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Budget 2017 Home Page Fiscal Strategy Report - Budget 2017

The Government's Fiscal Priorities

Long-term Objectives

The Government's finances continue to improve as a result of ongoing responsible expenditure management.

Reflecting this improvement, and the importance of building fiscal resilience, the Government has updated its long-term debt objective. The Government now plans to reduce net debt to between 10 per cent and 15 per cent of GDP over the long term, and aims to be within this band by 2025. The short-term target of reducing net debt to around 20 per cent of GDP in 2020 remains unchanged.

The new net debt objective will allow the Government to continue to support New Zealand communities following future significant adverse events. Should an economic shock occur it may be appropriate for net debt to rise above the targeted level for a period of time - preventing the Government from having to cut vital public services or infrastructure investments.

The new net debt objective complements the Government's other long-term objectives, which remain unchanged: keeping core Crown expenses below 30 per cent of GDP and ensuring operating balances are sufficient to meet net capital requirements, including NZS Fund contributions.

Short-term Priorities

The Government's short-term priorities have been updated to reflect the new debt target and to show the priorities for any additional fiscal headroom:

  • Maintain rising OBEGAL[1] surpluses over the forecast period so that cash surpluses are generated and net debt begins to reduce in dollar terms.
  • Reduce net debt to around 20 per cent of GDP in 2020, and to between 10 per cent and 15 per cent of GDP by 2025.
  • Invest in the public services and infrastructure needed for a growing country.
  • As fiscal conditions allow, adjust tax and transfer settings to improve family incomes and simplify the income tax and transfer system.

The Government intends to use any positive cyclical revenue surprises to strengthen the resilience of the balance sheet.


  • [1] Operating balance before gains and losses.
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