Annex 2 Principles of Responsible Fiscal Management
The Public Finance Act prescribes that the Government must pursue its policy objectives in accordance with the following principles:
(a) reducing total debt to prudent levels so as to provide a buffer against factors that may impact adversely on the level of total debt in the future by ensuring that, until those levels have been achieved, total operating expenses in each financial year are less than total operating revenues in the same financial year
(b) once prudent levels of total debt have been achieved, maintaining those levels by ensuring that, on average, over a reasonable period of time, total operating expenses do not exceed total operating revenues
(c) achieving and maintaining levels of total net worth that provide a buffer against factors that may impact adversely on total net worth in the future
(d) managing prudently the fiscal risks facing the Government, and
(e) pursuing policies that are consistent with a reasonable degree of predictability about the level and stability of tax rates for future years.
The Government is also progressing the Public Finance (Fiscal Responsibility) Amendment Bill, which is currently being considered by the Finance and Expenditure Committee. This Bill would replace principle (e) above with four new principles:
(e) formulating revenue strategy with regard to efficiency and fairness, including the predictability and stability of tax rates
(f) formulating fiscal strategy with regard to its interaction with monetary policy
(g) formulating fiscal strategy with regard to its likely impact on present and future generations, and
(h) ensuring that the Crown's resources are managed effectively and efficiently.
