Policy Advice: Economic Performance

Scope of Appropriation

Policy advice on the Government's economic strategy and policy settings and their effect on New Zealand's economic growth.

Output Class Description

This class of outputs involves the provision of policy advice and services relating to helping the Government to improve New Zealand's economic performance. This includes helping Ministers, the Government and State agencies understand policies that are important for economic growth and the connections between overall economic performance and other desired outcomes when developing strategies and evaluating intervention options.

The Treasury works alongside other government agencies, such as MED, to achieve this outcome.

The advice the Treasury provided included:

• analysis and advice to Ministers on broad economic strategies to promote economic growth and their impact on living standards
• analysis of the drivers of productivity growth and advice to Ministers on the policies, regulations and institutional arrangements that best achieve improved overall economic performance, and
• advice on trade-offs between these and other government outcomes.

Raising New Zealand's productivity performance is crucial for a better standard of living, and relies on better use of the country's capital, skills and international connections. Consistent with our objectives, we are seeking to achieve higher GDP per capita, higher productivity and higher living standards. Two of the four strategic result areas (SRAs) set out in the SOI 2008-13 fall under the Economic Performance outcome and its associated class of outputs. These are:

• Strengthening international connections, and
• Sustainable use of natural resources.

The Skills SRA, which also significantly affects economic performance, is allocated to the State Sector Performance outcome and its associated class of outputs in this plan.

Beyond the focus on SRAs, we have prioritised advice on the following specific policy areas which have a significant and pervasive impact on New Zealand's economic performance:

• productivity
• financial markets, investment and savings
• competition and regulatory frameworks
• tax policy
• infrastructure - including transport and telecommunications, and
• innovation.

Significant Work Completed During 2008/09

• Advice to Ministers on:
  • the reform of the Resource Management Act 1991 and other natural resource management policies
  • medium-term economic and fiscal policy options, implementing a productivity-focused economic agenda and options for a New Zealand Productivity Commission-style institution
  • the direction of innovation policy including structures, governance, funding incentives and assessment of the research and development tax credit
  • SEM initiatives: double-tax agreement, pension portability, CER investment protocol
  • options for change to the overseas investment regime: delegations, regulations, fees and initial work on a legislative review, and
  • medium-term tax reform issues and options, changes to the international tax regime and various other tax issues.
• Published a productivity paper on “International Connections and Productivity: Making Globalisation Work for New Zealand”.
• Provided advice and support to Ministers regarding the Government's response to the financial crisis. This included measures to give depositors confidence in New Zealand's financial system (Crown Deposit Guarantee Scheme) and to enable New Zealand institutions to access wholesale funding markets (Crown Wholesale Guarantee Facility), providing support to the Job Summit and developing a package of measures to assist business through the financial crisis.
• Established and serviced the Regulatory Responsibility Taskforce, coordinated the Government's regulatory review agenda, which comprises reviews of 13 major and pervasive regulatory regimes, and provided advice on regulatory quality management, including measures to improve regulatory quality.
• Established RIAT to independently assess the quality of regulatory impact analyses and regulatory impact statements for significant regulatory proposals.
• Established the National Infrastructure Unit to assist the Government in developing an infrastructure programme that is both strategically sound and helps build a more competitive, more productive economy.
• Advised the Minister on climate change issues, including the economic impact of a range of target levels for reducing greenhouse gas emission levels relative to other countries; and options regarding an Emissions Trading Scheme.

This output class belongs to a multi-output class appropriation.

Actual 2008/09 output class expenditure was $142,000 or 1% under Supplementary Estimates budgets owing to vacancies and cost savings.

The appropriation for this output class was increased by $520,000 in the Supplementary Estimates to enable the Treasury to perform the Regulatory Impact Analysis function and to take on strategic leadership of the regulatory quality assurance system.