Treasury Presentation: Launch of the Long-term Insights Briefing

Dominick Stephens:

[speaking in te reo Māori 00:00:13]. E ngā iwi, e ngā mana, e ngā hoa mahi. Tēnā koutou katoa. Kō Dominick Stephens tōku ingoa. Nau mai, haere mai ki Te Tai Ōhanga.

Welcome everybody. Welcome to those in the room and also, welcome to those watching this via the online live stream. Thank you for joining us today at the Treasury for the launch of Treasury's 2025 Long-term Insights Briefing. Just before we kick things off, let me run through quick health and safety briefing. In the event of a fire alarm, please follow Treasury staff to the nearest exit and progress down the stairwell and evacuate the building. Do not use the lifts. In the event of an earthquake, please drop, cover and hold. Stay in the building until instructed by a warden. And bathrooms can be found down the aisle to the left of the kitchenette.

So, the speech you're about to hear by our Secretary to the Treasury Iain Rennie launches the Treasury's Long-Term Insights Briefing for consultation. The topic is sustainable and resilient fiscal policy through economic shocks and cycles. It explores if, when and how fiscal policy can be used to buffer the economy from shocks and cycles and how to do so in a sustainable way. So, this is the first of three stewardship reports that Treasury will be releasing this year. Please keep an eye out for the Long-Term Fiscal Statement in the second half of the year and towards the back end, the Investment Statement later this year. So just in terms of the format, Iain is going to deliver the speech and that will be followed by a question and an answer session. We'll take questions, I'll try to take a mix of questions from in the room and online.

Iain will answer questions, but Iain is also joined by myself, Chief Economic Advisor at the Treasury and Ben Gaukrodger, Manager of the Macroeconomic and Fiscal Policy team and instrumental in producing the Te Ara Mokopuna. For those online, I encourage you to submit your questions using the Q&A functions. We'll do our best to cover as many questions as possible. We might be guided a little bit by likes, so for others online if you like a question, instead of submitting your own, perhaps like one of the ones that are there and that'll guide us as to the most important questions. So, without further ado, I'd like to invite Iain Rennie, Secretary of the Treasury to deliver the speech.

Iain Rennie:                       

Kia ora koutou. Good morning and welcome to the release of Te Ara Mokopuna, Treasury's draft 2025 Long-Term Insights Briefing. I'd like to begin by acknowledging that many people who would otherwise have been here today are at Dr Peter Bushnell's funeral. Peter made a huge contribution over a very long time to the Treasury and at personal level, I've been quite shocked and saddened by his sudden passing. We worked closely as colleagues, as deputy secretaries in the late 90s and in the early years of the 2000s. And so, at this time, myself and also the wider Treasury whānau, we send our condolences to Peter's family and friends.

As Dom said, this Briefing is one of four stewardship documents that are prepared by the Treasury under the statutes that we operate under. And together they orient policy and finances towards long-term intergenerational outcomes. They deepen our evidence base and long-term challenges and opportunities which successive governments will grapple with. And beyond the fact that they're in legislation, I think there are really important process for policy advisors to work their way through because particularly in dealing with the economy, we face many uncertainties, very many unknowns, and as policy advisors, it's really important that we are in some ways, quite humble and actually use experience both to confirm what we thought was the correct way forward, but also to challenge and broaden our thinking in the light of experience.

So, these reflections today are as much as anything the summary of I suppose our learnings about reviewing the experience of fiscal policy in New Zealand. So, this Briefing is focused on if, when and how fiscal policy can be used to buffer the economy from shocks and cycles, and how to do this in a sustainable way. While none of us can know the future, we know that we face significant risks and government definitely has a role to play, but we need to ensure that we are leaving future generations with choices and resources to tackle what life brings. Two other stewardship reports that the Treasury will be releasing over 2025, we'll add to this picture.

We'll be publishing the next Long-Term Fiscal Statement, looking at long-term pressures on fiscal sustainability such as population ageing and the Investment Statement which will explore the management of the government's balance sheet. Collectively, these reports are intended to support a sustained public discussion on long-term fiscal objectives to support higher living standards for all New Zealanders. The LTIB we are releasing today is a draft, so it is released for comment and input. We are seeking input by the 8th of May. I want to emphasise that input is open to and will be welcomed from all. Our deadline for publishing the final document is at the end of June this year.

