Budget 2019

The Fiscal Strategy

Our fiscal approach

The Budget Responsibility Rules are the basis of our fiscal strategy

The Budget Responsibility Rules underpin the Coalition Government’s fiscal strategy. They are to:

  • Deliver a sustainable operating surplus across an economic cycle
  • Reduce the level of net core Crown debt to 20 per cent of GDP within five years of taking office
  • Prioritise investments to address the long-term financial and sustainability challenges facing New Zealand
  • Take a prudent approach to ensure expenditure is phased, controlled and directed to maximise its benefits. The Government will maintain its expenditure to within the recent historical range of spending to GDP ratio
  • Ensure a progressive taxation system that is fair, balanced and promotes the long-term sustainability and productivity of the economy.

The Government has demonstrated its continued commitment to these rules throughout its term to date. We have delivered sustainable OBEGAL21 surpluses (Figure 22), maintained core Crown expenses around their historical average and are on track to reduce net core Crown debt to 20 per cent of GDP within five years of taking office (Table 8).

Figure 22 – Total Crown OBEGAL

Source: The Treasury

A strong fiscal position is not just a signal of sound fiscal management, it is also a prerequisite for improving the intergenerational wellbeing of New Zealanders. Maintaining debt at prudent levels supports New Zealand’s resilience to risks, such as unexpected economic downturns or natural disasters.

Sustainable operating surpluses help debt remain on a stable trajectory in the medium term. Avoiding deficits will ensure future generations are not burdened with paying for initiatives that primarily benefit the current generation.

Prioritising expenditure on high-value initiatives supports the effective and efficient management of the Crown’s resources.

Table 8 – Summary of the Treasury’s fiscal forecasts

Table 8 - Summary of the Treasury's fiscal forecasts
Year ending 30 June 2018
Actual
2019
Forecast
2020
Forecast
2021
Forecast
2022
Forecast
2023
Forecast
$ billions            
Core Crown revenue 86.8 91.6 96.4 102.9 108.1 113.8
Core Crown expenses 80.6 87.3 93.3 98.9 101.7 105.7
Total Crown OBEGAL 5.5 3.5 1.3 2.1 4.7 6.1
Core Crown residual cash 1.3 -2.8 -4.2 -4.3 -0.6 1.2
Net core Crown debt 57.5 60.3 64.7 69.2 69.9 68.5
Net worth attributable to the Crown 129.6 130.0 134.7 140.7 149.8 160.8
% of GDP            
Core Crown revenue 30.0 30.6 30.4 30.8 30.9 31.1
Core Crown expenses 27.9 29.1 29.4 29.6 29.0 28.8
Total Crown OBEGAL 1.9 1.2 0.4 0.6 1.3 1.7
Core Crown residual cash 0.5 -0.9 -1.3 -1.3 -0.2 0.3
Net core Crown debt 19.9 20.1 20.4 20.7 19.9 18.7
Net worth attributable to the Crown 44.9 43.4 42.5 42.1 42.8 43.9

Source: The Treasury

Footnote


21Operating balance before gains and losses.
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