Annex 3 — Forecast changes since PREFU 2023
The fiscal forecasts have changed markedly since the PREFU in September 2023. These changes have been driven largely by revisions to the economic forecasts — which affect tax revenue, benefits and some other expenses — and not by discretionary Government policy changes.
Annex 1 of the BPS showed revisions to the economic forecasts since PREFU, and decomposed the changes in OBEGALx forecasts from PREFU to HYEFU. It highlighted two key reasons for economic forecast changes. One was a better understanding of the economic downturn, which started earlier, was deeper, and persisted for longer, than was previously understood or expected. The other was the Treasury's evolving assessment of productivity trends. With the benefit of hindsight, earlier economic forecasts attributed too much weight to an apparent pickup in productivity during the COVID-19 pandemic that did not persist. Changes in the tax forecasts and new tax policies have also lowered the core Crown tax-to-GDP ratio — the average tax take for each dollar of GDP.
This Annex updates the previous analysis to BEFU (Figures A3.1 and A3.2). In the most recent forecasts, the conflict in the Middle East has also contributed to a small downward revision in real GDP forecasts. Table A3.1 continues to show that forecast changes outside the Government's immediate control have driven the downward revision in OBEGALx forecasts since PREFU.
Figure A3.1 — Real GDP forecasts from PREFU 2023 and BEFU 2026
Sources: Stats NZ, the Treasury
Figure A3.2 — Core Crown tax-to-GDP ratio forecasts from PREFU 2023 and BEFU 2026
Sources: Stats NZ, the Treasury
Table A3.1 — Changes in OBEGALx forecasts between PREFU 2023 and BEFU 2026
| Year ending 30 June $billions |
2026 Forecast |
2027 Forecast |
|---|---|---|
| OBEGALx — 2023 PREFU | 1.6 | 5.3 |
| Tax revenue (excluding Budget decisions) | (11.0) | (10.4) |
| Benefit and NZ Superannuation expenses (excluding Budget decisions) | (0.3) | (1.1) |
| Debt impairments | (0.6) | (0.4) |
| Net core Crown finance costs | (0.2) | (0.8) |
| Emissions Trading Scheme forecast changes (net impact) | (0.9) | (0.5) |
| Education - forecast and depreciation changes | (0.6) | (0.6) |
| Budget packages and allowance changes | 2.5 | 1.7 |
| Baseline savings forecast in PREFU but not implemented | (0.5) | (0.5) |
| Asset impairments | (0.5) | (0.2) |
| State-owned enterprise and Crown entity results | (0.5) | (1.1) |
| Other | (0.9) | (2.8) |
| Total movement | (13.5) | (16.7) |
| OBEGALx — 2026 BEFU | (11.9) | (11.4) |
Source: The Treasury