Comparison with longer-term fiscal projections
The fiscal projections in Figures 9 to 13 extend to June 2026, which is a decade beyond the final forecast year and is the period of time typically covered in fiscal strategy reports.
In the longer term, however, demographic factors increasingly come into play. An ageing population will place increasing and significant upward pressure on core Crown expenses such as New Zealand Superannuation and health.
To help understand the impact of these longer-term cost pressures, the Treasury uses a different methodology that assumes government expenses are driven by the expected demand for public services, rather than a continuation of current government fiscal policy.
A key message from the longer-term projections is that fiscal decisions made in the near to medium term can substantially alter the longer-term fiscal outlook.
This does not mean that the longer-term fiscal challenge from an ageing population has been solved. But the Government's commitment to prudent fiscal management, as well as an improvement in economic forecasts since the depths of the global financial crisis, has improved the longer-term fiscal projections hugely since 2009 (Figure 14).
- Figure 14 - Core Crown net debt projections from Budgets 2009 to 2012
- Source: The Treasury
The Treasury is required by legislation to publish a statement on the long-term fiscal position, at least every four years, that looks at least 40 years into the future.
The last Long-term Fiscal Statement was published in October 2009[7] and a full update is scheduled to be released in early 2013. The next Statement will play a key role in meeting the proposed new fiscal responsibility principle of the PFA that will require governments to take into account the impact of fiscal policy decisions on future generations.
Notes
- [7]http://www.treasury.govt.nz/government/longterm/fiscalposition/2009
