Guide to New Zealand budgeting practices
The Government's fiscal strategy
The Government's fiscal strategy is its plan for managing its finances, which include spending, revenue and the portfolio of assets and liabilities on the Crown balance sheet. New Zealand governments frequently express their fiscal strategies using goals for public debt and the gap between spending and revenue (that is, whether the annual Budget is in surplus or deficit). The Public Finance Act 1989 (PFA) requires the Government to produce a fiscal strategy every year and to set it out in a transparent way.
The Government discloses its fiscal strategy through its short-term intentions and long-term objectives as set out in the Budget Policy Statement (BPS), released ahead of the Budget, and in the Fiscal Strategy Report (FSR), released alongside the Budget.
The long-term objectives include:
- Prioritising investments to address the long-term financial and sustainability challenges facing New Zealand.
- Taking a prudent approach to ensure expenditure is phased, controlled, and directed to maximise its benefits. The Government will maintain its expenditure to within the recent historical range of spending to GDP ratio.
- Ensuring a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy.
The Fiscal Management Approach (FMA) can support the Government to achieve these goals by helping to manage all expenses and revenue decisions and providing the information needed for the Government to make informed decisions.
It is useful to remember that the rules presented here are not set out in legislation or standing orders; they are self-imposed by the Government of the day.
Defining Total Crown and Core Crown
You can read the 2022 Fiscal Strategy here.