The 2022/23 financial year has been a challenging period for New Zealand, marked by global volatility as countries emerged from the Covid pandemic, high levels of inflation, and domestic challenges such as extreme weather events. The Government has continued to take a responsible and balanced approach in dealing with these challenges by supporting New Zealanders with cost of living pressures and investing in public services and growing the economy while ensuring we sustainably manage our resources.
The New Zealand economy has remained resilient in these uncertain times, with unemployment well below the long‑term average and the economy nearly 8 percent larger than before the start of the pandemic. The economy has also benefited from growing exports, the return of tourists and international students and rising numbers of skilled overseas workers to help businesses fill job vacancies. Free trade agreements now cover almost three quarters of New Zealand’s exports, up from less than half six years ago.
New Zealand has a solid base as we face the challenges ahead. The global economy continues to experience the reverberations from the 1-in-100 year economic shocks from the pandemic while New Zealand also experienced its second largest natural disaster following the impact of flooding and Cyclone Gabrielle.
This has been reflected in the Government’s books. For the year to 30 June 2023, the Crown accounts show an operating balance before gains and losses (OBEGAL) deficit of $9.4 billion, which was broadly consistent with the result from the previous year but was $2.5 billion above what had been forecast in May’s budget.
Core Crown tax revenue was $3.9 billion higher than last year at $112.4 billion, largely on the back of a growing economy with more people in work, but $3.0 billion lower where Treasury had forecast it to be in May’s budget.
Core Crown expense were in line with forecasts at $127.6 billion and have fallen as a proportion of GDP to 32.2 percent of GDP in the year to June 2023 from 34.5 percent of GDP in the June 2022 as COVID-19 restrictions came to an end. In the 2022/23 financial year the Government has supported New Zealanders through the rising cost of living and invested in core public services and responding to extreme weather events. These investments include laying a foundation to tackle the inequities and intergenerational issues in the health system and addressing climate change.
In this uncertain environment the Government has continued to respond to ensure we meet our responsible and balanced fiscal goals of a surplus in the forecast period and net debt below the limit of 30 percent of GDP. We acted swiftly to the weaker outlook for tax revenue, by identifying close to $4 billion of savings through the Fiscal Sustainability and Effectiveness Programme on top of the $4 billion found in May’s budget to ensure a sustainable fiscal path into the future.
Net debt ended the year at 18.0 per cent of GDP, in line with the Budget 2023 forecast. This level of debt is well below the Government’s debt ceiling and means the government in well placed to respond to any future shocks. On a comparable measure of debt produced by the International Monetary Fund (IMF), our debt position as a percentage of GDP continues to be much lower than Australia, the United Kingdom and the United States.
We continue to invest in an economic plan that builds a stronger and more resilient economy that lifts productivity, profits, and wages. Valuations changes on the assets owned and liabilities owed by the Government in the 2022/23 year have strengthened the net worth position compared to last year. This includes an increase in assets of $34.8 billion, underpinned by our on-going investment programme including $13.3 billion building infrastructure in New Zealand, including roads, hospitals, houses and classrooms. We contributed $2.6 billion to the New Zealand Superannuation Fund (NZS Fund), an investment in the future of all Kiwis.
New Zealand is in a position of strength despite a challenging global environment. In the Pre‑election Economic and Fiscal Update, the Treasury have forecast the economy to grow 2.4 percent on average per year between 2023 and 2027, add 101,000 new jobs and wages to grow faster than inflation. The economy is turning a corner, we have every reason to be optimistic about the country’s future.
Hon Grant Robertson
Minister of Finance
29 September 2023
Financial Statements Summary
The financial results of the Government for the 2022/23-year show that revenue and expenses have grown at a similar pace since last year. Revaluation gains have had a significant favourable impact on the value of assets and liabilities, which has resulted in a stronger operating balance result and net worth position compared to last year. Since Budget 2023, tax outturns have fallen short of expectations which has led to a number of fiscal indicators coming in weaker than expected.
Total revenue at $153.0 billion was $11.4 billion higher than last year, but lower than the Budget 2023 forecast by $2.5 billion. These differences were largely due to changes in tax revenue (page 11).
Total expenses were $161.8 billion, $10.9 billion higher than last year and consistent with the Budget 2023 forecast (page 14). The increase from last year was largely due to economic factors and policy decisions (page 12).
The operating balance was a surplus of $5.3 billion largely a result of net gains of $14.7 billion partially offset by expenses exceeding revenue by $8.8 billion (page 15).
With revenue and expenses growing by a similar amount during the year, the operating balance before gains and losses (OBEGAL) deficit of $9.4 billion was broadly consistent with the deficit reported last year (page 18). However weaker tax outturns since Budget 2023 have resulted in the OBEGAL deficit being $2.5 billion more than anticipated.
Net worth increased by $17.2 billion to $191.5 billion (page 28), largely as a result of upward property, plant and equipment revaluations and the operating balance surplus (page 25).
