Wellbeing Budget 2020

The Fiscal Strategy

Fiscal projections and assumptions

The fiscal projections in Table 9 show the Government is expected to meet its long-term objectives. These projections are based on a set of modelling assumptions that are outlined on the Treasury website at: https://treasury.govt.nz/information-and-services/financial-management-and-advice/fiscal-strategy/fiscal-strategy-model

The key assumptions in the projections are:

  • Non-welfare spending growth is largely determined by operating allowances, which are assumed to be $2.1 billion in Budget 2024, growing at 2.0 per cent per year for subsequent Budgets.
  • Capital allowances are assumed to be $3.0 billion in Budget 2024, growing at 2.0 per cent per year for subsequent Budgets.
  • The long-term core Crown tax-to-GDP ratio is assumed to be 28.3 per cent.
  • Several economic variables that were impacted by the COVID-19 pandemic, such as the unemployment rate, are projected to transition back to long run stable assumptions over the early years of the projection period. Once this transition has happened the economy is assumed to grow at trend growth rates with no economic cycles in the projections.

The main changes to fiscal projections since the 2019 Fiscal Strategy are:

  • Changes in the economic and fiscal forecasts, largely due to the impacts of and response to COVID-19, which affect the starting point for the projections.
  • Changes in the Government's fiscal strategy in response to the COVID-19 pandemic.
  • Changes in the level and growth rate of operating and capital allowances, to ensure consistency with the updated long-term objectives.

Table 9 - Summary of fiscal projections

Year ending 30 June
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2034
% of GDP Forecasts Projections
Core Crown revenue 30.4 29.6 28.8 29.5 29.4 29.9 30.2 30.4 30.6 30.7 30.8 31.0
Core Crown expenses 38.7 38.6 36.5 33.7 30.2 30.0 29.9 29.9 29.9 30.0 30.0 30.0
Total Crown revenue 38.9 37.4 36.9 37.3 36.9 37.6 38.0 38.2 38.4 38.5 38.6 38.8
Total Crown expenses 48.5 47.4 45.1 41.8 38.1 38.2 38.1 38.1 38.2 38.3 38.4 38.5
Total Crown OBEGAL -9.6 -10.1 -8.3 -4.7 -1.3 -0.7 -0.2 -0.1 0.1 0.1 0.1 0.2
Total Crown operating balance1 -12.6 -10.0 -7.4 -3.7 -0.3 0.4 0.8 1.0 1.2 1.3 1.3 1.5
Gross sovereign-issued debt 45.6 69.2 74.3 74.4 74.0 73.9 73.4 72.6 71.5 70.3 68.9 63.2
Net core Crown debt2 30.2 44.0 49.8 53.6 53.6 53.2 52.3 51.3 50.1 48.8 47.5 42.0
Total Crown net worth 36.0 26.0 16.0 11.2 10.3 10.2 10.5 11.1 11.8 12.6 13.4 16.8
Net worth attributable
to the Crown
34.0 24.1 14.3 9.7 8.9 8.8 9.2 9.7 10.5 11.3 12.2 15.6

Notes

1 Excludes minority interests
2 Excludes the NZS Fund and advances

Source: The Treasury

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