Auditor-General's report: 2016 Long-Term Fiscal Position
The Auditor-General’s report Commentary on He Tirohanga Mokopuna: 2016 Statement on the Long-Term Fiscal Position was presented to the House of Representatives today.
For this report, we reviewed the Treasury’s latest long-term fiscal statement, which was published in November 2016. New Zealand is fortunate that the Treasury has the statutory authority and independence to take such a long-term outlook. The Treasury considers the long-term fiscal statement as a central part of its stewardship role.
The statement and the background papers published alongside it contain important information about the many challenges and opportunities that New Zealand might face in the future. However, the supporting financial projections focus primarily on demographic change and the consequences for future superannuation and healthcare spending. Although these are important matters, New Zealand and the Government are facing a more uncertain future and a broader set of challenges than just a changing demographic.
As we found in our review of the previous long-term fiscal statement in 2013, the financial projections provide little insight into the size, timing, financial effect, or interconnectedness of any other potential challenges and opportunities – individually or as a set of scenarios. Important concerns, such as the financial consequences of further shocks (including natural disasters), are not presented or analysed. Also, some projection assumptions, such as excluding New Zealand Superannuation Fund assets from the calculation of net debt, are questionable.
The Treasury acknowledges that its financial projections do not include many significant factors that could affect the long-term financial position of the Government. Further work is needed to prepare long-term financial projections based on a set of plausible scenarios of different futures for New Zealand, the public sector, and the Government.
As a result, the financial projections can be too easily dismissed by current and future decision-makers, reducing the value of the statement. Better projections would have allowed useful analysis and insights for planning and managing the uncertainties that surround the Government’s long-term financial position.