A quarter of a century of fiscal responsibility: The origins and evolution of fiscal policy governance and institutional arrangements in New Zealand, 1994 to 2018.

Abstract

The foundations for New Zealand’s current fiscal policy governance and institutional arrangements were established nearly 25 years ago by the Fiscal Responsibility Act 1994 (FRA). This Act placed an emphasis on fiscal principles and reporting provisions which were regarded as world-leading fiscal reforms when first introduced. These fundamental reforms have been embraced by successive New Zealand governments, and in 2005 were incorporated into the Public Finance Act 1989. This paper traces the evolution of the principles and reporting provisions during the past quarter of a century in response to the fiscal challenges posed by intergenerational issues and population ageing, avoiding unsustainable government expenditure growth during economic booms, the coordination of fiscal and monetary policy, recognition of the economic and social importance of the Government’s balance sheet, and the demands for greater transparency in fiscal policy decisions and performance. The paper concludes with a discussion of contemporary issues and challenges.