With that, let me take you through over the next few minutes, run through what we see as the key themes in the draft, and after that, we'll open up for any initial reactions, comments or questions, and I'll be assisted by both Dom and Ben. I want to organise what I have to say around four headings. Why the focus on shocks and cycles, the role of fiscal policy in responding to shocks and cycles, what that implies for and requires of fiscal policy, and finally, our institutional arrangements. First, why the subject sustainable and resilient fiscal policy through shocks and cycles. That I think will be reasonably self-evident, and you can sort of see on the chart just a selection of the various kinds of shocks that have either buffeted particular communities or the nation as a whole over the last few decades.

While it may have seemed during the post-Cold War great moderation that stability had broken out, we've been reminded that economic turbulence is much more the norm rather than the exception. So far, the century has seen at least the Dotcom bubble, the GFC, the COVID-19 pandemic, Russia's invasion of Ukraine, the Canterbury and Kaikoura earthquakes, numerous droughts in the early 2023, North Island Weather Events. And it's very easy to see similar shocks continuing into the future and it's very much our baseline for how we approach our role as economic advisers. We face ongoing risks from natural hazards such as earthquakes, biosecurity risks like foot and mouth disease.

Weather related risks arising going to climate change. And as we all know, geopolitical tensions are growing. We're also facing increasing pressures on government finances from a range of factors, including a higher starting level of public debt, the possibility of less favourable interest rate and growth trends in the future. And long-term fiscal pressures such as from population ageing and climate change. Fiscal policy is sometimes used to buffer economies against turbulence. However, the experience across countries and over time is that policy is easy to loosen in a downturn or shock, but difficult to tighten in an upturn. This can lead to government debt levels ratcheting upwards over time and New Zealand is no exception.

And you can see that from the chart both the way in which from the 70s to the early 90s, public debt levels ratcheted through the various shocks that governments through that period were coping with. And since the Global Financial Crisis in 2008, based on our recent experience, our broad rule of thumb is what we think the kinds of shocks New Zealand is exposed to come with a broad fiscal price tag of about 10% of GDP per decade. So, turning to the first heading, the role of fiscal policy in responding to shocks and cycles. The draft LTIB explores how fiscal policy can be used to buffer society from shocks and cycles and how to do so in a sustainable way.

In the event of specific shocks, governments can choose to provide support to the particular people, firms, and communities that are directly impacted such as in the case of earthquakes and weather events. Governments can also use fiscal policy more generally to reduce volatility and economy-wide activity by increasing spending or reducing taxes when the economy is weak and vice versa when the economy is strong. When there is a sizeable shock, such as in the case of the COVID pandemic, these two sets of circumstances, a specific shock and fluctuations in economic activity economy-wide can overlap. Indeed, for a small shock-prone economy like New Zealand, most of the economic cycles can be traced to a shock of one kind or another.

Regarding the cyclical economy-wide dimension of managing economic shocks and cycles, we continue to see that as best handled by monetary policy run by an operationally independent RBNZ. The international experience supports using monetary policy to moderate overall swings and economic activity in most circumstances, compared with fiscal policy, monetary policy changes can be reversed more readily and can often be implemented faster. This leaves the government's spending and taxation decisions more able to be focused on seeking to optimise effectiveness and efficiency over the medium term and without being unduly disrupted by periodic adjustments to moderate economic cycles.

Having said that, if you like, the starting point for analysing role of fiscal policy around economy-wide shocks, there could still be a role for fiscal policy to help stabilise economy in some particular circumstances. There will be occasions when adjustments to fiscal policy, at least at the margin, say in the timing of changes to spending programmes and taxes, can help to achieve better macroeconomic stabilisation outcomes. Indeed, the Public Finance Act since 2013 has required the government when formulating fiscal strategy to having regard the interaction between fiscal policy and monetary policy. That may be the case, for instance, if monetary policy is constrained or is at extreme settings.

