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.
