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Long-term options for affording our future

29 July 2013

Treasury-sponsored tertiary student workshops address long-term options for affording our future

The Treasury, in conjunction with the New Zealand Union of Students’ Associations, is sponsoring a series of nationwide workshops starting in Dunedin tomorrow which will address long-term options to maintain prudent Crown finances in the decades ahead.

Affording Our Future, the Treasury’s 2013 Statement on the Long-Term Fiscal Position, was presented to Parliament on 11 July. At the time, Treasury Secretary Gabriel Makhlouf said publication of the Statement represented the beginning of an effort to raise public understanding of the scale and the sources of the long-term fiscal challenge and the start of an evidence-based national discussion on how best, and when, to address the challenge.

“I want to express the Treasury’s appreciation to NZUSA for working with the Treasury to facilitate these workshops,” Treasury Deputy Secretary and Chief Economist Girol Karacaoglu said today.

“How to address the long-term fiscal challenge is a matter of strong public interest, perhaps most especially for younger people who have a direct stake in what our country will be like in the middle of this century,” Dr Karacaoglu said.

“Treasury Senior Analyst Rebecca Prebble will represent the Treasury at the workshops which are intended to examine the trade-offs involved in different potential options future governments may take to secure the ongoing soundness of the Crown’s finances,” Dr Karacaoglu said.

Pete Hodkinson, President of the NZ Union of Students’ Associations, said the first workshop will be held in Dunedin on Tuesday (30 July). There will also be workshops in Christchurch (1 August), Nelson (2 August), Auckland (6 August), Hamilton (8 August), Wellington (9 August) and Palmerston North (14 August).

“I will attend all the workshops which are being conducted under the banner of NZUSA’s Big Questions for 2013 programme and which follows a similar run of events around the country in February and March organized in conjunction with the Commission for Financial Literacy and Retirement Income and the Constitutional Advisory Panel.

Affording Our Future, a Quick Guide to the Statement, and links to background and research papers supporting the Statement are available at: http://www.treasury.govt.nz/government/longterm/fiscalposition/2013 2

Affording Our Future: Key findings

There is no crisis. The story is that if we were to revert to historic patterns of Crown spending and revenue after we return to surplus in 2014/15 then expenses will soon outstrip revenue, leading to persistent deficits. As a result, we will need to make policy adjustments, either to spending areas or to revenue, or a mixture of both.

The sooner we start giving serious consideration to how those policy adjustments will be designed and implemented, the better. That is because making early, incremental and less socially-disruptive policy responses will diminish the risk of needing to make sharper, more disruptive and potentially less equitable adjustments later on.

Affording Our Future: Online fiscal calculator

Affording Our Future outlined some options to illustrate how governments could act to better protect the Crown’s finances over the long-term, while the Background Papers Supporting the 2013 Statement on the Long-Term Fiscal Position provided many further examples of the types of policy choices that could be adopted.

To further facilitate an evidence-based national conversation, the Treasury in conjunction with Victoria University’s Chair of Public Finance, Professor Norman Gemmell, recently launched a long-term fiscal calculator. The calculator shows how a range of different choices in spending and taxation can help to address the challenges facing the Crown’s financial position over the next 40 years.

The calculator lets people choose which options they think are best. For example, you can choose to spend more on health or education but, at the same time, the calculator forces you to think about the trade-offs involved with this. It gives people more information about the range of options we have, and allows them to say “If I was going to maintain prudent Crown finances over the long-term, how would I do it?”

The calculator can be found at: http://nzpublicfinance.com/ltf-calculator-introduction

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