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

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


    (The Treasury)

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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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
Contact details of provider: Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
Phone: +64-4-472 2733
Fax: +64-4-473 0982
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