There is reason to hope that long-term fiscal planning can still be effective in New Zealand.
Many countries now require the regular publication of longterm fiscal projections, looking at the potential long-term costs of government spending programmes. In New Zealand, section 26N of the Public Finance Act 1989 (as amended in 2004) requires the Treasury to publish a Statement on the Long-Term Fiscal Position at least every four years. Under the act, such statements must look out at least 40 years. Their contents are the responsibility of the secretary to the Treasury (rather than the minister of finance), and the Treasury is required to use ‘its best professional judgments’ in assessing the fiscal outlook and potential risks.
It is also obliged under the act to ensure that ‘all significant assumptions underlying any projections’ are included in the statement. Aside from these parameters, the act is silent on the matters to be covered, giving the Treasury considerable flexibility over the process employed to produce such documents, including the nature and extent of any consultation with external experts, the wider policy community and interested stakeholders. Since the requirement for such statements was introduced in 2004 the Treasury has published three reports. The most recent of these – Affording Our Future – was released in July 2013. Against this backdrop, this article considers:
- the nature of long-term fiscal planning;
- why long-term fiscal planning is important;
- why a legislative requirement for such planning is desirable;
- whether long-term fiscal planning actually achieves its goals;
- some of the uncertainties involved in long-term fiscal planning; and
- the potential for long-term planning in areas beyond fiscal ones.