core Crown debt
Year ended 30 June
$billions
2013
Actual
2014
Forecast
2015
Forecast
2016
Forecast
2017
Forecast
2018
Forecast
Core Crown revenue 64.1 67.3 72.2 76.5 80.3 84.2
Core Crown expenses (70.3) (71.3) (72.8) (75.9) (78.6) (81.5)
Net surpluses/(deficits) of SOEs and CEs 1.8 1.4 0.9 0.2 0.2 0.3
Total Crown OBEGAL (4.4) (2.6) 0.3 0.8 1.9 3.0
Net retained surpluses of SOEs, CEs and NZS Fund (1.2) (0.9) (0.8) (0.2) (0.1) (0.3)
Non-cash items and working capital movements 1.1 0.5 1.7 1.7 2.5 1.2
Net core Crown cash flow from operations (4.5) (3.0) 1.2  2.3  4.3  3.9 
Net purchase of physical assets (1.2) (1.9) (2.5) (2.4) (2.2) (1.8)
Advances and capital injections (1.7) (1.6) (3.8) (2.4) (1.8) (1.6)
Forecast for future new capital spending - (0.1) (0.4) (0.7) (0.8)
Proceeds from government share offers 1.7 2.3  0.6  -   -   -  
Core Crown residual cash balance (5.7) (4.2) (4.6) (2.9) (0.4) (0.3)
Opening net core Crown debt 50.7 55.8 59.9 64.3 67.0 67.5
Core Crown residual cash deficit/(surplus) 5.7 4.2 4.6 2.9 0.4 0.3
Valuation changes in financial instruments (0.6) (0.1) (0.2) (0.2) 0.1 0.1
Closing net core Crown debt 55.8 59.9 64.3 67.0 67.5 67.9
As a percentage of GDP 26.2% 25.9% 26.8% 26.7% 25.8% 25.0%

Source: The Treasury

  • This chapter also includes medium-term projections to 2027/28. These projections represent a potential future path based on historical averages. The weaker OBEGAL outlook compared to the Budget Update would mean there would be a delay by one year to the re-commencement of the Crown's NZS Fund contributions (to 2020/21).

Notes

  • [1]Operating allowances are assumed to flow through as expenses. However, allowances can be used for a combination of both revenue and expense initiatives when allocated.
Page top