For example, fiscal stimulus can support the economy if there is limited scope for interest rates to fall any further or at the other end of the scale, fiscal restraint could be used to help moderate booms that would otherwise result in interest rates or the exchange rate becoming inordinately high. There is a role for fiscal policy in responding to what I've referred to as shocks as distinct from the economic cycle. Here we see fiscal policy as having essentially two roles. First, there is a need to ensure that important government functions and services are maintained, such as by ensuring the continued provision of essential public services and restoring essential infrastructure when damaged.

And second, there is a role for fiscal policy in responding to the distributional impact of shocks. While monetary policy is effective at mitigating economy-wide effects, fiscal policy provides governments with more control around how the costs of a shock are shared and when the costs are paid. The government can absorb part of the impact of a shock on the firms, households and communities directly affected, thereby spreading the costs more broadly across society and through time. Often therefore, if a shock is large, both monetary and fiscal policy will be on the field at the same time. As I said, it's not entirely a binary matter of whether it's the role of monetary policy or fiscal policy to respond, but we do see a delineation in these roles.

Under the framework that we've set out in the LTIB, it is for fiscal responses to be focused on addressing the direct impacts of a shock on those directly affected with it being for monetary policy in general to address the macroeconomic that is economy-wide effects. Turning to the second heading, the implications of that framework for the operation of fiscal policy, for fiscal policy to be an option at all during shocks, governments will need to have the capacity to fund the responses by keeping debt at prudent levels. Having prudent debt means we can borrow more if needed and can do so without creating the need for rapid and disruptive fiscal adjustments on into the future.

Determining the maximum prudent level of debt is by no means an exact science, but as a guide in 2022, the Treasury assessed that the maximum prudent level of debt in relatively normal times is around 50% of GDP. The current level of public debt is not far off that. To keep debt at prudent levels and avoid further upward ratcheting, governments will need to run surpluses during good economic times. The fiscal policy is to be used, the standard mantra on what makes for good fiscal responses to shocks is the 3Ts. They're timely, temporary and targeted. It goes without saying that policy responses should be as timely as they can be. Elaboration on that is hardly needed, although it does bear noting that repairing damage to fiscal infrastructure can take some considerable periods of time.

The lags can be long and variable, depending on planning and design requirements and the like. Targeting of responses, though often not easy, is something that fiscal policy can deliver, and which monetary policy cannot. It follows that where a shock is specific or localised, fiscal policy generally will be a lead responder. A well-targeted response generally almost by definition will also be a temporary response, if once a shock has passed, the response has not been turned off, it is no longer well-targeted. Keeping fiscal responses as temporary as the underlying shock is a good principle but has been difficult to put into practice. Measures originally introduced to cushion the blow of a shock and that people like can be difficult to terminate.

Experience suggests that one way to get around this is design fiscal responses in a way that ties them as directly as possible to the shock itself. To the extent this can be achieved, fiscal responses should be in some ways self-terminating. What we see when fiscal responses broaden out to include provision of unrelated fiscal stimulus is that what was to be targeted and temporary tends to become baked into baselines. In the draft LTIB, we set out a range of tools and you can sort of see them in some detail on the chart, that could be considered in response to shocks and assess the ability of each to be timely, temporary and targeted. Lessons learnt from our response to recent shocks and cycles, including the COVID-19 pandemic have informed our assessment of the tools.

Briefly in summary, firstly in relationship to households, specific lump sum payments can be quick to implement, are inherently temporary and mostly can be tightly targeted. Adjusting existing benefit subsidy and fee regimes for those affected by the shock may be feasible in some cases, but much depends on the specifics of the shock and once existing policy settings are changed, they can be difficult to reverse. Changes to taxes like personal income taxes or GST are usually not timely, can be difficult to target, and tax reductions are hard to reverse. In relationship to firms, credit guarantee schemes can provide timely and temporary support to businesses during a downturn.

However, they can reduce economic efficiency over time by impeding the redeployment of resources away from non-viable firms. Temporary changes to business tax settings such as depreciation allowances can be used to boost business investment. However, this can lead to market distortions and the resulting investment activity may not be timely. Thirdly, wage subsidies can be effective if there is a clear exit strategy and there is a strong case for keeping people connected to their jobs, but it can be difficult to target those subsidies to specific sectors, regions or demographics. As I've already mentioned, we don't see varying government spending programmes in general whether on government consumption or investment, other than in direct response to a shock as being timely enough to counter shocks and cycles.

