6 Government saving
6.1 Fiscal policy
Operating deficits are still forecast to run for a further five years, increasing net debt. It is important to return to fiscal surplus earlier than projected in order to:
- Increase the resilience of the economy given the high likelihood of further adverse shocks.
- Increase national saving, allowing more investment to be funded (and owned) by New Zealanders.
- Help lower interest rates and increase investment.
- Help lower the exchange rate and shift resources to the tradable sector.
- Position the State Sector to deal with demographic pressure from an ageing population.
- Improve the alignment of government spending with economic and social priorities.
It is important to examine government spending and eliminate programmes that are poorly targeted and not adding sufficient value. There is scope to tighten operating and capital allowances for the next five years by a combination of bottom up (target specific projects and programmes) and top down (general change targets), with a strong shift to a continuous improvement.
