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The Treasury Statement of Intent 2012-17

Introduction from the Chief Executive

The focus of the five-year strategy set out in this Statement of Intent is the delivery of the Treasury's vision to be a world class organisation working towards higher living standards for New Zealanders.

Our concept of living standards encompasses economic, human, social and environmental dimensions which are set out in our 'Living Standards Framework'. Our aim is to embed the framework as the cornerstone of our policy-making process.

The context for our strategy is a rapidly changing world which is characterised by uncertainty, fragility and volatility. But it is also a world which offers opportunities for New Zealand. The most significant development is the shift in economic power from West to East and, in practice, closer to New Zealand. This trend has been under way since before the global financial crisis but it has accelerated as emerging economies have led the global recovery. Increasingly, the Asia-Pacific will be the benchmark against which others measure their progress, rather than the traditional Organisation for Economic Cooperation and Development (OECD) community.

New Zealand's challenges in this time of change are not the same as other countries. We have a flexible exchange rate, relatively low levels of Government debt, a healthy banking sector and a generally flexible labour market compared with many other European economies. But our overall growth performance has been low for some time: New Zealand's GDP per capita has been stuck at around 85-90% of the OECD average since the mid-1990s. We have also seen a build-up of imbalances in the economy. New Zealand's stock of external liabilities exceeded 80 per cent of GDP in 2008. Household debt rose rapidly and consistently exceeded 100 per cent of disposable income since 2001.

Our challenges are to reduce imbalances and build resilience and capability to cope with future global instability, and to boost our own growth performance.

This Statement of Intent is focussed around three outcomes: A Stable and Sustainable Macroeconomic Environment, A More Effective and Efficient State Sector and Improved Economic Performance. In the short term returning the budget to surplus will reduce pressure on our interest and exchange rates which is critical to support the tradable sector of the economy. It will require the State sector to live within tight fiscal constraints while delivering on key results. Taking advantage of the dynamic international environment and capturing the enormous economic opportunities created by the ongoing rise of the Asian economies will play an important role in helping New Zealand lift its trend growth. We need to ensure that we have an internationally competitive domestic business environment which will require action on a number of different fronts, including improving our education outcomes and the management of our natural resources.

The Treasury's policy priorities are designed for a time of uncertainty, and we are ready to adapt our thinking as the world continues to change and as we learn from experience and new ideas. I am confident that the Treasury can help the Government and government agencies respond to these challenges in a way that ultimately leads to higher living standards for New Zealanders.

Chief Executive's Statement of Responsibility

In signing this statement, I acknowledge that I am responsible for the information contained in the Statement of Intent for the Treasury. This information has been prepared in accordance with the Public Finance Act 1989. It is also consistent with the proposed appropriations set out in the Appropriation (2012/13 Estimates) Bill, as presented to the House of Representatives in accordance with section 13 of the Public Finance Act 1989, and with existing appropriations and financial authorities.


Gabriel Makhlouf

Chief Executive


Counter-signed: Fergus Welsh

Chief Financial Officer

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