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.
A government may choose to focus on one or two of its short-term intentions and long-term objectives as primary fiscal rules or targets, as a way of anchoring its overall fiscal strategy. It is useful to remember that these fiscal rules are not set out in legislation or standing orders; they are self-imposed by the Government of the day.
As at Budget 2023, the Government’s long-term objectives are to:
- Maintain total debt at prudent levels and net debt at below 30% of GDP, subject to significant shocks;
- Maintain an average surplus in range of 0 to 2 percent of GDP, subject to economic and fiscal conditions;
- Ensure operating expenses support a responsible and proportionate role for the Government in maintaining a productive, sustainable, and inclusive economy;
- Ensure a progressive taxation system that it fair, balanced and promotes the long-term sustainability and productivity of the economy; and
- Use the Crown’s net worth to maintain a productive, sustainable and inclusive economy
The Fiscal Management Approach (FMA) can support the Government to achieve these objectives by helping to manage all expenses and revenue decisions and providing the information needed for the Government to make informed decisions.
You can read the 2023 Fiscal Strategy here.