Short-term intentions and long-term objectives
The Government's commitment to reduce core Crown expenses and net core Crown debt as a proportion of GDP, and to return to operating surplus, are formalised in statements of short-term fiscal intentions (Table 4) and long-term fiscal objectives (Table 5). Apart from those relating to net worth, the intentions and objectives remain the same as those stated in the BPS.
Net worth is the Crown's assets minus its liabilities and has previously been the Government's headline indicator of overall balance sheet strength. The Government has now decided to use “net worth attributable to the Crown” as its preferred indicator. This measure excludes non-government shareholdings in majority government-owned entities, for example the privately owned part of Meridian Energy. It therefore gives a more accurate picture of what the Crown owns. The new short-term intention is to “maintain net worth attributable to the Crown consistent with the operating balance intention”. Net worth attributable to the Crown is influenced by gains, losses, revaluations, ACC net revenue and OBEGALx, but of these factors, OBEGALx is most within the Government's immediate control.
Table 4 — The Government's short-term fiscal intentions for the next four financial years
| Fiscal Strategy Report 2026 | |
|---|---|
| Debt | Maintain total debt at prudent levels. Put net core Crown debt as a percentage of GDP on a downward trajectory towards 40 per cent. |
| Operating balance | Bring total operating expenses and total operating revenues into balance. Return the operating balance (before gains and losses, excluding ACC) to surplus by 2028/29. Ensure consistency with the short-term intention for debt. |
| Expenses | Reduce core Crown expenses as a percentage of GDP. Ensure expenses are consistent with the operating balance intention. |
| Revenue | Ensure revenue is consistent with the operating balance intention. |
| Net worth | Maintain net worth attributable to the Crown consistent with the operating balance intention. |
The short-term intentions accord with the principles of responsible fiscal management in the PFA. For example, because they target a return to surplus, the intentions accord with the principle to ensure that, on average, over a reasonable period of time, total operating expenses do not exceed total operating revenues and therefore maintain total debt at prudent levels. The short-term intentions are also consistent with the long-term objectives set out below as they indicate the same direction of travel for each of the fiscal variables. The intention to return to surplus will support the long-term debt and net worth objectives.
The BEFU forecasts are consistent with the short-term intentions. Net core Crown debt as a percentage of GDP is expected to be on a downward trajectory after 2027/28, and OBEGALx returns to surplus in 2028/29. Core Crown expenses are forecast to reduce as a percentage of GDP after 2026/27.
As set out in previous statements, the following circumstances could lead the Government to consider amending the short-term intentions in Table 4:
- a significant decline in forecast revenue due to factors outside of the direct control of the Government
- a significant economic shock, arising for example from a natural disaster, that necessitates an increase in spending, or
- a material likelihood of constraints on the ability of monetary policy to stabilise the economy.
The Government does not consider that the impact of the Middle East conflict, as currently understood, is a shock of significant magnitude to trigger any of the above.
The new long-term objective for net worth now uses net worth attributable to the Crown as the preferred indicator, instead of net worth itself (Table 5).
Table 5 — The Government's long-term fiscal objectives for the next 15 financial years
| Fiscal Strategy Report 2026 | |
|---|---|
| Debt | Maintain total debt at prudent levels. Once net core Crown debt is below 40 per cent of GDP, maintain it within a range of 20 per cent to 40 per cent of GDP, subject to economic shocks. |
| Operating balance | Maintain operating surpluses sufficient to ensure consistency with the debt objective. This will ensure that, on average, over a reasonable period of time, operating expenses are funded from operating revenues and not from debt. |
| Expenses | Control growth in government spending so that, over time, core Crown expenses reduce towards 30 per cent of GDP. |
| Revenue | Ensure the level of operating revenues is consistent with the operating balance objective and supports long-term productive economic growth. |
| Net worth | Ensure net worth attributable to the Crown remains at a level sufficient to act as a buffer to economic shocks. |
These long-term objectives are consistent with the principles of responsible fiscal management set out in the PFA. A key principle is to maintain total debt at prudent levels. The Government has stated that net core Crown debt of less than 50 per cent is prudent, based on Treasury modelling. Its long-term objective to have net core Crown debt between 20 per cent and 40 per cent of GDP therefore implies that total debt will also be at prudent levels.
Box 4 — Amendments to Section 26 of the PFA
The PFA is a cornerstone of New Zealand's public finance system, regulating the Crown's financial powers and ensuring Parliament's authority to approve, review and scrutinise revenue and spending.
Sections 26J and 26K of the PFA require the Minister of Finance to state the government's short‑term fiscal intentions and long-term fiscal objectives for five fiscal variables: total operating expenses, total operating revenues, the balance between these expenses and revenues, the level of total debt and the level of total net worth. While these variables reflect internationally recognised accounting standards, successive governments have, for good reasons, used other, closely related variables when expressing their fiscal strategy, for example using core Crown rather than total Crown measures as these are more closely within the government's control, and net debt rather than gross debt, as the Crown’s holding of financial assets offset its financial liabilities.
Amendments to the PFA, effective from 1 July 2026, formalise this practice while ensuring transparency and accountability. They allow the government to use alternative fiscal variables in addition to, or in substitution for, the five statutory variables, if they are similar in nature and accord with the principles of responsible fiscal management set out elsewhere in the PFA.