That is particularly the case with infrastructure investment for which the lead times are inherently long and variable. They often used phrase shovel-ready projects, are easier to conceive of in the abstract than in practice. Also, increases in general public consumption can be difficult to reverse. We've turned then to what does all of this mean for our institutional arrangements. In all of these respects that is achieving timely, targeted and temporary responses. One of the learnings from experience has been the benefit of being prepared, at least in terms of having broad processes and systems in place. Being prepared allows faster responses, more effective targeting and better fiscal management, including better value for money.

A shared understanding of which tools might be used and their different impacts on the wider economy should also help set expectations and help the independent central bank in its monetary policy decision-making. Another reason for being prepared in advance is to be reasonably clear on the nature and extent of what the government will and will not do by way of response to shocks. As I've noted, government can play a role in spreading the costs of shocks more broadly across society and over time. Alongside the economic and social benefit that comes with that, is a moral hazard problem. Those who don't bear the cost of a risk tend to do less to manage that risk.

Generally risk is managed best by those closest to the exposure, whether that'd be, for example, by exercising prudent choice over where to build, local councils building, river stock banks firms having business interruption insurance and so on. It is vital that fiscal responses to shocks do not materially undermine the incentives facing and avenues available to local communities, firms, and households for taking the actions that they can take to manage the risks they face. One way in which governments can manage the moral hazard problem, at least for shocks, the nature of which is reasonably predictable, is by pre-positioning the response. In this way, it is possible for the government to make reasonably clear ex-ante, how it'll respond and will not respond.

And also, to set up the funding mechanisms needed to cover the outlays when they arise. Examples of arrangements institutionalised along these lines include the Natural Hazards Commission and the upcoming Depositor Compensation Scheme. Where full institutionalisation of the policy response is not possible, which often won't be the case because the specifics of the shock are insufficiently knowable in advance. Governments can nonetheless have clearly established ex-ante policy positions. An example is the damage to local government critical infrastructure, where the government under the Civil Defence Emergency Management plan commits in principle to fund 60% of essential repairs.

At the macro level, New Zealand's institutional arrangements for fiscal policy are founded on transparency and medium-term fiscal sustainability targets. They emphasise transparency by requiring governments to publish and be accountable for achieving fiscal sustainability targets. It is important that targets set a credible and that government's fiscal strategies have an eye to longer-term fiscal sustainability. New Zealand's fiscal institutions are well regarded internationally. The Treasury continues to support this transparency-based approach over legislating specific fiscal rules. That said, the report debates whether we can go beyond our existing institutional arrangements. Minister of Finance has already said publicly that she's asking us to do work around setting up institution around costing the policies of political parties.

And report also canvases whether we could go further, for example, the creation of an independent fiscal institution is used in a number of countries. The aim of any of these institutions is to strengthen our arrangements by supporting the public and the Parliament in holding government to account for its fiscal strategy. The benefits of an independent fiscal institution producing economic and fiscal forecasts or undertaking long-term fiscal sustainability analysis may be more limited in New Zealand's case, however than in some other countries, given that the Treasury already produces and publishes such forecasts independently of the government.

However, there may be merit in establishing such an institution, tasked with providing even more public scrutiny of the government's fiscal policy than the Treasury is currently charged with. The bigger point here is that given the pressures that we see on fiscal policy over the medium and long term, we need to ask the question about whether our institutions are strong enough to lean against the pressures that those pressures are going to create. With those observations, let me conclude with what I see as the key takeaways in the draft LTIB. First and foremost, there is a need to maintain fiscal space for fiscal policy to play a shock absorber role. That means paying down our debt during relatively normal economic times. This will require successive governments to set sustainable medium-term fiscal intentions and deliver operating surpluses on average over time.

