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The structure of this Statement

In the following sections we focus on: economic growth; employment and skills; social inclusion; and natural resources. To raise living standards, it is important that we take into account an assessment of current and future financial and physical, human, social, and natural capital stocks. Such an assessment can also help us manage the long-term fiscal position in the context of a prosperous, sustainable and inclusive New Zealand. The focus areas of this Statement expand on the following strategic opportunities and challenges identified in Holding On and Letting Go and the Treasury's 2014 Briefing to the Incoming Minister:

  • The rapid acceleration of global flows of people, capital, trade and ideas creates opportunities for a small economy like New Zealand. However, it also brings risks of greater volatility and challenges for a distant economy to play a role in global supply/value chains.
  • The centre of economic activity is moving closer to New Zealand with strong growth in the Asia-Pacific expected to continue. However, distance will still play a role and New Zealand may face greater cultural challenges in connecting with Asia than with traditional trading partners.
  • Strong income growth in emerging markets is supporting demand for our natural resource-based commodities. However, there is increasing scarcity of natural resources and growing evidence of environmental pressures. The way that resources are managed and allocated is becoming increasingly important for our living standards.
  • New Zealand, like much of the world, is in the midst of an unprecedented demographic transition towards an older age structure. Most developed economies, including New Zealand, will face declining labour market participation rates and fiscal challenges from rising health and pension costs over the next fifty years.

Although we have taken a wider perspective in this Statement than in the three previous Statements, for technical reasons not all elements are reflected in the long-term fiscal projections set out in Section Six. For example, economic growth and employment have connections to both living standards and sustainable public finances via productivity and participation. We have included illustrative scenarios around the fiscal and wider effects of improved social outcomes. Sustainable economic growth depends on good management of our natural resources. Due to information gaps and significant uncertainties in future trends and impacts, natural resources are currently difficult to incorporate in long-term fiscal projections.

The Treasury is still developing the capabilities to more effectively measure and assess New Zealand's capitals and the interventions and investments required to improve them. He Tirohanga Mokopuna and the associated background papers show evidence of this progression, while the next Investment Statement will further demonstrate this evolution.

This Statement contains no specific or detailed policy prescriptions, and no criticism of previous or current policies is intended or should be inferred. The work in this Statement is an important part of our ongoing role to apply evidence, analysis and strategic perspectives in a way that informs public debate on important issues relevant to higher living standards and sustainable public finances.

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