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Pre-election Economic and Fiscal Update 2017

2 Fiscal Outlook


  • The 2016/17 fiscal results are estimated to be significantly improved from the previous financial year. The operating balance before gains and losses (OBEGAL) surplus is estimated to reach $3.7 billion with core Crown tax revenue expected to grow by 7.4% compared to an increase of around 4% in core Crown expenses. In addition net core Crown debt is expected to reduce by $1.3 billion compared to 2015/16, to be $60.6 billion.
  • Growth in the nominal economy, partially offset by the introduction of the Family Incomes Package in April 2018, contribute to core Crown tax revenue increasing across the remainder of the forecast period.
  • Core Crown expenses rise in nominal terms but continue to decline as a percentage of GDP to reach 27.7% by 2020/21. Budget allowances (both operating and capital) are as set out in the 2017 Fiscal Strategy Report (FSR).
  • Residual cash is largely neutral over the forecast period with net core Crown debt at the end of the forecast period similar to current levels. As a percentage of GDP, it reduces across the forecast period and is forecast to be 18.8% of GDP by 2020/21.
  • Net worth attributable to the Crown continues to grow across the forecast period, largely owing to rising operating balances.
  • Contributions to the New Zealand Superannuation Fund (NZS Fund) are forecast to resume in 2020/21 when net debt is forecast to fall below 20% of GDP, with $2.2 billion assumed to be contributed in that year.
  • Total assets are forecast to grow by $47.3 billion to stand at $340.0 billion by 2020/21 largely reflecting the increased capital spend and the upward valuation of property, plant and equipment at 30 June 2017. Liabilities fall in nominal terms, with borrowings decreasing in the later part of the forecast period. Total liabilities are expected to stand at $193.8 billion at the end of 2020/21, with borrowings making up $109.5 billion of that balance.
  • While the 2016/17 fiscal results are estimated to be better than previously forecast, the OBEGAL forecasts for the next four years remain fairly close to the Budget Update. Net core Crown debt is estimated to be around $2.0 billion lower than the Budget Update across the forecast period, largely reflecting the 2016/17 outturn. Further discussion on the comparison to the Budget Update is on page 41.
  • These forecasts are sensitive to a number of assumptions and should be read in conjunction with the Risks and Scenarios and Specific Fiscal Risks chapters. In particular, judgements have been made regarding the extent to which the current strength in tax revenue outturns continues throughout the forecast period.
  • The Fiscal Outlook chapter also includes medium term projections that extend beyond the forecast period until 2030/31. These projections represent a potential future path based on historic averages. The assumptions for allowances in the projections remain unchanged from those used in the 2017 FSR.
Table 2.1 - Fiscal indicators
Year ending 30 June 2016
Core Crown tax revenue 70.4 75.6 78.3 81.3 85.8 89.8
Core Crown expenses 73.9 76.8 81.0 83.7 86.1 89.5
Total Crown OBEGAL1  1.8 3.7 2.9 3.5 5.7 6.4
Core Crown residual cash  (1.3) 1.5  (1.4) (1.4) 1.7 1.1
Net core Crown debt2 61.9 60.6 62.2 63.7 62.0 60.8
Net worth attributable to the Crown 89.4 108.9 114.5 121.2 130.4 140.6
% of GDP            
Core Crown tax revenue 27.8 28.1 27.7 27.4 27.6 27.8
Core Crown expenses 29.2 28.6 28.7 28.2 27.7 27.7
Total Crown OBEGAL1 0.7 1.4 1.0 1.2 1.9 2.0
Core Crown residual cash  (0.5) 0.6  (0.5) (0.5) 0.6 0.3
Net core Crown debt2 24.5 22.5 22.0 21.5 20.0 18.8
Net worth attributable to the Crown 35.3 40.5 40.5 40.9 42.0 43.5


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

Source: The Treasury

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