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Automatic Fiscal Stabilisers: Implications for New Zealand

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Listed:
  • Julie Tam
  • Heather Kirkham

Abstract

Automatic fiscal stabilisers, or the cyclical components of the budget balance, are larger in New Zealand than in the average OECD country, reflecting both higher sensitivity to the conomic cycle, and a more volatile cycle. Fiscal vigilance is especially important in New Zealand. Large projected operating surpluses could easily disappear if lower economic outcomes are mistakenly assumed to be cyclical. But, automatic stabilisers are difficult to use in a policy framework as empirical estimates of the cyclical budget balance vary significantly. While the estimated trend in automatic stabilisers is broadly similar, the level varies significantly, such that at any point in time a 'structural surplus' may be dependant on the estimation method.

Suggested Citation

  • Julie Tam & Heather Kirkham, 2000. "Automatic Fiscal Stabilisers: Implications for New Zealand," Treasury Working Paper Series 01/10, New Zealand Treasury, revised 2001.
    • Handle: RePEc:nzt:nztwps:01/10
    Note: An earlier draft of this paper was prepared by Julie Tam in 2000, and has been updated by Heather Kirkham.
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    File URL: https://treasury.govt.nz/sites/default/files/2018-04/twp01-10.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Şen, Hüseyin & Kaya, Ayşe, 2019. "Output-volatility reducing effect of automatic stabilizers: Evidence from nine EMU member states," EconStor Preprints 206687, ZBW - Leibniz Information Centre for Economics.
    2. Renee Philip & John Janssen, 2002. "Indicators of Fiscal Impulse for New Zealand," Treasury Working Paper Series 02/30, New Zealand Treasury.
    3. Felicity C Barker & Robert A Buckle & Robert W St Clair, 2008. "Roles of Fiscal Policy in New Zealand," Treasury Working Paper Series 08/02, New Zealand Treasury.
    4. Şen, Hüseyin & Kaya, Ayşe, 2021. "Output-volatility reducing effects of automatic stabilizers: Policy implications for EMU member states," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1388-1414.
    5. Angela Barnes & Steve Leith, 2001. "Budget Management That Counts: Recent Approaches to Budget and Fiscal Management in New Zealand," Treasury Working Paper Series 01/24, New Zealand Treasury.
    6. John Janssen, 2001. "New Zealand's Fiscal Policy Framework: Experience and Evolution," Treasury Working Paper Series 01/25, New Zealand Treasury.
    7. Guay C. Lim & Chew Lian Chua & Edda Claus & Sarantis Tsiaplias, 2010. "Review of the Australian Economy 2009–10: On the Road to Recovery," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(1), pages 1-11, March.

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    More about this item

    Keywords

    automatic fiscal stabilisers; economic cycle; cyclical budget balance; expenditure and tax elasticities;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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