Fiscal Strategy
Budget 2012 is about delivering on the Government's four priorities, which are to:
- responsibly manage the Government's finances
- build a more productive and competitive economy
- deliver better public services, within tight financial constraints, and
- support the rebuilding of Christchurch.
Responsibly managing the Government's finances involves the fiscal goals of:
- returning the operating balance to surplus in 2014/15 and getting net debt down to prudent levels
- maintaining a broad-base, low-rate tax system that minimises economic distortions (Annex 2), and
- effectively managing the Crown's balance sheet.
The Government has updated and strengthened its long-term debt objective. The objective is now to bring net debt down to no higher than 20 per cent of GDP by 2020.
If the economy was hit by a very severe negative shock the Government would look at whether sticking to the current fiscal strategy would harm the economy by forcing a sharp reduction in demand. However, outside that scenario, the Government remains firmly committed to its fiscal strategy, including achieving an operating surplus in 2014/15 and bringing net debt down to 20 per cent of GDP.
