New Zealand’s Fiscal Policy Framework: Experience and Evolution

Abstract

The paper by Janssen discusses New Zealand’s fiscal policy framework. The author points out that over the past 15 years New Zealand has been paying considerable attention to the “rules of the game” for monetary, fiscal and regulatory policies and that this new focus has been an integral part of New Zealand’s economic reforms. For fiscal policy, significant changes to the institutional framework have accompanied the consolidation of the Government’s position. Especially important was the introduction of the Fiscal Responsibility Act in 1994. Janssen notes that the framework for fiscal policy adopted in New Zealand differs from that used elsewhere, especially in its use of legislated “principles of responsible fiscal management” as opposed to mandatory targets. However, New Zealand Governments are still required to set short-term fiscal targets and long-term objectives for a range of fiscal aggregates. According to Janssen, New Zealand’s fiscal policy framework faces a number of challenges and is subject to ongoing developments. He indicates the potential benefits of a more explicit institutional framework and stresses the relevance of long-term fiscal issues for the formulation of fiscal policy.