The Treasury is carefully assessing the conclusions of an external review that it has received into the quality of the department’s fiscal policy advice over the last decade, its Chief Economist, Girol Karacaoglu, said today.
“Last year the Treasury commissioned former Director of the Fiscal Affairs Department at the International Monetary Fund, Teresa Ter-Minassian, to provide her expert assessment on the quality of the Treasury’s fiscal policy advice to governments and to indicate also where there is scope to strengthen our processes, practices and the general fiscal policy framework in New Zealand.
“I am impressed by the scope and depth of this review. It is an extensive and detailed report which the Treasury will now systematically examine to better inform our work programmes and advice in the years ahead,” Dr Karacaoglu said.
The report examines not only the country’s fiscal policy framework and institutions, but the utility of the Treasury’s analytical toolkit in advising on fiscal settings, the robustness of the Treasury’s advice on fiscal stabilisation, its analysis of long-term fiscal challenges and of the Crown’s balance sheet, and the effectiveness of the use of performance-orientated financial management practices across the public service.
The report’s overarching conclusion is that the Treasury’s advice has been ‘consistent with sound principles and practices of responsible fiscal management’ and that it has been ‘appropriately mindful of fiscal policy’s equity, effectiveness, and efficiency objectives’. The country’s fiscal policy framework has served New Zealanders well as it has:
- Promoted responsible conduct of fiscal policies under different governments, delivering levels of net public debt that are low by international standards
- Provided flexibility to accommodate the adverse fiscal consequences of the 2007-2008 global financial crisis and the very significant costs to the Crown associated with rebuilding Christchurch, and
- Consistently promoted a strong culture of transparency and accountability which is widely regarded as an example of international best practice.
Dr Karacaoglu said he was pleased the Review also acknowledged the Treasury’s concerted efforts in recent years to become more inclusive by systematically seeking input and feedback from external specialists in the development of its analysis.
“While the framework and general quality of the Treasury’s advice gets a positive report from one of the world’s leading fiscal policy experts, there are suggestions for practical steps that the Treasury could or should seriously consider as it looks for ways to continuously improve its processes and the utility of its analysis and, therefore, advice,” he said.
“These include ways that we might strengthen our modelling and empirical estimation of the macro-economic and distributional effects of fiscal policies, means to sharpen our analysis and advice around managing fiscal risks, and how we might go about enriching the information-base that we utilise to assess and manage expenditure programmes and the Crown balance sheet.
“The Treasury will progress a number of the recommendations in the months ahead,” he said.
TheTer-Minassian Review and the Treasury’s initial responses to some of its major recommendations are available on the Treasury’s website to facilitate transparency and to encourage informed public discussion.
Other links:
- Review of the Treasury's Fiscal Policy Advice Information Release
- Terms of Reference for the Review of the Treasury's Fiscal Policy Advice