Next Steps for Public Spending in New Zealand

This paper reviews public expenditure in New Zealand and the scope for further progress. Since the mid-1980s, New Zealand has been a world leader in public management reforms. Government agencies have been transformed by delegating managerial responsibility to them and replacing input controls with an output-based budgeting and management approach. The adoption of a medium-term top-down fiscal management framework contributed to a large reduction in public debt. But while the system is good at producing outputs cheaply and often in innovative, responsive, and customer-driven ways, it is not as good at choosing what to produce in the first place (i.e. technical versus allocative efficiency). This reflects insufficient evaluation of programmes, not enough focus on managing for outcomes, and a budget that is excessively fragmented. The quality of spending could also be improved by a greater willingness to extend the use of market-based mechanisms, including usercharges, competition ...