The Treasury consulted in July 2024 on the proposed scope of its upcoming 2025 Long-term Insights Briefing (LTIB) and has released details of the final scope. The Treasury has also issued a summary of the submissions it received on the proposed scope.
Final scope of the LTIB
In July 2024, the Treasury publicly consulted on the draft topic and scope of the upcoming LTIB - Consultation on the Scope of the Treasury's Long-term Insights Briefing - Sustainable and Resilient Fiscal Policy Over Economic Cycles.
A summary of the submitted feedback is below. After considering the feedback, we made some changes to the scope:
- Distinguishing more between shocks with specific or concentrated impacts, versus economy-wide business cycles, and the different macroeconomic policy responses required for each.
- Integrating reflections from the economic response to COVID-19 throughout the LTIB.
- Including more focus on supply shocks, such as from climate change.
- Using some quantitative scenarios to illustrate possible shocks, cycles, and responses.
- Considering the role of overall economic performance in providing capacity to respond to shocks and cycles.
The final scope is as follows:
- Understanding the economic shocks and cycles New Zealand is exposed to
- A description of New Zealand’s past economic shocks and cycles, macroeconomic policy responses to them, and some international comparisons.
- Analysis of how New Zealand’s future economic shocks and cycles may differ from those in the past, drawing on the available quantitative evidence.
- A description of the distributional impacts of New Zealand’s previous cycles and shocks and how these might differ in the future.
- What role should fiscal policy have in responding to shocks and cycles?
- The relative roles of fiscal and monetary policy in economic shocks and cycles.
- Principles for using fiscal policy in response to shocks.
- Arrangements to support sustainable fiscal policy in the face of shocks and cycles
- Fiscal/debt buffers the government might need to respond to shocks and cycles.
- New Zealand’s institutional arrangements for fiscal policy and policy options to strengthen these.
- The suitability of different fiscal tools for use in response to shocks and cycles, and options to improve the cost-effectiveness of their use.
Second phase of consultation: The first draft of the LTIB
The Treasury is now undertaking analysis and drafting for the first draft of the upcoming Briefing. We are aiming to publicly consult on the first draft in March 2025.
First phase of consultation: Proposed scope of the LTIB
The first phase of consultation on the LTIB focused on the proposed scope of the Briefing. The draft proposed scope was how we can ensure that fiscal policy remains sustainable and resilient over the economic cycle.
The detailed consultation document with more information on the Long-term Insights Briefing and the work the Treasury proposed to include and exclude from the Briefing’s scope is available here: Consultation on the Scope of the Treasury's Long-term Insights Briefing - Sustainable and Resilient Fiscal Policy Over Economic Cycles.
The consultation period was from Wednesday 26 June to Friday 26 July 2024.
Summary of submissions on the proposed scope
The Treasury received 18 submissions (4 through an online workshop, and 14 through written submissions) from 17 submitters. We received feedback from a range of different stakeholders, with most submissions coming from academia, non-governmental organisations, and private individuals.
Key feedback points include the following:
- Most supported the proposed topic of sustainable and resilient fiscal policy over economic cycles. Components of the proposed scope that many submitters supported include:
- the exploration of future shocks, including distributional analysis,
- climate change and natural hazard risks, and
- considering the role of fiscal institutions, including the use of “rainy day” or ringfenced funds for particular risks or saving upside revenue surprises.
- Most submissions focused on suggesting additional areas for us to cover, rather than noting areas of less importance. Expansions to our proposed scope suggested by multiple stakeholders included:
- More clearly articulating when there is and is not a case for using fiscal policy and monetary policy, and distinguishing more between the business cycle and shocks/losses,
- the role of economic performance in underpinning our ability to respond to shocks and cycles with fiscal policy,
- the effects of net migration and migration movements in and out of New Zealand, and
- international comparisons with other countries.
- Of responders who did not support the overall topic:
- Some considered different topics were more important, such as productivity, inequality, aspects of social policy, housing affordability, and environmental sustainability.
- One thought it seemed the authors’ views were already determined in favour of active use of fiscal policy, without sufficient supporting evidence or consideration of the role of monetary policy.
- There were differing views about how the LTIB should consider fiscal policy.
- One sub-group of respondents was more supportive of broader use of fiscal policy in general, and this flowed through to their suggestions about the topic. These respondents often noted the importance of distributional analysis proposed as part of the work programme.
- Another sub-group was more concerned about recent looser fiscal policy, and thought there should be a review of the COVID period and related Treasury advice.