Automatic Fiscal Stabilisers: Implications for New Zealand
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.
|Date of creation:||2000|
|Date of revision:||2001|
|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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