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The long-term fiscal outlook and living standards

There is a dynamic relationship between New Zealand's long-term public finances and intergenerational well-being. The four capitals of the living standards approach matter for sustained improvements in well-being. They can also matter for long-term public finances via the links from the capitals to economic growth and therefore tax revenues. These tax revenues allow the Government to fund transfer payments and the provision of goods and services. The Government's own physical capital stock in schools, roads, and hospitals also plays a role in delivering public services.

Links between the other capitals and public finances can also be significant. For example, citizen discontent or unrest, poor health, unreliable water quality and natural disasters can all have negative implications for social, human, and environmental capital, and place significant pressures on public finances. On the other hand, strong and sustainable government finances enable New Zealand to respond to challenges and opportunities arising in the capitals, including decisions to invest and grow them over time. The Treasury continues to advise governments to maintain prudent and low average levels of public debt over time.

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