Wellbeing Budget 2021

Securing
Our Recovery

The Government's short-term intentions and long-term objectives for fiscal policy remain unchanged from the BPS 2021

Table 7 - Short-term intentions and long-term objectives

Table 7 - Short-term intentions and long-term objectives
Short-term intention Long-term objective
Debt Our intention is to allow the level of net core Crown debt to rise in the short term to fight COVID-19, cushion its impact and position New Zealand for recovery. The Government will stabilise net core Crown debt as a percentage of GDP by the mid-2020s and then reduce it as conditions permit (subject to any significant shocks).
Operating balance The Government will use fiscal policy to secure the economic recovery for New Zealand and reduce deficits over the forecast period as economic conditions allow. The Government will run an operating balance consistent with meeting the long-term debt objective.
Expenses Our intention is to ensure expenses are consistent with the operating balance objective. The Government will ensure operating expenses support a responsible and proportionate role for the Government in maintaining a productive, sustainable and inclusive economy, consistent with the debt and operating balance objectives.
Revenue Our intention is to ensure revenue is consistent with the operating balance objective. The Government will ensure a progressive taxation system that is fair, balanced and promotes the long-term sustainability and productivity of the economy, consistent with the debt and operating balance objectives.
Net worth Our intention is to use the Crown's net worth to fight COVID-19, cushion its impact and position New Zealand for recovery. Significant risks will be transferred onto the Crown's balance sheet through the response period. The Government will use the Crown's net worth to maintain a productive, sustainable and inclusive economy, consistent with the debt and operating balance objectives.

Our short-term intentions and long-term objectives have not changed since the BPS (see page 24 of the BPS), with the long-term objectives continuing to relate to the projection period. As already signalled in the BPS, the Government is continuing its approach to the short-term operating balance intention as in the Fiscal Strategy Report 2020 (FSR) with regard to the fiscal management principles in the Public Finance Act 1989. Section 26G(2) of the Act allows the Government to depart from the principles on a temporary basis. Doing so in this case for the short-term operating balance intention is the right thing to do, given the unprecedented size of the global economic shock caused by COVID-19 and the need for the Government to provide a strong ongoing fiscal response to protect lives and livelihoods in New Zealand as we secure the economic recovery. The long-term objectives and other short-term intentions remain consistent with all the principles, as illustrated in the forecast and projections. The intentions remain consistent with the objectives and both remain consistent with the economic and fiscal outlook as presented in the Budget Update and the projections.

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