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Challenges and Choices: Modelling New Zealand’s Long-term Fiscal Position

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Author Info

  • Matthew Bell
  • Gary Blick
  • Oscar Parkyn
  • Paul Rodway
  • Polly Vowles

    ()
    (The Treasury)

Abstract

This working paper provides further detail on the modelling behind Challenges and Choices – New Zealand’s Long-Term Fiscal Statement, published on 29 October 2009. Building on the first Statement of 2006, we construct two main fiscal scenarios over a 40- year horizon. The historic trends scenario allows historic and current spending and revenue settings to interact with changing demography. The sustainable debt scenario applies a fiscal constraint on non-benefit spending so that Crown net debt follows the Government’s medium-term fiscal targets. The modelling innovations introduced this time do not alter the basic structure and principles of the Long-term Fiscal Model, but instead provide insights into government spending: public sector productivity growth and the growth of the basket of services each person receives. These innovations enable us to illustrate the effects of tradeoffs between broad spending categories in a constrained fiscal environment. In the 2009 Statement, these policy changes are combined into three possible scenarios for obtaining a sustainable fiscal position. The paper also illustrates the sensitivity of the fiscal position to small changes in the demographic, macroeconomic and fiscal modelling assumptions.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2010/10-01/twp10-01.pdf
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Bibliographic Info

Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 10/01.

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Length: 91
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:nzt:nztwps:10/01

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Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
Phone: +64-4-472 2733
Fax: +64-4-473 0982
Web page: http://www.treasury.govt.nz
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Related research

Keywords: Population; projections; social expenditure; fiscal costs; New Zealand;

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Cited by:
  1. John Creedy & Norman Gemmell, 2013. "Can Automatic Tax Increases Pay for the Public Spending Effects of Population Ageing in New Zealand?," Treasury Working Paper Series, New Zealand Treasury 13/22, New Zealand Treasury.
  2. Ross Guest, 2013. "Population Ageing and Productivity: Implications and Policy Options for New Zealand," Treasury Working Paper Series, New Zealand Treasury 13/21, New Zealand Treasury.
  3. Lees, Kirdan, 2013. "Fighting fit? Assessing New Zealand’s fiscal sustainability," NZIER Working Paper, New Zealand Institute of Economic Research 2013/5, New Zealand Institute of Economic Research.
  4. Robert A Buckle & Amy A Cruickshank, 2013. "The Requirements for Long-Run Fiscal Sustainability," Treasury Working Paper Series, New Zealand Treasury 13/20, New Zealand Treasury.
  5. Ross Guest, 2013. "Intergenerational Smoothing of New Zealand’s Future Fiscal Costs," Treasury Working Paper Series, New Zealand Treasury 13/12, New Zealand Treasury.
  6. Werner Schule, 2010. "The Potential Contribution of Fiscal Policy to Rebalancing and Growth in New Zealand," IMF Working Papers, International Monetary Fund 10/128, International Monetary Fund.

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