External Panel gives feedback on draft Long-Term Fiscal Statement

On 11 March, the Long-Term Fiscal External Panel reviewed a first draft of the Treasury’s 2013 Statement on the Long-Term Fiscal Position. The Treasury established the External Panel to strengthen the quality of its analysis prior to the publication of the 2013 Statement.

Bill Moran, who is leading the Treasury’s Long-Term Fiscal project, said that he found the Panel’s feedback on the draft Statement very helpful.

“The Panel emphasised to us that there are a number of messages that need to come through very clearly in our next Statement,” said Mr Moran.

“One of the key messages is about risk. As a small, open economy, New Zealand is particularly vulnerable to shocks of different kinds. We need to make sure we have low public debt, making us more resilient in the future. The next 15 years are crucial. That means we need to get on top of pressures associated with an ageing population now.

“The Panel also encouraged us to draw out the intergenerational impacts of different policy options. We are in a transition period where we are seeing fundamental changes to the structure of our population. This transition means that we need to rethink our implied intergenerational contract. There is no ‘right’ answer about what is fair to different generations, but we need to at least highlight the fact that different policies have different impacts.”

Professor Bob Buckle, the Chair of the Panel, was pleased with how the session went. “Members of the Panel appreciated the opportunity to provide feedback on the analysis in the Treasury’s draft Long-Term Fiscal Statement. The Treasury clearly appreciated the thoughtful contributions that members of the panel made during this session.”

At the same session, Professors John Creedy and Norman Gemmell, both of Victoria University, presented a draft paper examining whether a version of fiscal drag – people moving into higher tax brackets as their real wages rise with economic growth – could help fund some of New Zealand’s future fiscal pressures. That draft paper is now available on the Victoria University Chair in Public Finance website.

The Panel will meet again on 11 April to consider a revised draft of the Statement.

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