- Info
2. Problem definition
- New Zealand's fiscal performance over the previous economic cycle has shown that although the fiscal responsibility provisions are supportive of debt reduction, they have not been sufficient to take into account the impact of fiscal policy on other aspects of the economy. In particular,
- there is an insufficient requirement or mandate to consider the stage of the economic cycle in formulating fiscal policy;
- there is no requirement to focus on the efficient and effective management of resources during good times as well as during times of relative constraint; and
- there is no requirement to consider future generations when formulating fiscal policy.
- In addition, since governments are not required to consider these aspects formally in developing fiscal policy, they tend not to report on them. The lack of transparency about the potential impacts of fiscal policy may have contributed to limited public debate about fiscal strategy and its interaction with the economy. In particular,
- there is no requirement for governments to look back and assess past fiscal policy, meaning that lessons from the past can be lost and also that it is relatively easy for governments to depart from previously announced fiscal policy; and
- there is a risk that current practices that are voluntary, such as the preparation of the revenue strategy and the Investment Statement, are dropped by future governments if they are not codified.
Page top
