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Summary fiscal indicators

The Treasury calculates two summary fiscal indicators - the cyclically-adjusted balance and the fiscal impulse indicator - to help assess the Government's fiscal position. These indicators are subject to uncertainty as their calculation relies on estimated variables. Further detail on these indicators, including sensitivity analysis, can be found in the Additional Information on the Treasury website (www.treasury.govt.nz/budget/forecasts/prefu2017).

Table 2.5 - Structural fiscal balance indicators
Year ending 30 June
% of GDP
2016
Actual
2017
Forecast
2018
Forecast
2019
Forecast
2020
Forecast
2021
Forecast
OBEGAL 0.7 1.4 1.0 1.2 1.9 2.0
Cyclically-adjusted balance 1.2 2.2 1.3 1.1 1.7 2.0
Fiscal impulse[5] -0.2 -0.6 1.0 0.6 -1.1 -0.4

Source: The Treasury

Cyclically-adjusted balance

The cyclically-adjusted balance (CAB) is an estimate of the OBEGAL adjusted for the cyclical position of the economy. Cyclical factors (eg, higher tax receipts in an upturn or higher unemployment expenses in a downturn) are removed to assess the Government's underlying fiscal position.The CAB is in surplus across the entire forecast period, indicating the forecast OBEGAL surpluses are structural – that is, they are not owing to cyclical economic conditions. The profile of the CAB broadly reflects the profile of the OBEGAL across the forecast period. In 2016/17 the CAB peaks owing to high company tax revenue, timing of expenditure and the improved performance of CES and SOEs. The introduction of the Family Incomes Package sees the CAB decline over 2017/18 and 2018/19. Cyclically-adjusted surpluses are forecast to rise from 1.1% of GDP in 2018/19 to 2.0% of GDP by the end of the forecast period.

Figure 2.11 - Operating balance indicators
Figure 2.11 - Operating balance indicators.
Source: The Treasury

Fiscal impulse

The fiscal impulse is an estimate of discretionary changes in the fiscal position that have an impact on aggregate demand pressures in the economy. The fiscal impulse indicates that fiscal policy is forecast to have a contractionary impact on aggregate demand in 2016/17. This stance turns stimulatory in 2017/18 and 2018/19, and returns to a contractionary stance in the last two years of the forecast period. The positive impulses in 2017/18 and 2018/19 reflect the stimulatory impact of the Family Incomes Package, timing effects of company tax receipts and elevated capital spending. This is somewhat offset by the ongoing decline in operating expenditure as a percentage of GDP across the forecast period, which also drives the negative impulses from 2019/20.Movements in the timing of operating and capital expenditure, and higher company tax receipts have resulted in a contractionary impulse in 2016/17 and a more stimulatory impulse in 2017/18 relative to the Budget Update.

Notes

  • [5] The fiscal impulse measure shown is the core Crown fiscal impulse plus Crown entities excluding EQC and Southern Response payments. A positive number indicates stimulatory fiscal policy.
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