COOK ISLANDS GOVERNMENT BUDGET ESTIMATES 2019/20 Book 1 Appropriation Bill Appropriations and Commentary Hon. Mark Brown Minister of Finance JUNE 2019 Table of Contents 1 Statement of Responsibility .................................................................................................1 2 Appropriation Bill 2019 ........................................................................................................3 3 Budget Overview ............................................................................................................... 10 Summary ............................................................................................................................. 10 Economic performance and outlook .................................................................................. 10 Fiscal performance and outlook ......................................................................................... 11 4 Fiscal Strategy .................................................................................................................... 13 The Cook Islands Fiscal Framework 2019/20–2022/23 ...................................................... 13 Medium-term Fiscal Strategy .............................................................................................. 14 Performance against the fiscal rules ................................................................................... 15 Establishment of reserve funds .......................................................................................... 18 Medium-term expenditure ceilings .................................................................................... 19 Medium-term national priorities ........................................................................................ 20 Medium-term fiscal outlook ............................................................................................... 23 Fiscal update ....................................................................................................................... 25 Assumptions underlying the economic and fiscal projections ........................................... 31 Economic and fiscal risks..................................................................................................... 32 Economic and fiscal sensitivity analysis .............................................................................. 36 5 Economic Update ............................................................................................................... 42 Summary ............................................................................................................................. 42 The global economy ............................................................................................................ 43 Cook Islands Economic Output ........................................................................................... 48 Consumer price index ......................................................................................................... 51 Tourism ............................................................................................................................... 56 Housing and construction ................................................................................................... 62 Marine resources ................................................................................................................ 64 Agriculture .......................................................................................................................... 69 Goods imports and exports................................................................................................. 71 Banking and finance ............................................................................................................ 75 Financial services industry .................................................................................................. 76 6 Government Financial Statistics Statement ......................................................................... 80 GFS Net Operating Balance ................................................................................................. 81 GFS Non-Operating Items ................................................................................................... 83 Classification of Functions of Government (COFOG) .......................................................... 83 7 Revenue ............................................................................................................................ 86 Total revenue ...................................................................................................................... 86 Revenue Initiatives for the 2019/20 – 2022/23 medium-term .......................................... 87 Taxes ................................................................................................................................... 87 i 8 Expenditure ....................................................................................................................... 96 Operating expenditure ........................................................................................................ 96 Changes to expenditure since the 2018/19 Supplementary Budget .................................. 97 Payments on Behalf of the Crown (POBOC) ..................................................................... 112 Parliamentary Entitlements and House of Ariki................................................................ 112 Welfare Payments ............................................................................................................. 115 9 Cook Islands Capital Expenditure ...................................................................................... 118 Summary ........................................................................................................................... 118 Capital Spending by Agency .............................................................................................. 120 10 Tax Exemptions (Expenditure) .......................................................................................... 132 Introduction ...................................................................................................................... 132 Import duty ....................................................................................................................... 132 Income tax ......................................................................................................................... 133 Value-added tax ................................................................................................................ 134 11 Crown Debt and Net Worth .............................................................................................. 135 The Loan Repayment Fund (LRF) ...................................................................................... 135 Gross Debt owed by the Crown ........................................................................................ 136 Gross Debt by Currency .................................................................................................... 138 Gross Debt by Lenders ...................................................................................................... 141 Gross Debt by Source ........................................................................................................ 143 Net Debt ............................................................................................................................ 143 Debt Headroom ................................................................................................................ 144 Crown Debt Sensitivity Analysis ........................................................................................ 146 Long term debt projections and fiscal risks ...................................................................... 147 State Owned Enterprise Debt ........................................................................................... 147 Net worth .......................................................................................................................... 148 12 National Sustainable Development Plan (NSDP) 2016-2020 ............................................... 149 Measuring our progress – a scorecard for development ................................................. 149 Investment by NSDP goal priorities for the 2019/20 and the medium term ................... 152 Expenditure by Budget Policy Statement 2019/20 goal ................................................... 154 13 State-owned Enterprises .................................................................................................. 163 CIIC .................................................................................................................................... 163 Airport Authority ............................................................................................................... 163 Avaroa Cable Limited (ACL) ............................................................................................... 164 Bank of the Cook Islands (BCI) .......................................................................................... 164 Ports Authority .................................................................................................................. 165 Te Aponga Uira .................................................................................................................