Treasury advice to be reviewed

The quality of advice provided by Treasury in the past 10 years will be independently assessed by a long-time IMF official

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The quality of advice provided by Treasury in the past 10 years will be independently assessed by a long-time IMF official

21st Nov 13, 1:15pm by David Hargreaves

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The Treasury has commissioned an independent external review into the quality of the department's fiscal policy advice over the past decade, Treasury's chief economist and deputy secretary Girol Karacaoglu says.

The review will be conducted by Teresa Ter-Minassian, a former Director of the Fiscal Affairs Department at the International Monetary Fund. The terms of the review can be seen here.

"It is almost 20 years since fiscal responsibility provisions were enacted into New Zealand law, Karacaoglu said.

"The provisions, which specify a set of principles underpinning responsible fiscal management and which require regular public reporting by governments on their intentions and objectives for fiscal policy, have informed fiscal policy decision-making in New Zealand ever since.

"While New Zealand institutions have performed well over this period and are well regarded internationally, the Treasury wishes to constantly scrutinise and improve our performance in order to maintain our position at the forefront of fiscal policy management and advice," Karacaoglu said.

"The review will bring an international perspective to this, so that we can learn from what other countries do to ensure high quality expenditures and ever-improving public services," he said.

"I see this review as part of the Treasury's commitment to ensuring that the quality of its advice is up to scratch and open to lessons from other countries. I also see it as an example of the Treasury not being afraid to being put under the spotlight by one of the world's renowned specialists in the field as we must always be open to evidence and to independent scrutiny," he said.

The review, along with the Treasury’s response to its findings, will be published before the end of the fiscal year to June 30 2014.

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5 Comments

by Stephen Hulme | 21st Nov 13, 1:43pm 1384994598

I cannot believe I am reading this - institutionalised jobs for the boys or in this case for the girls- a step too far. Kiwis are funding a paid retirement service for spent bureaucrats.

by Boatman | 21st Nov 13, 2:18pm 1384996688

I dont share Stephen Hulmes cynical view of this , I think it is a good thing if it is done quickly , efficiently and without excessive cost .

I am often perplexed as to why Kiwis have such a jaded view of their Treasury which does a really good job , especially during the GFC we are still in

Some countries would do well to have such a review .

I would assume its a bit like a Practice review for professional practices , there are clear parameters and terms of engagement / reference , and a bit of box ticking , and some sample testing to see whther the Treasuries processes are rigourous and meet benchmarks .

There should be some checking on political interference and bias in recommmndations from treasury .

by Stephen L | 21st Nov 13, 5:03pm 1385006619

The idea of the review seems very good to me. Whether the reviewer is best qualified is hard to know, but the terms of reference seem sensible. I have personally been critical of the Treasury's advice on fiscal policy and its effect on and combined with monetary policy.

The second term of reference as follows seems to cover this area:

The coordination of fiscal policy with other elements of the economic policy framework. The review will consider Treasury’s processes for coordinating advice on fiscal policy strategy with other elements of the economic policy framework – including implications for the “mix” of macro-economic stabilisation policy (ie, the interaction with monetary policy), and the more structural dimensions of fiscal policy (the composition of revenue and expenditure policies). The review will also consider the different roles of the balance sheet and comment on whether fiscal policy advice adequately incorporates the implications of choices for the balance sheet. I have for example argued that with a fiscal multiplier of zero in an open economy like New Zealand's, and the effects of capital flows on the exchange rate, asset prices, the current account, and our trading industries, that the government funding itself with offshore borrowing or asset sales is just a free gift to foreigners at the expense of our trading industries. Note, not a cheap gift, or a low price gift, but an absolutely free gift. Some of the Reserve Bank actions and statements since Graeme Wheeler came to office, and even some statements recently from Bill English, suggest they may agree with my views. (although I accept they probably got to those views on their own, even if remarkably belatedly in Bill English's case).

by Brendon | 21st Nov 13, 9:16pm 1385021797

Hugh these are really good points. Strangling residential land supply causes booms and busts. In the booms you get cowboys, in the busts you lose good tradesmen. At no time does the industry invest in cost cutting building processes because the next bust is just around the corner.

by Stephen L | 21st Nov 13, 9:13pm 1385021597

As an aside, the fact the review is happening suggests someone in government, and potentially even Treasury themselves, realise the world has moved on, and that our current paradigm is quite broken and leaves us massively exposed given how the rest of the world is now operating. But change needs the smokescreen of an outside "expert" to be the catalyst to bring about real change without significant loss of face for those in charge now and in the past. Whether this is political expedience to go into the next election with a much better government funding model, maybe; but good at least that someone has blown the whistle.