Net debt at $71.4 billion (18.0% of GDP), was $9.5 billion higher than the June 2022 level, but close to the $71.0 billion (18.0% of GDP) forecast in Budget 2023 (page 21).
| Year ended 30 June | Actual 2023 $ millions |
Actual 2022 $ millions |
Variance | Forecast | |||
|---|---|---|---|---|---|---|---|
| Budget 2023 | Variance | ||||||
| 2023 $ millions |
|||||||
| $ millions | % | $ millions | % | ||||
| Total revenue | 153,011 | 141,627 | 11,384 | 8.0 | 155,556 | (2,545) | (1.6) |
| Total expenses | 161,822 | 150,956 | 10,866 | 7.2 | 161,924 | (102) | (0.1) |
| Operating balance1 | 5,321 | (16,932) | 22,253 | (131.4) | 4,219 | 1,102 | 26.1 |
| Total net worth | 191,472 | 174,319 | 17,153 | 9.8 | 178,956 | 12,516 | 7.0 |
| Total assets | 536,666 | 501,844 | 34,822 | 6.9 | 519,192 | 17,474 | 3.4 |
| Total liabilities | 345,194 | 327,525 | 17,669 | 5.4 | 340,236 | 4,958 | 1.5 |
| OBEGAL1 | (9,446) | (9,691) | 245 | (2.5) | (6,959) | (2,487) | 35.7 |
| Net debt | 71,367 | 61,850 | 9,517 | 15.4 | 70,957 | 410 | 0.6 |
| % of GDP2 | |||||||
| Total revenue | 38.6 | 38.9 | (0.3) | 39.5 | (0.9) | ||
| Total expenses | 40.9 | 41.5 | (0.6) | 41.1 | (0.2) | ||
| Operating balance | 1.3 | (4.7) | 6.0 | 1.1 | 0.2 | ||
| Total net worth | 48.4 | 47.9 | 0.5 | 45.4 | 3.0 | ||
| Total assets | 135.6 | 138.0 | (2.4) | 131.8 | 3.8 | ||
| Total liabilities | 87.2 | 90.1 | (2.9) | 86.4 | 0.8 | ||
| OBEGAL | (2.4) | (2.7) | 0.3 | (1.8) | (0.6) | ||
| Net debt | 18.0 | 17.0 | 1.0 | 18.0 | 0.0 | ||
Excluding minority interests.
Actual GDP is updated to reflect the most recently published numbers – refer historical time series on page 181 for the nominal GDP figures (Source: Stats NZ).Source: The Treasury
This commentary should be read in conjunction with the audited financial statements on pages 44 to 166. The Financial Statements of the Government received an unmodified auditor’s opinion for the year ended 30 June 2023.
The 2022/23 fiscal year coincided with an economic backdrop of high inflation and rising interest rates. These conditions have contributed to a number of the trends in the Government’s key fiscal indicators compared to last year. At 30 June 2023, the annual percentage change in the Consumer Price Index was 6.0%. This has supported strong wage growth and private consumption through the year and led to steady growth in the nominal economy, with nominal GDP increasing by 8.9%. Tax revenue has grown on the back of growth in the economy, however at a slightly slower pace reflecting the impact of weaker business profits. Inflation has also contributed to the growth in expenses, with a large part of the Budget 2022 package funding cost pressures and policy initiatives to support New Zealanders through the rising cost of living (eg, the cost-of-living payment).
With the objective of easing the rate of inflation, the Reserve Bank of New Zealand (the Reserve Bank) has lifted the official cash rate (OCR) from 2.5% in July 2022 to 5.5% by June 2023, which in turn flows through to an increase in interest rates. Overall, the increase in interest rates have had an adverse impact on the Government fiscal results with the increase in finance cost exceeding the increase in interest revenue.
The 2022/23 fiscal year also covers a period where COVID-19 restrictions have mostly come to an end and significant temporary Government support measures (for example, the wage subsidy scheme and resurgence support payments), have been minimal compared to the last few years, resulting in a reduction in expenses. The removal of most COVID-19 restrictions has also meant activity in some sectors (eg, air travel) has rebounded back to pre-COVID-19 levels, which has increased both revenue and expenses. However, the North Island weather events early in the 2023 calendar year have resulted in some one-off costs being incurred in the 2022/23 fiscal year. This includes costs to settle insurance claims, asset impairment and immediate response costs.
As a result of the above factors, total Crown revenue at $153.0 billion has increased by $11.4 billion and total Crown expenses at $161.8 billion were higher by $10.9 billion from the 2021/22 fiscal year. With both revenue and expenses growing at a similar rate the OBEGAL deficit of $9.4 billion for 2022/23 is broadly consistent with the deficit reported last year.
Similarly, the residual cash deficit of $25.6 billion was broadly consistent with the deficit reported in 2021/22. The funding of the cash shortfall in 2022/23 contributes to the increase in net debt. However, this is somewhat offset by stronger investment market conditions through the 2022/23 year which has increased financial assets. Overall, net debt in 2022/23 was $9.5 billion more than the prior year increasing from $61.9 billion (17.0% of GDP) to $71.4 billion (18.0% of GDP).
The valuation of assets and liabilities have contributed to a stronger operating balance result and net worth position compared to last year. Stronger investment market conditions have increased the value of financial instruments, predominately held by the NZS Fund and the Accident Compensation Corporation (ACC). The value of the New Zealand Emissions Trading Scheme (NZ ETS) liability has reduced, resulting in the recognition of a valuation gain. Overall, net valuation gains recognised in the operating balance result totalled $14.7 billion and were the key driver for the operating balance surplus of $5.3 billion being stronger than the result from last year.
The Government’s net worth position is $17.2 billion stronger than the prior year mainly as a result of the operating balance surplus reported in 2022/23 and revaluation uplifts in some of the Government’s physical assets. The revaluation increases largely reflect higher material costs required to replace existing assets.
Most of the Government’s key fiscal indicators have come in weaker than what was forecast at Budget 2023.
The weaker result is largely owing to tax revenue, which came in $2.9 billion lower than expected. This was mostly due to weaker than expected corporate and net other persons tax revenue, as taxable profits for the 2022 tax year were lower than what was assumed in the Budget 2023 forecast.
The results are compared against the previous year and against forecasts for the 2022/23 year:
Budget 2022 refers to the 2022 Budget Economic and Fiscal Update published in May 2022, and
Budget 2023 refers to the 2023 Budget Economic and Fiscal Update published in May 2023.
