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How New Zealand Governments Determine Their Fiscal Strategies - A Layman's Guide

Introduction: What is a fiscal strategy?

A government's fiscal strategy is a plan for managing its finances, which includes spending, revenue and the portfolio of assets and liabilities on the Crown balance sheet. New Zealand governments frequently express their fiscal strategies using goals for public debt and the gap between spending and revenue (that is, whether the annual budget is in surplus or deficit).

It is a requirement under the Public Finance Act 1989 (PFA) for governments to produce a fiscal strategy every year and to set it out in a transparent way.

Part 1 of this pamphlet explains why a government's fiscal strategy is important for New Zealanders. Part 2 explains the factors that are generally taken into account when developing a robust fiscal strategy.

A key part of the current Government's fiscal strategy is to reduce net core Crown debt to no higher than 20% of national income (GDP) by 2020 and, after that, to keep net debt in the 10-20% range over the economic cycle. In the short term, the current Government's focus is on returning to surplus by 2014/15 and increasing surpluses thereafter.

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