Financial Management Reform: Principles and Practice in New Zealand

Abstract

This article explores the nature and impact of New Zealand's financial management reforms introduced by the fourth Labour Government (1984-90). These reforms, which were given legislative backing via the Public Finance Act 1989, are of interest not merely because of their scope and scale, but because of some of the concepts and principles which have fashioned their design and implementation. In particular, the article highlights the importance which has been attached to the distinction between departmental outputs and outcomes, and the distinction between the interest that a government has as a purchaser of department goods and services and its interest as an owner of departmental assets, and explains how these distinctions have been used to fashion the new framework of accountability. In evaluating the reform programme, the article draws on the results of a comprehensive review undertaken on behalf of the National Government (1990- ) and published in late 1991. This reveals overwhelming support for the new policy framework amongst senior officials and ministers. It also indicates that the reforms are beginning to achieve their intended goals of improving departmental efficiency and accountability and facilitating better expenditure control. Finally, some of the issues which the new financial management regime has either generated or failed to resolve are explored.