Second, part of maintaining that fiscal space is about the fiscal support provided in response to shocks being turned off in a timely manner once the impact of a shock passes. And better still having institutional arrangements and policies under which there is at least some pre-funding of the calls that negative shocks make on the fiscal accounts. That includes, in particular the banking or fiscal surpluses during periods of cyclical macroeconomic upswing. Third, fiscal responses to shocks should normally be confined to addressing the direct impact of the shock on those directly affected. With stabilisation on an economy-wide basis, taking into account those direct fiscal responses being the role of the operationally independent Monetary Policy Committee of the RBNZ.

But also, recognising that monetary policy is at or approaching its limits, support from fiscal and other policies can be helpful. Fourth, in designing fiscal policy responses to shocks, there is a need for particular care to ensure that incentives facing those directly exposed and best placed to manage and mitigate a risk are not unduly undermined. Fifth and finally, as always, having good institutional arrangements in place matters. Based on the experience of the past couple of decades, we think that cyclical stabilisation should mostly be left to monetary policy that a transparency-based approach to managing fiscal policy in the aggregate remains appropriate for New Zealand.

And that there is value in pre-positioning government responses to shocks, subject to the limits of what can be knowable in advance. With that, thank you and I look forward to your questions and comments and also to the input we hope to receive on the current draft of the LTIB before we finalise it in June. Kia ora.

Dominick Stephens:

Well, thanks much, Iain. So, we'll take approximately 20 minutes of questions both in the room and online. I'll start quickly with an online question, which is when will the report go out, please? 11 AM today, which is in two minutes time. So, the report will be available on the Treasury website. So, are there questions in the room? Just raise your hand if you've ... Patrick.

Patrick:

Thanks Dom, and thank you. That's a really useful piece of work and it's really, really valuable. I guess my question is, it relates to the debt ratchet concern that you have and how much of that is because of a reliance on discretionary fiscal policy versus automatic stabilisers, because I didn't hear a lot of discussion around the fact that fiscal policy does have some stabilisation function automatically built in.

Ben:      

Yeah. Is this working? Yep. Great. Yeah, so good question, Patrick. I think practically, if you think about the deterioration in New Zealand's fiscal balance over the last few years, obviously, there's been sort of a number of factors that have fit into that. Partly, it's been ... We've seen tax revenue fall relative to our forecasts through cyclical weakness. We've also seen expenditure increase in some forms, part of which is automatic fiscal stabilisers and when you'd expect, part of it has been an increase in or a permanent increase in some forms of expenditure. So, it's absolutely a mix. I think the breakdown of that is important. But I think the key message here is one of ... If that's the trajectory, then we need to make sure that we've got the surpluses or the calibration of our surpluses that we're targeting in the good times right such that we're able to offset the downturns in the negative side.

Dominick Stephens:       

Great, thank you. I'll alternate between online and in-person questions. So, we have one question. How do you ensure that monetary and fiscal responses to shocks are aligned such that undesirable outcomes are avoided as happened with the policy-induced inflation increase after COVID?

Iain Rennie:       

I think what we're sort saying in the LTIB, so a couple of things. One is the importance about transparency for the fiscal authorities so that at any time there's clarity about, if you like, the fiscal plans here and also almost more the contingent thinking and predictability about how the fiscal authorities may be likely to respond to particular shocks. And it's sort of, I think, helpful to the framework within which the RBNZ will rightly take its independent decision-making around monetary policy. And I think that's an important part of how you get that coordination. Obviously, institutionally, with the previous changes to the RBNZ Act, the Treasury is an observer on MPC.

Some motivation for that policy change was to ensure that in MPC and coming to its independent decisions was fully informed about any matters around government policy that might be material to its decision making. So those are both the institutional settings that have been put in place. Having said that, both for central bank and also fiscal authorities face considerable uncertainty when they make policy adjustments at any time about the likely economic impacts. And so, these institutional arrangements I think are helpful in having an appropriate alignment. That's a different matter from saying that given the information that authorities have a particular time, there's this guarantee about the economic outcomes that will transpire.

