Fiscal Strategy Model
Page updated 15 May 2014
The Fiscal Strategy Model (FSM) projects the financial performance and the financial position of the government over a medium-term horizon and is normally published with the latest Economic and Fiscal Update.
Note: Previously these medium-term projections were done by the Long Term Fiscal Model (LTFM) however the LTFM is now used solely for longer-term projections (minimum of 40 years).
Fiscal Strategy Model Projections
The principal purpose of the FSM is to produce the post-forecast fiscal projections. The Budget Economic and Fiscal Update 2014 updated version of the FSM is published here on the Treasury's website.
- begin from the end of the five-year forecasts in Economic and Fiscal Updates (EFUs) and normally cover a period of ten years beyond that
- are strongly influenced by the EFU forecasts
- are consistent with the Government's approach to fiscal management in that new initiatives are modelled through assumed operating and capital allowances
- grow operating and capital allowances from their end-of-forecast levels at prescribed rates, as no decisions on the size of these spending increments are made beyond the five-year forecast horizon;
- rely on long-term assumptions such as future population growth and economic growth
- include some degree of recovery to these long-term assumptions in the early years of the projections, if the long-term rates or levels have not been reached at the end of the forecast period, and
- are required to be published annually, as part of the Fiscal Strategy Report, under the Public Finance Act (1989).
Download the Fiscal Strategy Model
Using MS Excel Files
|15 May 2014
||Fiscal Strategy Model - BEFU 2014 Update||fsm-befu14.xls (1,189 KB)|
|15 May 2014
||Economic and Demographic Projections - BEFU 2014||fsm-projections-befu14.xls (24 KB)|
Notes for this Version of the Fiscal Strategy Model
- Scenarios for different levels of operating expenses and revenue can be tested using the Forecast Adjuster sheet of the FSM. The output of the Forecast Adjuster is in the Option worksheet.
- The FSM has been updated to incorporate the latest economic and fiscal forecasts contained in the BEFU. A summary of key economic and demographic assumptions in the BEFU FSM are provided in the Excel file 'Economic and Demographic Projections - BEFU 2014', above.
- For more detail on assumptions and modelling behind both economic and fiscal projections see Annex 3 Projection Assumptions of the 2014 Fiscal Strategy Report. No significant modelling changes have occurred since the 2013 Half Year EFU version of the FSM, to which Annex 3 refers, was produced. Any updated figures, such as the Operating Allowances in the first projected year, can be found in the Describe worksheet of the 2014 BEFU FSM.
Other Treasury Models
The Long-Term Fiscal Model
Treasury produces another model that projects fiscal and economic variables beyond the forecasts. It is called the Long-Term Fiscal Model (LTFM).
The LTFM differs from the FSM in that:
- modelling for the LTFM extends at least as far as the year ending June 2060;
- the LTFM's projections are not intended to assess the Government's fiscal strategy;
- in regard to the last point, the LTFM projects individual operating and capital expenditure classes with their own particular cost drivers, such as changes in the recipient population and expense growth factors based on historical averages, rather than restricting their growth to a share of projected operating or capital allowances; and
- the LTFM has more modelling capability so that it can, for example, produce scenarios where debt is constrained and some other fiscal variable, such as expenditure or tax revenue, becomes the balancing output.
New Zealand Superannuation (NZS) Fund Contribution Rate Model
The projected required contributions track from the Treasury's New Zealand Superannuation (NZS) Fund Contribution Rate Model is an input into the LTFM and the FSM.