Policy Advice - Fiscal and Macroeconomic
Scope of Appropriation
This output class is limited to the provision of fiscal and macroeconomic policy advice.
Significant Work Completed During 2009/10
- Published Challenges and Choices: New Zealand’s Long-term Fiscal Statement in October 2009.
- Published a technical working paper on Challenges and Choices: Modelling New Zealand’s Long-term Fiscal Position in January 2010.
- Published the BPS, including medium-term fiscal projections, in December 2009.
- Published the FSR in May 2010. After taking advice from the Treasury, the Minister of Finance changed the net debt objective from 30% of GDP to 20%.
- Presented the Minister of Finance with options for implementing a spending cap. The proposed spending cap was not adopted, but it has identified enough issues that there is strong appetite to investigate other options for achieving similar outcomes. This has led to the review of the fiscal management approach.
- The “Fiscal Anchor”: Provided advice on the benefits of setting numerical objectives for fiscal measures other than net debt, such as net worth.
- Fiscal consolidation: The global financial crisis, combined with increased government spending and tax cuts over the previous few years, meant that in Budget 2009 the Government’s operating balance was projected to be in deficit for at least the next 10 years. The Treasury provided advice on how to advance the return to surplus and how it might help to reduce vulnerabilities and support economic growth.
| Performance Dimensions | Target | Performance for 2009/10 | ||||
|---|---|---|---|---|---|---|
| All policy outputs comply with the Treasury's Quality Standards for Policy Advice, as assessed by the Minister three times during the year. | Rated as meeting and frequently exceeding expectations |
Not assessed in 2009/10. Refer to page 60 for further information on the application of the policy standard during 2009/10. |
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| Production of advice that provides options which allow the Government to deliver a credible fiscal strategy consistent with the fiscal prudence provisions of the Public Finance Act 1989. Where this advice is underpinned by modelling, the models are externally quality assured and, where appropriate, assumptions are tested with suitably qualified external experts. | Achieved |
Achieved. Fiscal consolidation was a key driver in assisting the Minister of Finance when he was reviewing the net debt objective. Provided advice to the Minister on the pros and cons of net worth as an alternative fiscal anchor to net debt. Net debt was reconfirmed as the Government's fiscal anchor as a result of this work along with the influence of the current fiscal position (banking surprises and the objective of getting to surplus as soon as practical). The advice led to further work on options to bring greater balance sheet scrutiny and transparency. Provided advice to the Minister on a spending cap, which prompted a review of the fiscal management approach. The long-term fiscal statement was successful in initiating public debate on options for managing the fiscal impact of population ageing, using a basket of goods and services to demonstrate choices and trade-offs. The modelling and assumptions behind the statement received public scrutiny when the technical working paper was presented at two macroeconomic conferences this year. |
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| 2009/10 Actual $000 |
Supp. Estimates - Voted $000 |
Main Estimates $000 |
2008/09 Actual $000 |
|
|---|---|---|---|---|
| Expenses | 4,268 | 4,296 | 4,079 | |
| Funded by: | ||||
| Revenue Crown | 4,190 | 4,224 | 4,004 | |
| Other Revenue | 78 | 72 | 75 |
