Page updated 16 May 2013
The Treasury uses its Long-term Fiscal Model to project the state of the government finances and is required to produce at least every four years a statement on the long-term fiscal position of the government that covers a period of at least 40 years.
Statements on the Long-term Fiscal Position indicate possible trends in spending, revenue, operating balance and debt over this period, based on current policy settings and recent history.
The Treasury's latest statement, Challenges and Choices: New Zealand's Long-term Fiscal Statement, was published on 29 October 2009. The first statement, New Zealand's Long-term Fiscal Position, was released in June 2006.
The statements are based on projections from the Treasury's Long-term Fiscal Model (LTFM). Each statement attempts to project the consequences of current revenue and spending decisions over the next four decades or so and will pick up slower-moving trends such as population ageing, the compounding effects of surpluses and deficits, wage and price growth, and so on.
The Treasury sees the purpose of these statements as being to increase the quality and depth of public information and understanding about the long-term consequences of policy decisions and to assist governments in making fiscally-sound decisions. These statements are part of a suite of reporting documents the Public Finance Act requires from the Minister of Finance and the Treasury. Twice a year, for the budget (around May) and in the middle of the financial year (around December), the Treasury produces an Economic and Fiscal Update, containing forecasts covering the next 3-5 years.
With each Budget, the Minister of Finance also releases a Fiscal Strategy Report, outlining the long-term objectives of fiscal policy and including projections over at least 10 years. These projections are based on Treasury's Fiscal Strategy Model (FSM) and show the likely progress against the long-term fiscal objectives.
The models used in statements on the long-term fiscal position and the Fiscal Strategy Report have many things in common, but a crucial difference is that the FSM keeps the allowances for new spending separate from spending based on past decisions. This reflects current budget practice used in the Economic and Fiscal Update forecasts. The LTFM, on the other hand, allocates forecast new spending to the major spending categories which are then grown out by demographics, wages and other cost drivers. Another difference is that health spending in the LTFM takes greater account of changing health status over the long term. These differences mean that it is difficult to compare the two models.
In the lead-up to the publication of its next Long-Term Fiscal Statement in 2013, the Treasury ran the Long-Term Fiscal Schools Challenge in 2012.
- Putting It Together: An Explanatory Guide to New Zealand's State Sector Financial Management System (September 2011)
- A Guide to the Public Finance Act
- Long-term Fiscal Model
- Statements on the Long-term Fiscal Position
- Long-Term Fiscal External Panel
- Affording Our Future Conference 2012
- Long-Term Fiscal Schools Challenge
- Fiscal Strategy Report 2013
- Fiscal Strategy Model
- Economic and Fiscal Updates