The final fiscal position for 2018/19 was stronger than the Treasury expected at Budget 2019. The Government achieved an OBEGAL surplus of $7.3 billion in the 2018/19 financial year compared to an expected OBEGAL surplus of $3.5 billion. This was a strong result, even accounting for a number of one-off factors that are likely temporary.
The Government reduced net core Crown debt to 19.0 per cent of GDP at 30 June 2019, below the 20 per cent target in the Budget Responsibility Rules. This was the second year in a row that net debt fell below 20 per cent of GDP.
The Treasury's fiscal forecasts in the Half Year Update reflect the Government's decisions to increase investment in infrastructure and social services over the next four years. The Government inherited a public sector that had suffered from years of underfunding in these areas and is committed to closing these social and infrastructure deficits.
Budgets 2018 and 2019 formed a strong foundation, prioritising increased investment to fix hospitals, build new classrooms and revive rail and regional road infrastructure.
The Half Year Update forecasts reflect the next steps in our plan. The additional capital investment announced alongside this Budget Policy Statement uses the opportunity provided by the Government's careful fiscal management. Current low Government debt, together with the record low cost of borrowing, mean now is the right time to invest in high-value infrastructure that will build, grow and future-proof the economy.
The Government inherited a net debt position of 22.9 per cent of GDP. The Treasury forecasts net core Crown debt to fall to 21.5 per cent of GDP in 2021/22. Net debt is forecast to then fall further to 19.6 per cent of GDP in 2023/24, in line with the Government's target to maintain debt within a prudent range of 15 to 25 per cent of GDP.
In the past two years the Government has run surpluses of $5.5 billion and $7.3 billion. The Treasury forecasts a small OBEGAL deficit in 2019/20. This is owing to increased investment at recent Budgets and the temporary effects of the global headwinds mentioned above flowing through the New Zealand economy.
Surpluses will return from 2020/21, rising to 1.5 per cent of GDP in 2023/24. These, combined with the Government's first two surpluses, will more than outweigh one year of a small deficit. The OBEGAL surplus is forecast to average 0.6 per cent of GDP over the next five years.
As a percentage of GDP, core Crown expenses are expected to gradually increase from 28.6 per cent in 2018/19 to 29.4 per cent in 2020/21 and back down to 28.1 per cent in 2023/24.
|Year ending 30 June
% of GDP
|Core Crown tax revenue||28.4||27.7||28.0||28.0||28.2||28.4|
|Core Crown expenses||28.6||29.3||29.4||28.8||28.6||28.1|
|Total Crown OBEGAL||2.4||(0.3)||0.0||0.5||1.1||1.5|
|Core Crown residual cash||(0.2)||(1.6)||(2.4)||(1.6)||(0.6)||0.2|
|Net core Crown debt||19.0||19.6||21.0||21.5||20.9||19.6|
|Net worth attributable to the Crown||45.9||43.7||42.6||42.2||42.5||43.5|
Source: The Treasury
-  The 2018/19 financial results have been restated owing to changes in accounting policies to be consistent with policies applied in the Treasury’s fiscal forecasts. The results stated here therefore differ from those published in the Financial Statements of the Government of New Zealand for the Year Ended 30 June 2019.