Dominick Stephens:

Yeah, I think a couple of points that we make in the LTIB. I mean yes, there's great uncertainty when policies are put in place. Nobody has a crystal ball. Things can turn out differently to expectation. One of the key points we make is that monetary policy has proved easier to reverse than fiscal policy. And that is a key reason that in most circumstances, we would argue that monetary policy should be the first port of call for responding to cyclical fluctuations in the economy. And then second key point we're making is when monetary policies and extremes, fiscal policy may well want to step in and actually, just prior to COVID was one of those extremes when the OCR was reaching zero. So, there was more of a need to coordinate around providing stimulus at that time. Let's head over to an in-person question.

Speaker 5:          

The chart that you put up, it showed debt to GDP reaching 70% by about 2040 under current policies and obviously, 50% being the level that you're describing as prudence. So how quickly does action need to be taken in your view to prevent debt reaching that prudent level? And also, are we in what you describe as normal economic times now or is it possible that the situation with tariff turmoil might guide the Treasury to view that perhaps we're in a position where we could be outside that envelope?

Iain Rennie:       

I think the first question is look ... Because we see real longer-term pressures on public finances, that's why Treasury has been saying for many years, there is a need to think about the medium to long-term policy settings in areas like retirement income and healthcare, et cetera, because of what you can. And that chart is actually from the 2021 Long-Term Fiscal Statement. So, it's not a new piece, it's not a new projection. We'll be updating our modelling for this year's Long-Term Fiscal Statement, but that's why we've been saying, and we'll continue to say, there is a real need for New Zealand collectively, to think about how it wants to address the policy settings, whether it wants to change spending settings, whether it wants to change revenue settings, some mix of the two.

Those are ultimately political choices, but we're saying, well actually, in the absence of those changes, we are likely to have high levels of debt. And that means it will constrain over time, progressively New Zealand governments from responding to shocks and it increases the risk of a disruptive fiscal adjustment, which will have real impacts on the wellbeing of communities through significant changes to either spending levels or taxation. So that's sort of the medium term. I think the phrase normal times there's an element about the relative and maybe we're in a new normal, so ask us tomorrow. But that's why I say ... As I said in the opening remarks, our reference to the overall level of debt, but prudence is not an exact science, and it needs to be thought about in context. And obviously, that's something which we as advisors would want to engage with a government. But it's not like we've got a mechanical rule that 49.9 is fine, 50.1 is Armageddon. It's something, it's more nuanced and it would rely upon understanding of context.

Dominick Stephens:       

Great. We'll go to an online question. So, how's the Treasury ... does the report look at how greater economic resilience can be achieved by directly addressing some of the risks we now face in the future i.e, droughts, floods, and from climate change?

Iain Rennie:       

Well, I think I can kick off on that. I mean, it's partly the message about why we think it's important that those best able to manage risks, have good incentives and information to do so, because if you like, that's your first line of defence in terms of mitigating impacts, whether it's the impact of a drying climate on various kinds of agriculture, whether it's location, decisions of firms and households in relation to waterways or other natural hazards in a sense of the framework that we've put in place is whatever government does shouldn't get in the way of what the community or private actors can do to mitigate those risks. Because in many cases, we actually see that those players can play a more significant role than government can. Not in all cases, but in a number.

Dominick Stephens:

So, I think we'll go to an in-person question. David?

David:  

Congratulations on a clear and helpful framework, picking up on Tom's new normal. Arguably we are in a new world order with different trade drivers and investment drivers, which will create both micro and macroeconomic shocks for New Zealand. How would you consider applying this framework to the new world order and the potential turbulence that it will and is already creating for us?

Iain Rennie:       

I think the first point is, there is an incredibly high level of policy uncertainty. So, I think all policy advisors are quite cautious about being definitive about implications are what time frames through what ... throughout channels. Having said that, it's hard to see what's happening globally as anything other than negative in terms of our longer-term economic prospects, if the trends are sustained, right? So, if you take this framework which is about ... and so, therefore essentially there is something that's going on that is more structural, and how the world economy operates and therefore how New Zealand engages in a ... without taking the analogy too far, it's a little bit like the UK going into the ... It was then the EEC. And then the disruption that created for a whole range of production and investment relationships that New Zealand had built up over basically a century. And I suppose one of the learnings that I take out of that, the policy response in that sort of 70s period was macroeconomic policy was sometimes used through fiscal, rather than thinking through what were the structural changes in the economy that would enable the kinds of shifts and resources that needed to go on, given the change in arrangements. So, it's probably, if you take the framework and the LTIB that's sort of saying ... and I kind of abstract, obviously, there's a shorter-term cyclical component here.

