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New Zealand's Fiscal Policy Framework: Experience and Evolution

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Abstract

Fiscal policy in New Zealand has seen a consolidation of the Government’s position and continuing refinements to the institutional framework and Budget processes. The key institutional change has been the introduction of the Fiscal Responsibility Act 1994. The paper sets out the background to the fiscal policy framework, including fiscal history and various institutional changes in the public sector. This paper is a companion paper to Treasury Working Paper 01/24 by Angela Barnes and Steve Leith. The key elements of the fiscal policy framework are explained and compared to various “fiscal rules” used internationally. The New Zealand framework differs from that used elsewhere, especially in its use of legislated “principles of responsible fiscal management” as opposed to mandatory targets. However, the Fiscal Responsibility Act 1994 does require Governments to set short-term fiscal intentions and long-term fiscal objectives for a range of fiscal aggregates. The paper discusses the experience with the framework including a comparison of fiscal outcomes with fiscal objectives. The New Zealand experience has seen the evolution of specific operational targets (the fiscal provisions) to help improve the consistency of short-term intentions with longer-term fiscal objectives. The paper concludes with a set of challenges facing the framework, both short- and long-term.

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  • John Janssen, 2001. "New Zealand's Fiscal Policy Framework: Experience and Evolution," Treasury Working Paper Series 01/25, New Zealand Treasury.
    • Handle: RePEc:nzt:nztwps:01/25
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    File URL: https://treasury.govt.nz/sites/default/files/2018-12/twp01-25.pdf
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    References listed on IDEAS

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    Cited by:

    1. Marco Buti & Sylvester Eijffinger & Daniele Franco, 2003. "Revisiting the Stability and Growth Pact: grand design or internal adjustment?," European Economy - Economic Papers 2008 - 2015 180, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    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. Lees, Kirdan, 2013. "Fighting fit? Assessing New Zealand’s fiscal sustainability," NZIER Working Paper 2013/5, New Zealand Institute of Economic Research.
    5. Mr. Erik J. Lundback, 2008. "Medium-Term Budgetary Frameworks - Lessons for Austria from International Experience," IMF Working Papers 2008/163, International Monetary Fund.
    6. 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.

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    More about this item

    Keywords

    Fiscal policy; Fiscal Responsibility Act;

    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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