Budget 2020

Budget Policy Statement

Annex

Long-term Fiscal Objectives and Short-term Fiscal Intentions

The Government's long-term objectives relate to the next 10 years. These long-term objectives are unchanged from those set out in the Fiscal Strategy Report 2019 (FSR).

Table A1 - Long-term objectives

Budget Policy Statement 2020
Operating balance

The Government will deliver a sustainable operating surplus across an economic cycle.

Operating expenses

The Government will maintain its expenditure to within the recent historical range of spending as a ratio of GDP.

The Government will take a prudent approach to ensure expenditure is phased, controlled and directed to maximise its benefits, in particular prioritising investments to address the long-term financial and sustainability challenges facing New Zealand.

Operating revenues

The Government will ensure a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy.

Debt 

Maintain total debt at prudent levels.

The Government will reduce the level of net core Crown debt to 20 per cent of GDP within five years of taking office and maintain it at prudent levels thereafter. Prudent levels of net core Crown debt are within a range of 15 to 25 per cent of GDP (subject to any significant shocks to the economy).

Net worth  

The Government will strengthen net worth consistent with the debt and operating balance objectives.

The Government's debt short-term fiscal intention (in Table A2 below) has changed since the FSR to incorporate our commitment to maintain net debt within a prudent range of 15 to 25 per cent of GDP. The operating balance short-term intention has been updated to reflect this. Maintaining debt within a range provides flexibility for fiscal policy to support economic stability and encourages a longer-term perspective for fiscal policy by allowing the Government to look through short-term volatility in net debt.

In addition, the forecast values (in Table A2 below) have been updated since the FSR to reflect the impact of changes in the Half Year Update forecasts. The updates to the forecast values reflect changes to the economic forecasts and the impact of policy changes, such as the new capital investment. The Treasury's latest forecasts show that Budget 2020 will be consistent with the Government's short-term fiscal intentions.

Both the short-term intentions and long-term objectives remain consistent with each other and with the principles of responsible fiscal management, as set out in the Public Finance Act 1989. That is, they aim to:

  • reduce total debt to prudent levels and achieve and maintain levels of total net worth so as to provide a buffer against adverse economic shocks
  • ensure that, on average, total operating expenses do not exceed total operating revenues
  • take into account the impact of fiscal policy on monetary policy
  • prudently manage the fiscal risks facing government
  • have regard for present and future generations, and
  • ensure the Crown's resources are managed effectively and efficiently.

More detailed information about the principles of responsible fiscal management can be found at: https://treasury.govt.nz/publications/introduction-new-zealands-fiscal-policy-framework-html

Table A2 - Short-term intentions

Budget Policy Statement 2020 Fiscal Strategy Report 2019
Debt Debt

Our intention is to reduce the level of net core Crown debt to 20 per cent of GDP within five years of taking office (subject to any significant shocks in the economy). We will continue to maintain debt at prudent levels (a range of 15-25 per cent of GDP).

Gross sovereign-issued debt (including Reserve Bank settlement cash and Reserve Bank bills) is forecast to be 28.2 per cent of GDP in 2023/24.

Net core Crown debt (excluding NZS Fund and advances) is forecast to be 19.6 per cent of GDP in 2019/20, 21.5 per cent of GDP in 2021/22 and 19.6 per cent of GDP in 2023/24.

This assumes a new capital allocation of $8.0 billion in the 2019/20 financial year and a multi-year capital allowance of $8.4 billion for Budget 2020 and the next three Budgets.

Our intention is to reduce the level of net core Crown debt to 20 per cent of GDP within five years of taking office (subject to any significant shocks to the economy).

Gross sovereign-issued debt (including Reserve Bank settlement cash and Reserve Bank bills) is forecast to be 26.9 per cent of GDP in 2022/23.

Net core Crown debt (excluding NZS Fund and advances) is forecast to be 20.4 per cent of GDP in 2019/20, 20.7 per cent of GDP in 2020/21, 19.9 per cent of GDP in 2021/22 and 18.7 per cent of GDP in 2022/23.

This assumes a multi-year capital allowance of $14.8 billion for Budget 2019 and the next three Budgets.

Operating balance Operating balance

Our intention is to deliver operating surpluses (before gains and losses) to ensure net debt falls to 20 per cent of GDP within five years of taking office and to maintain it at prudent levels thereafter (a range of 15-25 per cent of GDP).

The operating balance (before gains and losses) is forecast to be -0.3 per cent of GDP in 2019/20, increasing to 1.5 per cent of GDP in 2023/24. This is consistent with the long-term objective for the operating balance.

The operating balance is forecast to be 2.8 per cent of GDP in 2023/24.

Our intention is to deliver operating surpluses (before gains and losses) to ensure net debt falls to 20 per cent of GDP within five years of taking office.

The operating balance (before gains and losses) is forecast to be 1.2 per cent of GDP in 2018/19, rising to 1.3 per cent of GDP in 2021/22 and 1.7 per cent of GDP in 2022/23. This is consistent with the long-term objective for the operating balance.

The operating balance is forecast to be 3.0 per cent of GDP in 2022/23.

Expenses Expenses

Our intention is to ensure expenses are consistent with the operating balance objective.

Core Crown expenses are forecast to fall from 29.3 per cent of GDP in 2019/20 to 28.1 per cent of GDP in 2023/24.

Total Crown expenses are forecast to be 35.9 per cent of GDP in 2023/24.

This assumes new operating allowances of $3.0 billion per year in Budget 2020, $2.4 billion per year in Budget 2021, $2.4 billion per year in Budget 2022 and $2.6 billion per year in Budget 2023.

Our intention is to ensure expenses are consistent with the operating balance objective.

Core Crown expenses are forecast to fall from 29.1 per cent of GDP in 2018/19 to 28.8 per cent of GDP in 2022/23.

Total Crown expenses are forecast to be 36.5 per cent of GDP in 2022/23.

This assumes new operating allowances of $3.8 billion per year in Budget 2019, $3.0 billion per year in Budget 2020 and $2.4 billion per year in Budgets 2021 and 2022.

Revenue Revenue

Our intention is to ensure sufficient revenue to meet the operating balance objective.

Total Crown revenues are forecast to be 37.6 per cent of GDP in 2023/24.

Core Crown revenues are forecast to be 30.2 per cent of GDP in 2023/24.

Core Crown tax revenues are forecast to be 28.4 per cent of GDP in 2023/24.

Our intention is to ensure sufficient revenue to meet the operating balance objective.

Total Crown revenues are forecast to be 38.3 per cent of GDP in 2022/23.

Core Crown revenues are forecast to be 31.1 per cent of GDP in 2022/23.

Core Crown tax revenues are forecast to be 28.8 per cent of GDP in 2022/23.

Net worth Net worth

Our intention is to increase net worth consistent with the operating balance objective.

Total net worth attributable to the Crown is forecast to be 43.5 per cent of GDP in 2023/24.

Total Crown net worth is forecast to be 44.9 per cent of GDP in 2023/24.

Our intention is to increase net worth consistent with the operating balance objective.

Total net worth attributable to the Crown is forecast to be 43.9 per cent of GDP in 2022/23.

Total Crown net worth is forecast to be 45.4 per cent of GDP in 2022/23.

Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now

×

Back to Top