Guide to New Zealand budgeting practices
Responsible fiscal management
New Zealand's fiscal policy framework differs from many other comparable countries in that principles are legislated for, rather than mandatory targets.
The principles of responsible fiscal management are outlined in Part 2 of the Public Finance Act 1989 (PFA) and include reducing and maintaining debt to prudent levels, and once those levels have been reached, running operating surpluses, managing fiscal risks facing the Government, having regard for the impact on present and future generations, and ensuring that the Crown's resources are managed effectively and efficiently.
The PFA requires the publication of a Fiscal Strategy Report (FSR), which must be delivered on Budget Day. In this report the Government must outline their specific long-term objectives and short-term intentions, and the extent to which these objectives and intentions are consistent with the principles of responsible fiscal management.
The PFA also requires that the Government of the day to set wellbeing objectives and explain how those objectives will guide the development of each Budget. The Treasury is also required to report periodically on the state of wellbeing in New Zealand. For more information about this, and the Treasury’s approach to wellbeing, the Living Standards Framework and He Ara Waiora, please visit the Treasury website.
The FMA constitutes a flexible set of rules applied to the day-to-day operations of Government to inform decision-making and assist them in achieving their fiscal strategy. This includes things like the setting of allowances for new spending (and/or revenue reductions) and setting constraints on between-Budget spending.
New Zealand's fiscal policy framework
|FISCAL STRATEGY||FISCAL MANAGEMENT APPROACH|
|Part 2 of the PFA sets out the high level principles of responsible fiscal management and requires the Government to publish their long-term fiscal policy objectives and their short term intentions.||These objectives are outlined in the annual Fiscal Strategy Report, which sets out the Government's fiscal strategy in areas such as operating balance, revenues, expenses, and debt.||The Fiscal Management Approach (FMA) is an agreed set of 'rules' designed to assist the Government achieve their fiscal strategy.|