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Government as saver

The quickest increase in national saving may come from an increase in the Government's own saving

The quickest way for the Government to improve national saving and reduce imbalances would be to improve its own saving position. The Government has moved from being a significant saver to a significant dis-saver with deficits forecast to continue for the next five years.[12]

Policy changes designed to accelerate the return to surplus could take a number of years to be implemented and take effect, but this can happen more quickly than most of the other policy levers outlined in this document. This suggests that fiscal policy is an important part of a saving policy package designed to have an early impact. It would also provide a buffer in the event that the economy is hit by a negative shock.

The extent to which improved government saving can be sustained over a longer period depends on the durability of policy choices underpinning it and ongoing government commitment, noting that fiscal challenges also become harder over the long term.[13] To ensure a significant and enduring lift in national saving, options to increase private saving should also be considered as part of a saving package.

The way the Government increases its saving will determine whether private saving rises or falls

The policy choices to increase government saving may also have an impact on private saving. Reductions in government spending in areas that are currently reducing private saving will have the most impact on national saving. Some of these options are discussed in the following sections (for example, interest-free student loans). Conversely, reductions in government spending in some areas (such as compulsory education) would likely be, at least partly, offset by increased spending by individuals, such that national saving would be largely unchanged.

Finally, reduced government spending in areas where there are significant inefficiencies would likely further assist economic growth and rebalancing by freeing up resources for use in the tradeable sector, and allow interest rates and the exchange rate to be lower than otherwise. Conversely, reductions in spending in growth-enhancing areas or tax increases would be likely to slow economic growth and could add to New Zealand's imbalances.

  Pros Cons
Speed up the return of government surpluses (projected for 2016)
  • Increased national saving
  • Assist the rebalancing of the economy through lower interest rates and exchange rates
  • Greater government fiscal flexibility in economic shocks
  • Reduce finance costs by lowering government debt
  • Move earlier to manage costs of ageing population
  • Provide increased scope for new initiatives in later years
  • Expenditure reductions may include areas that add to peoples
    wellbeing or are growth enhancing
  • Risk of slower economic growth in the short term
  • Households/businesses may increase spending (reduce saving) to maintain
    services that would otherwise have been provided by the Government


  • Are there pros and cons not considered here? On balance, is an earlier return to surpluses a good option that the Government should consider to increase national saving?
  • Once the Government is in surplus, does more need to be done to ensure that it continues to save?


  • [12]Net core Crown debt is forecast to increase to 25.3 percent of gross domestic product in 2013, up from a low of 5.6 percent in 2008. This dis-saving is forecast to continue until 2016, when the Government's budget is projected to return to surplus.
  • [13]New Zealand Treasury (2009) Challenges and Choices: New Zealand's Long-term Fiscal Statement.
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