Being asked to write about Prudent Financial Management was music to my ears – it is what I have delivered in my first year as Finance Minister and what this Government plans to continue to do throughout its term in office.
New Zealand is a small trading economy set in the South Pacific.
While this makes us the envy of many, it also brings its challenges.
We are more exposed to international economic and geopolitical risks than many other countries. My job is to ensure our economy is prepared for any shocks that come our way, for our rainy day.
Every Government also has the responsibility to future generations to ensure that we budget responsibly and have the means to make significant and sustained investments.
We need to future proof the economy to ensure that New Zealand is resilient to any shocks – natural or global – that we may face.
You do this when running your business, I do it when running the economy.
Our economy must be fit for purpose for this generation and for our children and grandchildren.
To do this, the Government has committed to a set of Budget Responsibility Rules (agreed with New Zealand First and the Greens) that require us to
- deliver a sustainable operating surplus across an economic cycle. Budget 2018 will generate a surplus. We will not create artificial surpluses by underfunding essential areas such as health, education, and infrastructure.
- reduce the level of net core Crown debt to 20% of GDP within five years of taking office. This commitment is to ensure that we are in the best position to be able to respond effectively to any shocks that might occur – be they natural or economic.
- prioritise investments to address the long-term financial and sustainability challenges facing New Zealand. We have already reinstated contributions to the Super Fund after nine years of no government contributions.
- show discipline in Government expenditure by keeping it within the recent historical range of spending to GDP, which has averaged around 30% over the last 20 years.
- ensure a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy. The Tax Working Group will be making their recommendations to us about this by early 2019.
Lifting living standards
These rules underpin the Government’s work programme as we strive to lift the wellbeing and living standards of all New Zealanders.
We know that we need Budget surpluses and a growing economy to be able to fund our public services to the high standards that Kiwis expect and deserve.
This Government is committed to keeping its Budget Responsibility Rules and made big and significant investments in the areas that the public wanted us to do – Health, Education, Housing and reducing Child Poverty.
Our view is that a strong economy is not an end in itself – rather it is the means by which we can deliver better conditions and opportunities for New Zealanders now and for future generations.
To achieve the Government’s plan for a more productive, sustainable and inclusive economy that delivers better jobs and higher wages, we need to have a strong and stable economy.
That requires Prudent Fiscal Management.
The Budget Responsibility Rules ensure we achieve that.
We will grow New Zealand’s economy for the benefit of all New Zealanders.
That is the point of economic growth.
Grant Robertson is Finance Minister of New Zealand.