|
The following OECD assessment and recommendations summarise Chapter 5 of the Economic Survey of New Zealand 2005 published on 4 July 2005.
Care should be taken to avoid weakening the long-term fiscal position
The country has turned in a strong fiscal performance in recent years, although decisions taken in the 2004 and 2005 budgets significantly scale back the central government’s overall surplus over coming years. Looking ahead, the government’s forecasts show outlays rising by around 2 percentage points of GDP over the coming five years, even with a much smaller allowance for new spending initiatives in the future than in the previous two Budgets. Further out, the country will not be immune to the spending pressures of an ageing population and difficulties in constraining increases in health care coverage and costs. Against this backdrop, it would be regrettable if spending or tax initiatives were implemented that significantly weakened the long-term fiscal outlook. The change embodied in the Public Finance Amendment Act passed last December to require a more systematic and transparent assessment of the medium and long term fiscal position will be helpful in bringing a longer-term perspective to current decision-making and highlighting policy trade-offs.
Cyclically-adjusted general government balances
as a per cent of potential GDP, 2004
Source: OECD Economic Outlook 77 database.
More effective prioritisation of public outlays will be needed
Strong economic growth and buoyant tax revenues have made it possible for the government to channel an increasing share of spending to the education and health sectors as well as to introduce new initiatives such as the Working for Families package. In the environment of large surpluses there has been relatively little evidence of counter balancing these increases by pruning back lower-priority spending. In order to leave sufficient room for new policy initiatives and to meet its fiscal objectives, the government is likely to require more reprioritisation in the future. A well designed ongoing review process could identify those programmes that do not contribute enough to offset the deadweight losses associated with the taxes required to fund them. This could free resources for higher value uses. The “managing for outcomes” approach, designed to link government outlays and desired results, has now been enshrined in legislation, but it remains very ambitious and will require skill and commitment to implement successfully. At the same time, care needs to be taken to ensure that this stronger emphasis on outcomes does not compromise control of, and accountability for, outputs.
Boosting public sector productivity growth requires better information
and clearer incentives on managers
Across public-sector spending, particularly on education and health, information about performance is still patchy. This makes it difficult to establish how productive different parts of the sectors are and whether they deliver “value for money”. A significant improvement in information is needed to fill this gap and make it possible to monitor productivity growth over time. At the same time, the government should examine whether more could be done to strengthen the incentives on public-sector managers to identify and implement efficiency improvements. In education, a national testing system for children at the beginning and end of each year to provide an estimate of the value added of the year’s schooling could be considered against the alternative of getting more system-wide information out of existing assessment instruments. In health, the technical challenges of measurement are complex but not insurmountable, especially given parallel initiatives in other OECD countries and the start that has already been made to upgrade data collection across the sector.
-------------------------------------------------------
Return to the Economic Survey of New Zealand 2005 homepage
A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.
To access the full version of the OECD Economic Survey of New Zealand:
-
Readers at subscribing institutions can go to SourceOECD, our online library.
-
Non-subscribers can purchase the PDF e-book and/or printed book at our Online Bookshop.Government officials can go to OLISnet's Publication Locator.
-
For further information please contact the New Zealand Desk at the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by Deborah Roseveare and Annabelle Mourougane under the supervision of Peter Jarrett.
-------------------------------------------------------
Also available: Etude économique de la Nouvelle-Zélande 2005 (French)
|
