Fiscal outlook
The HYEFU fiscal forecasts are summarised in Table 2. These show core Crown expenses declining as a percentage of GDP over the forecast period, reaching 31.5 per cent by 2028/29. Tight operating allowances contribute significantly to this decline. The operating balance also improves over the forecast period, under both the OBEGALx and OBEGAL measures. A small OBEGALx deficit of $304 million is forecast in 2027/28, followed by a $1.9 billion surplus in 2028/29. OBEGAL does not return to surplus in the forecast period, showing a small deficit in 2028/29.
Table 2 - Key fiscal indicators from the HYEFU
| Year ending 30 June | 2024 Actual |
2025 Forecast |
2026 Forecast |
2027 Forecast |
2028 Forecast |
2029 Forecast |
|---|---|---|---|---|---|---|
| $billions | ||||||
| Core Crown tax revenue | 120.6 | 120.6 | 128.3 | 136.7 | 144.1 | 151.2 |
| Core Crown revenue | 133.2 | 134.0 | 140.8 | 149.6 | 157.6 | 165.0 |
| Core Crown expenses | 139.0 | 144.6 | 149.8 | 152.6 | 157.7 | 162.9 |
| OBEGALx | (8.8) | (12.9) | (10.5) | (4.4) | (0.3) | 1.9 |
| OBEGAL | (12.9) | (17.3) | (14.1) | (8.2) | (4.3) | (2.4) |
| Net core Crown debt | 175.5 | 192.8 | 202.9 | 220.0 | 228.6 | 234.1 |
| Net worth | 191.0 | 177.5 | 169.5 | 168.1 | 171.0 | 176.2 |
| % of GDP | ||||||
| Core Crown tax revenue | 29.2 | 28.2 | 28.5 | 28.9 | 29.1 | 29.2 |
| Core Crown revenue | 32.2 | 31.4 | 31.3 | 31.6 | 31.8 | 31.9 |
| Core Crown expenses | 33.6 | 33.9 | 33.3 | 32.2 | 31.8 | 31.5 |
| OBEGALx | (2.1) | (3.0) | (2.3) | (0.9) | (0.1) | 0.4 |
| OBEGAL | (3.1) | (4.1) | (3.1) | (1.7) | (0.9) | (0.5) |
| Net core Crown debt | 42.4 | 45.1 | 45.1 | 46.5 | 46.1 | 45.2 |
| Net worth | 46.2 | 41.5 | 37.6 | 35.5 | 34.5 | 34.0 |
Source: The Treasury
The recovery in the fiscal outlook shown in Table 2 is slower than that presented in the BEFU. This slower forecast recovery is almost entirely driven by revisions to revenue and expense forecasts, rather than discretionary fiscal decisions.
This is illustrated in Table 3, which details the changes in the OBEGALx forecast track between the BEFU and the HYEFU. Relatively few fiscal decisions have been made since Budget 2024, outside those managed within existing allowances and contingencies. The most significant discretionary decision the Government has taken since the Budget with new (i.e. previously unaccounted for) fiscal implications is to increase future capital allowances, as discussed above. This contributes to, although is only one of the factors behind, the “net finance costs” line in Table 3. “Expense phasing changes” reflect expenses previously forecast to be incurred in 2023/24 being rolled forward, and the City Rail Link asset allocation between Auckland Council and the Crown being reforecast from 2024/25 into 2025/26.
Table 3 - Changes in fiscal forecasts between the BEFU and the HYEFU 2024
| Year ending 30 June $billions |
2025 | 2026 | 2027 | 2028 |
|---|---|---|---|---|
| OBEGALx - 2024 BEFU | (9.6) | (5.1) | 0.2 | 4.7 |
| Core Crown tax revenue | (2.3) | (3.1) | (3.5) | (4.1) |
| Core Crown benefit expenses | (0.1) | (0.2) | (0.1) | 0.2 |
| Net finance costs | 0.3 | (0.4) | (0.6) | (0.9) |
| Expense phasing changes | (0.1) | (1.2) | (0.2) | (0.2) |
| Education forecasting and depreciation expenses | (0.3) | (0.4) | (0.3) | (0.4) |
| Health NZ results | (1.1) | (0.2) | - | - |
| Other | 0.3 | 0.1 | 0.1 | 0.4 |
| Total movement | (3.3) | (5.4) | (4.6) | (5.0) |
| OBEGALx - 2024 HYEFU | (12.9) | (10.5) | (4.4) | (0.3) |
Source: The Treasury
In the HYEFU forecasts, the track for net core Crown debt as a percentage of GDP follows a similar pattern to the BEFU, increasing slightly before beginning to reduce after 2026/27. Net core Crown debt is expected to peak at 46.5 per cent of GDP in 2026/27 (Table 2), around 3 percentage points higher than expected at the BEFU, and thereafter decline to 45.2 per cent of GDP at the end of the forecast period. The higher track for net core Crown debt as a percentage of GDP, compared to the BEFU, reflects both a nominal increase in debt from additional funding requirements and a forecast smaller economy.