The Treasury uses its Long-term Fiscal Model to project the state of the government finances and is required to produce at least every four years a statement on the long-term fiscal position of the government that covers a period of at least 40 years.
Statements on the Long-term Fiscal Position indicate possible trends in spending, revenue, operating balance and debt over this period, based on current policy settings and recent history.
The 2020 Statement on the Long-term Fiscal Position (the 2020 Statement) was originally planned for publication in March 2020. However, the rapid emergence of the COVID-19 pandemic in mid-March and the high likelihood that it would have a very large economic and fiscal impact meant that we had to substantially revise our analysis, including projections and scenarios, for the 2020 Statement.
The timeframe for this work has been extended to allow for a better understanding of the likely impacts of COVID-19 and subsequent response and recovery measures on the New Zealand economy and fiscal position. The Treasury now intends to publish the 2020 Statement before the end of September 2021.
The Treasury's previous statement was published on 22 November 2016.
Purpose of the Statements
The first statement was released in June 2006.
The statements are based on projections from the Treasury's Long-term Fiscal Model (LTFM).
Each statement attempts to project the consequences of current revenue and spending decisions over the next four decades or so and will pick up slower-moving trends such as population ageing, the compounding effects of surpluses and deficits, wage and price growth, and so on.
The Treasury sees the purpose of these statements as being to increase the quality and depth of public information and understanding about the long-term consequences of policy decisions and to assist governments in making fiscally-sound decisions. These statements are part of a suite of reporting documents the Public Finance Act requires from the Minister of Finance and the Treasury. Twice a year, for the budget (around May) and in the middle of the financial year (around December), the Treasury produces an Economic and Fiscal Update containing forecasts covering the next 3-5 years.
With each Budget, the Minister of Finance also releases a Fiscal Strategy Report, outlining the long-term objectives of fiscal policy and including projections over at least 10 years. These projections are based on Treasury's Fiscal Strategy Model (FSM) and show the likely progress against the long-term fiscal objectives.
The models used in statements on the long-term fiscal position and the Fiscal Strategy Report have many things in common, but a crucial difference is that the FSM keeps the allowances for new spending separate from spending based on past decisions. This reflects current budget practice used in the Economic and Fiscal Update forecasts. The LTFM, on the other hand, allocates forecast new spending to the major spending categories which are then grown out by demographics, wages and other cost drivers. Another difference is that health spending in the LTFM takes greater account of changing health status over the long term. These differences mean that it is difficult to compare the two models.