What We Do

The Treasury's overall vision is to be a world-class Treasury working for higher living standards for New Zealanders. We aim to raise the country's capacity to deliver on people's aspirations for a better quality of life, through making an impact on the issues that are important to New Zealand's economic performance and State sector management.

Guiding the Treasury's work is our focus on achieving three main outcomes, all of which are necessary to attaining higher living standards for New Zealanders:

• Improved economic performance
• Improved State sector performance
• A stable and sustainable macroeconomic environment.

The Treasury also has three core roles that underpin what we do:

• Economic role - concentrates on issues with regulatory or policy implications that may have a significant and therefore pervasive impact on the performance of the economy as a whole.
• Financial role - concentrates on issues with a significant fiscal focus - expensive policies and long-term trends, and financial management and standards (including financial probity issues).
• Central Agency role - places more emphasis on helping the Government develop its overall strategy and manage significant issues that emerge.

As these roles suggest, the Treasury is uniquely placed to provide the Government with advice that integrates economic and financial perspectives including interests in institutions, macroeconomic performance and structural policy issues. We bring it together in a way that helps the Government focus on what really matters to raise living standards. We operate in partnership with other agencies that have more specific responsibilities, as well as our fellow Central Agencies to ensure that the public service overall is well placed to fulfil the Government's priorities.

The Treasury also engages with stakeholders across the public and private sectors to strengthen our analysis and to identify where our efforts to raise living standards can best be targeted. Our engagement and analysis have helped us prioritise four strategic result areas where our advice over the next three to five years can have the most impact:

• Skills - to achieve a substantive increase in the economic contribution of New Zealand's collective skills base.
• Internationalconnections - to achieve a sustained increase in the contribution of international connections to New Zealand's Gross Domestic Product (GDP).
• Naturalresourcemanagement - to ensure the New Zealand economy uses natural resources sustainably and productively.
• Long-term fiscal sustainability - to ensure decision-makers take action to meet long-term fiscal challenges.

Crown Company Monitoring Advisory Unit

The Crown Company Monitoring Advisory Unit (CCMAU) is a stand-alone unit within the Treasury responsible for maintaining and enhancing the Crown's ownership interest in a range of Crown research institutes, State-owned enterprises, Crown companies and other entities. The Executive Director of the Unit is directly accountable to the Secretary to the Treasury for the Crown's investment in CCMAU, and for CCMAU's performance.

Our Outcome Performance 2007/08

This section reports on progress we made in our three outcome areas: Improved Overall Economic Performance, Stable and Sustainable Macroeconomic Environment and Improved State Sector Performance. These three outcomes reflect those areas where we feel we can have most influence towards achieving the Government's goals.

The Treasury's main output, or service, is policy advice. This policy advice, as well as the other services we provide, is captured in our six output classes. As the diagram below illustrates, these individual output classes may contribute to one or more of the three outcomes.

The six output classes contribute directly to results we want to achieve. These result areas are selected because they represent the areas where we can have the greatest impact, and our aim in focusing on them is to maximise the impact that we have. The focus on results is also intended to enhance our effectiveness as a department.

Success in achieving our portfolio of results involves engaging effectively internally, and with our key external customers, providing good-quality policy advice and operations, and being flexible in our approach so that we can respond to changes in our operating environment.

Outcome: Improved Overall Economic Performance

The Treasury brings an overall perspective, including interests in institutions, macroeconomics and microeconomics, to advise Ministers on what really matters for New Zealand's economic performance. New Zealand's primary economic challenge is to improve long-term productivity performance.

Overall, the New Zealand economy has performed well over the past decade, including in 2007/08, averaging 3.3% per annum growth in GDP since 2000. Compared to other benchmark economies, growth in real GDP per capita is still somewhat above average, although still not sufficient to have made appreciable inroads on our relatively low level of per-capita GDP, which remains around 14% below the OECD average.

Most of our growth (2.2% per annum) has come from increases in labour utilisation, with unemployment in 2007/08 dropping to its lowest level since the 1980s (3.6%). This “good news” masks a growing concern, however. Relatively little of New Zealand's economic growth has come from improvements in labour productivity (1.1% per annum since 2000). While our productivity growth was roughly on a par with Australia's over the 1990s, it has weakened since - partly due to the dampening effect of high employment growth.

New Zealand is a poor productivity performer by international standards. Given the limits to improving our labour utilisation further, New Zealand's future economic prosperity will increasingly depend on improving our productivity performance.

Improving long-term productivity performance will require sustained effort on multiple fronts. Recent Treasury work has highlighted policy challenges for New Zealand centring around five drivers of productivity: innovation, skills, enterprise, investment and natural resources. For a small open economy, international connections provide a key opportunity to improve performance across all of these drivers.

Increases in productivity come from investing in new capital, increasing skill levels, encouraging entrepreneurial activity and better natural resource management, and from using international connections to further each of those areas. Our strategic result areas were chosen to target these key drivers of productivity.

Monitoring Economic Performance

The key tool we use to monitor economic performance is the Economic Development Indicators report. The latest edition of this report was jointly published this year by the Treasury, Ministry of Economic Development and Statistics New Zealand (available at www.med.govt.nz/indicators). The Economic Development Indicators report provides a snapshot of New Zealand's overall economic performance relative to other OECD countries.[1] Key conclusions include:

• overall, relatively low per-capita GDP but improving at a faster rate than the OECD average
• relatively low labour productivity, improving at about the same rate as the OECD average
• strong investment performance but relatively weak savings performance
• high levels of innovation that are not fully reflected in productivity performance
• relatively strong skills, but with apparent weaknesses in specific areas such as the “long tail” of low achievers.

This suggests a pattern of significant strengths in the New Zealand economy pocketed with areas in which we need to improve if we are to close the gap to other countries against which we benchmark ourselves.