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An Introduction to New Zealand's Fiscal Policy Framework

Reporting on whether fiscal policy is consistent with the principles

The fiscal responsibility provisions require governments to set out, in the Fiscal Strategy Report (published alongside each Budget), their short-term fiscal intentions and long-term fiscal objectives for fiscal policy. These intentions and objectives must be expressed in terms of five variables:

  • Total operating expenses.
  • Total operating revenues.
  • The balance between total operating expenses and total operating revenues.
  • Total debt.
  • Total net worth.

These intentions and objectives in many respects approximate the legislated fiscal rules of other countries, with the difference being that specific targets are not set down in law. As well as setting out these intentions and objectives, the government must also explain how its fiscal strategy is responsible.

The fiscal responsibility provisions explicitly anticipate that at times, governments will need (or want) to pursue fiscal strategies that are not consistent with the principles. In those cases, governments must give reasons for their departure from the principles, and explain how and when they expect to return to them.

The provisions also require the government of the day to look back and assess the extent to which its fiscal performance was consistent with its published fiscal strategy.

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