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New Zealand's Long-Term Fiscal Position [June 2006]

Annex 2: Previous Studies

While the legislative requirement for the Treasury to produce a long-term fiscal statement is new, this is not by any means the first time that the issue has been placed in the public arena.

Many reports by the Treasury and by other agencies over the past 15 years have focused on New Zealand’s long-term fiscal position. Some have focused on the impact of population ageing, while others have looked at a wider range of drivers of the fiscal position.

Some notable examples are:

the first Todd Taskforce on private provision of retirement incomes, published in 1992. The Taskforce included a section in its report on the long-term affordability of National Superannuation, using their own model

  • Treasury’s 1993 Briefing to the incoming government, which contained estimates of the long-term fiscal position looking out to 2049
  • the New Zealand Institute of Economic Research’s The Fiscal Impacts of an Ageing Population, a report to the Office of the Retirement Commissioner, October 1995. This was an update of work the Institute carried out for the Todd Taskforce, looking at the overall fiscal position, not just superannuation
  • Hana Polackova’s Population Aging and Financing of Government Liabilities in New Zealand, World Bank Policy Research Working Paper 1703, February 1997, which used the Treasury Long-term Fiscal Model to explore the fiscal effects of an ageing population in New Zealand
  • the second Todd Periodic Report Group’s report on retirement incomes. Its 1997 Interim Report included an extensive discussion on population ageing, modelling the long-term fiscal position and the sustainability of public provision of retirement incomes
  • You and Your Retirement Savings, the document outlining the proposed compulsory Retirement Savings Scheme, published in 1997, which contained detailed analysis of the government’s long-term fiscal position (not just that relating to public provision of retirement income) with and without the Scheme.
  • Pre-funding New Zealand Superannuation (Treasury Working Document), June 2000, which discusses the establishment of the New Zealand Superannuation Fund and its fiscal implications and affordability
  • John Janssen’s Long-term Fiscal Projections and their Relationship with the Intertemporal Budget Constraint: An Application to New Zealand, Treasury Working Paper 2002/04
  • the Treasury’s The Fiscal Implications of Population Ageing in New Zealand. A report to the 2003 Periodic Report Group. This provided a summary of work undertaken by the New Zealand Treasury on the fiscal implications of population ageing, with a particular focus on New Zealand Superannuation.

The common approach of these studies (which is also seen in official studies undertaken in other countries) is to project the path of expenditure and taxes based on some notion of “current policy.” The idea is to investigate the impact of external drivers – often demographic, but sometimes economic, like the cost of health care – on the overall fiscal position. They have commonly indexed social security benefits to wages and have assumed that in the long term, taxes are a fixed proportion of GDP.

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