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Statement of Intent 2015-2019

The economic cycle is managed in a way that supports sustainable growth

What we intend to achieve

  • Tax, product, financial and labour market policy settings and the operation of fiscal policy do not unnecessarily amplify the business cycle. This will minimise the degree to which interest rates and the exchange rate have to move to keep the economy operating close to full employment, thus promoting higher trend growth.

Specific intentions include:

  • the operating balance is returned to surplus and fiscal policy does not exacerbate the economic cycle
  • long-term fiscal pressures are reduced and the Crown pre-funds satisfactorily for future expenditure pressures
  • macro-prudential tools are used appropriately to increase the resilience of the domestic financial system, and
  • policy settings ensure banking crises can be well managed.

What success will look like

  • Fiscal policy has supported monetary policy by placing downward pressure on aggregate demand growth during upswings as measured by a range of indicators (such as the fiscal balance and fiscal impulse).
  • The Government’s financial buffers have been strengthened, with core Crown net debt on track to fall and remain below 20% of GDP by 2020.
  • Positive operating balance surprises are used primarily to further strengthen the Government’s balance sheet.
  • Lifting government and private sector saving rates contributes to higher national saving over time.
  • Cycles in interest rates and the exchange rate are smaller than they have been historically.
  • Strengthened measures are in place to ensure a bank failure can be appropriately managed and crisis management tools allow sound management of any fiscal exposure for the Crown.
  • Financial stability risks in New Zealand are within a reasonable range.

What we will do to achieve this

  • Assist the Minister of Finance to produce the Budget Policy Statement and Fiscal Strategy Report.
  • Undertake macroeconomic monitoring, economic and tax forecasting, including Economic and Fiscal Updates, monthly economic indicator reports and monthly reporting on tax revenue outcomes.
  • Monitor and provide advice on fiscal settings and frameworks, including the use of short- and medium-term fiscal indicators and targets.
  • Develop tools and frameworks for measuring and communicating uncertainty and risks around the fiscal position.
  • Develop and disseminate key quarterly fiscal data and existing data series.
  • Track fiscal strategy developments in other countries.
  • Conduct analytical work to support the next Statement on the Long-term Fiscal Position.
  • Monitor and provide advice on macroeconomic stability and related issues, including advice on monetary and macro-prudential policy frameworks, financial crisis governance and the performance of the Reserve Bank of New Zealand.
  • Work with Australian counterparts and financial regulators on cross-border financial stability issues through the Trans-Tasman Banking Council.
  • Conduct a legislative review of the Earthquake Commission Act 1993.
  • Contribute to international engagements such as country reviews by the International Monetary Fund, the OECD and credit agencies.
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