The interim Financial Statements of the Government of New Zealand for the ten months ended 30 April 2019 (the financial statements) were released by the Treasury today. The financial statements are compared against forecasts based on the Budget Economic and Fiscal Update 2019 (BEFU 2019) published on 30 May 2019.
Results can fluctuate from month to month, due to a number of factors, such as timing. This is particularly relevant for tax revenue this month. We are doing analysis to determine the key drivers of this variance from the BEFU 2019 forecast. We are aware some of these are timing differences, particularly in GST, underlying strength in profits and the income tax revenue estimates from the new system. The Treasury and Inland Revenue are continuing to do more analysis on the April results and for the May 2019 financial statements. At this stage, the year-to-date results do not necessarily indicate a significant deviation from the full year expected results.
Core Crown tax revenue of $71.1 billion was $2.3 billion (3.3%) above forecast. Within this, other individuals tax was $0.9 billion (24.1%) above forecast, corporate tax $0.6 billion (4.8%) and GST $0.5 billion (2.6%) above forecast. These variances were caused by a combination of:
- some higher-than-forecast revenue relating to previous tax years, due to higher terminal tax revenue than forecast, which will likely persist until year end
- higher-than-expected income tax revenue in relation to the transition to the new IRD system used to calculate tax revenue. As this is the first set of data from the new system, it is unclear how much of this variance may impact on the 30 June 2019 results, and
- Portfolio Investment Entity (PIE) tax was approximately $0.2 billion above forecast, as PIE profits for the year to March 2019 were higher than was forecast in the BEFU 2019.
Core Crown expenses of $70.9 billion were $0.3 billion (0.4%) below forecast. Of this, $0.3 billion related to education expenses which were lower than forecast as a result of demand-driven factors across the primary, secondary and tertiary sectors.
The operating balance before gains and losses (OBEGAL) was a surplus of $5.2 billion, $2.6 billion higher than forecast. This was primarily due to the core Crown tax result discussed above.
When total gains and losses are added to the OBEGAL result, the operating balance (excluding minority interests) was a $0.8 billion surplus, $2.9 billion higher than forecast. Total net losses were $4.5 billion, largely due to decreases in the discount rate (used to value long term liabilities in today’s dollars) and favourable movements in exchange rates.
Core Crown residual cash was a deficit of $5.3 billion, that was $0.6 billion less than forecast due mainly to core Crown tax receipts being $0.3 billion higher than forecast and operating payments being $0.3 billion less than forecast.
Net core Crown debt at $62.3 billion, or 21.2% of GDP was $1.1 billion less than forecast as a result of the core Crown residual cash result discussed above and also circulating currency being $0.3 billion higher than forecast.
Gross debt at $86.0 billion was $2.0 billion higher than forecast. $1.5 billion of this related to unsettled trades. The rest of the variance is due to movement in the value of derivatives.
Net worth attributable to the Crown at $130.9 billion (44.6% of GDP) was $2.8 billion higher than the forecast largely due to the higher than forecast operating balance result.
|$ million||Year to date||Full Year|
|Core Crown tax revenue||71,073||68,821||2,252||3.3||84,650|
|Core Crown revenue||77,029||74,665||2,364||3.2||91,599|
|Core Crown expenses||70,852||71,132||280||0.4||87,300|
|Core Crown residual cash||(5,341)||(5,916)||575||9.7||(2,785)|
|Net core Crown debt4||62,277||63,398||1,121||1.8||60,299|
|as a percentage of GDP||21.2%||21.6%||20.1%|
|as a percentage of GDP||29.3%||28.7%||27.8%|
|Operating balance before gains and losses||5,170||2,560||2,610||102.0||3,465|
|Operating balance (excluding minority interests)||848||(2,060)||2,908||141.2||(284)|
|Net worth attributable to the Crown||130,907||128,086||2,821||2.2||129,999|
- Using the most recently published GDP (for the year ended 31 December 2018) of $293,233 million (Source: Stats NZ).
- Favourable variances against forecast have a positive sign and unfavourable variances against forecast have a negative sign.
- Using BEFU 19 forecast GDP for the year ending 30 June 2019 of $299,713 million (Source: The Treasury).
- Net core Crown debt excluding student loans and other advances. Net debt may fluctuate during the year largely reflecting the timing of tax receipts.
- Gross sovereign-issued debt excluding settlement cash and Reserve Bank bills.
EnquiriesJayne Winfield | Office of the Government Accountant
Tel: +64 4 890 7205