The world in which the Treasury operates changed markedly in 2008/09, and the face of the Treasury has changed with it. In the past year we have had to call on all our strengths as the Government's lead advisor on economic and financial issues, demonstrate public sector leadership as a Central Agency (alongside the State Services Commission (SSC) and Department of the Prime Minister and Cabinet (DPMC)) and take on important new operational roles.
In 2008/09, New Zealand was in the midst of the most difficult economic conditions we have experienced in generations as a deep, synchronised, global recession coincided with our own protracted domestic recession. That has meant facing challenges and thinking about some issues in new ways.
In the political environment, a change of government has led to new priorities and different performance expectations. Ministers are looking for the Treasury to take a lead in improving public sector performance - acting as a catalyst for sector-wide change as well as being an effective deliverer of services ourselves.
These developments in the economic and political landscape reinforce the importance of the longstanding core of work the Treasury undertakes to lift economic growth and raise living standards. Demands for practical economic advice and robust forecasts are stronger than ever. It is critical that we continue to advise effectively on policies and strategies that matter for New Zealand's long-term economic performance. We need to help maintain a stable and sustainable economy during the most unstable conditions for decades. We also have to keep driving public sector performance that reflects fiscal reality and delivers on the Government's objectives for smarter, better public services for less.
2008/09 Developments and Challenges
In addition to this longer-term work, a number of developments within the Treasury during the year serve as examples of just some of the ways we are addressing formidable economic challenges and focusing on the Government's priorities.
Among the most pressing issues as the global economic and financial crisis unfolded was the need to maintain depositors' confidence in New Zealand's financial sector, and to ensure the sector continues to have access to funding. Since October 2008 the Treasury has administered the Crown Retail Deposit Guarantee Scheme, a role which involves assessing and approving financial institutions, monitoring compliance with the Scheme and ensuring eligible depositors receive their entitlements if the guarantee is called on. The Treasury also administers the Wholesale Funding Guarantee Facility, which was put in place to facilitate improved access to international funding markets for New Zealand's investment-grade financial institutions. The retail and wholesale guarantee schemes represent substantial new operational areas of work for us.
Another way New Zealand responded to the crisis was to expand our assistance to New Zealand exporters. After private trade credit insurers reduced their line of cover (making it harder for many of our exporters to continue trade in some countries), the New Zealand Export Credit Office (NZECO) introduced a short-term trade credit guarantee in February 2009. Owing to strong demand, the facility for the short-term trade credit guarantee has risen from $50 million to $150 million. The financial crisis has also generated greater interest from exporters in a range of other NZECO products.
Complementing our immediate responses to the global downturn were other developments during 2008/09 that have bolstered the Treasury's role in helping position New Zealand to come out of the recession with higher productivity and stronger economic growth.
Among the Government's objectives is for New Zealand's infrastructure to be a means to permanently lift the sustainable growth rate of the economy, through increased productivity and improved management of Crown assets. The National Infrastructure Unit was established within the Treasury to take a national overview of the Government's infrastructure priorities - providing cross-government coordination, planning and expertise. The Unit is assisting the Government to produce its first 20-year National Infrastructure Plan with the intention thereafter of updating this every three years. This will present a high-level view of the state of New Zealand's infrastructure and include a stock-take of existing infrastructure and anticipated future requirements. The Plan will help Ministers, agencies, local government and the private sector identify needs and prioritise investments to lift growth.
In mid-2008 the Government took decisions to strengthen the regulatory management system, and put in place a more strategic approach to managing the impact of regulation on economic performance. From November 2008, the Treasury took on three new roles. First, all proposals with regulatory implications are referred to the Treasury for possible scrutiny. The Treasury's Regulatory Impact Analysis Team (RIAT) is responsible for independent assessment of regulatory impact analyses and statements for proposals likely to have a significant impact on economic growth. Second, the Treasury is tasked with advising the Government on a prioritised regulatory review programme and coordinating across government agencies to deliver on this programme. The third main area is strategic coordination of the regulatory quality system, including recommending improvements to the system and Cabinet and parliamentary processes related to regulations and regulatory reform.
Lifting our Performance
Current circumstances make it more important than ever that our longstanding work and new responsibilities are performed to the highest standards. We aim to strengthen our performance across all of our activities, both because of, and in the face of, a rapidly-changing economic environment. I believe the Treasury has responded well to the challenges so far. Our successes during 2008/09 have reaffirmed the steps we have taken in recent years to focus on results and operate more flexibly and nimbly. We need to continue down this track, as there is always more we can do to sharpen our performance. In particular, we have to ensure we can continue to respond to the leadership role demanded of the Treasury as a Central Agency, and ensure we are well placed to help form and inform public debate on major economic and State sector issues.
The Treasury has great quality staff with which to meet the priorities of the Government, the demands of the economy and the aims of the organisation. It is imperative that we make the most of the skills and expertise of our people as we take on challenges and opportunities over the coming year. Most notably, we will be marshalling our efforts to achieve results in some key areas: the financial crisis, medium-term economic strategy, State sector performance, infrastructure, regulatory reform, macroeconomic stability, the Crown balance sheet, debt management and organisational performance.
I would like to thank all staff for their hard work and dedication in 2008/09 and their continuing commitment and professionalism in the year ahead.
Secretary to the Treasury