And I think our framework would say by and large, obviously, our colleagues at RBNZ will be looking at that, thinking about what if ... Anything, that means for the independent decision-making through time. But from our point of view, what you get here is ... Both as a natural scepticism about how you use fiscal policy in response to shocks, but particularly we think if there is more of a structural nature and I think we'll become clearer over time, then the policy responses from government may be in other areas, whether it's around skills investment policy support that government provides for different industries, those might be more effective policy levers over the medium term than what you do with taxes and spending in the short term.

Dominick Stephens:       

Yeah, I mean, we started writing this document well before tariffs were a potential issue, but with all of the volatility going on now, it's actually a really apt time to launch this document so that we can draw on some of the key principles and apply them to the current circumstance. I mean, Iain has mentioned that monetary policy is not currently in an extreme, maintaining flexibility of the economy is paramount. Thinking about whether this is a temporary shock or not, maintaining the viability of ... So, any support provided should be really careful to ensure that it's not propping up firms that are no longer viable, thinking about flexibility in the economy.

If government's wish to provide some form of support, that we've also got practical lessons that we've learned on the various tools that are available and have been informed by recent experience that can be applied going forward. So, I think it's just an opportunist time to launch this document, I think. Okay. Perhaps one more ... Are there any more in-person questions? We have time for one more.

Bill Rosenberg:                

Bill Rosenberg. One of the problems during the COVID crisis, if you like, or impact was that it was largely a supply-led downturn or crisis. And in those circumstances the Reserve Bank finds it hard to find the tools to be effective. And so, the fiscal authorities have a much greater responsibility. Looking at your 10 or so possible tools there, they seem to be very heavily weighted towards the demand side. I'm just wondering what you're thinking about a supply-led crisis and that's probably quite relevant to the current circumstances, because we just don't know how that's going to play out. Some of it may be on demand side, some of it may be on the supply side.

Dominick Stephens:       

I mean, I think again, a long-lived supply shock is better dealt with by thinking about the structure of the economy and maintaining its flexibility. Actually, some of the tools, I think when you go through it, they are appropriate for a short-lived supply shock. So, for example, if there was a short-lived disruption to the ability of firms to carry on their business, there are tools available such as the weather events. There are tools available to support businesses through a short-term period of disruption. So, it's more ... I would argue that the tools that we're thinking about are designed to deal with more temporary shocks. But I think there are a mix of tools available for temporary supply shocks or demand shocks. I think we've got time for one last question from Susan St. John. Does Treasury think current automatic stabilisers are well enough designed? That's for Ben.

Ben:      

I can take that one. Yeah, good question. I think so in the document we set out that the automatic fiscal stabilisers in New Zealand are about on average for the OECD. So, if you have a GDP shock of about 1%, the automatic fiscal stabilisers will offset about half a percent of that. So, half of the shock. I think from a macroeconomic perspective, you might always like to have more of that offset by the automatic fiscal stabilisers, but in reality, we recognise that they're the product of structural economic policy settings, so your benefit system, your tax system, and we don't see the design of those being primarily set by your macroeconomic stabilisation goals. They're determined by your structural goals in terms of how the economy ... What sort of economy you want, and what sort of society you want. So primarily we'd be looking at them through that lens.

Dominick Stephens:       

Okay. So, we've run out of time. So, thank you very much for those who've attended and thanks to those who've attended online. And thank you very much for your questions. So, the Long-Term Insights Briefing is now available online. I encourage you to take a look and to make your submission. Feedback could be sent to an email address [email protected]. That will feed into our mahi towards the final LTIB, which will be published in June.

So, I'd just like to finish with a karakia [speaking in te reo Māori 00:45:42] Piki te kaha. Piki te Ora. Piki te Wairua. Hui e, tāiki e!

Thanks everyone. [speaking in te reo Māori 00:45:44] Mā te wā.