Fiscal Strategy Model

Page updated 28 May 2009

The Fiscal Strategy Model (FSM) projects the financial performance and the financial position of the Government over a medium-term horizon and is published once a year with the Budget.

Note: Previously these medium-term projections were done by the Long Term Fiscal Model (LTFM) however the LTFM is now used solely for longer-term projections (minimum of 40 years).

Fiscal Strategy Model Projections

The principal purpose of the FSM is to produce the fiscal position projections (Progress Outlooks) for Fiscal Strategy Reports and PREFUs. The Budget Economic and Fiscal Update 2009 updated version of the FSM is published here on the Treasury's web site.

The projections illustrate a path for fiscal variables which would be consistent with the Government’s fiscal objectives. Projections are made of total operating expenditure, total operating revenue, the balance between total operating expenses and total operating revenue, the level of total and net debt and the level of net worth.

The projections:

• begin from the end of the five-year forecasts in Economic and Fiscal Updates (EFUs) and cover a period of at least five further consecutive years;
• are strongly influenced by the EFU forecasts;
• are consistent with Government’s approach to fiscal management in that new initiatives are modelled through an assumed operating and capital allowance;
• rely on long-term assumptions such as future population growth and economic growth;
• include some degree of recovery to these long-term assumptions in the early years of the projections, if the long-term rates or levels have not been reached at the end of the forecast period;
• are required under the Public Finance Act (1989).
  

Download the Fiscal Strategy Model

Notes for this Version of the Fiscal Strategy Model

• Scenarios for different levels of operating expenses and revenue can be tested using the Ready Reckoner sheet of the FSM. The output of the Ready Reckoner is in the options sheet.
• The FSM has been updated to incorporate the latest economic and fiscal forecasts contained in the BEFU. Policy assumptions underpinning the BEFU FSM are outlined in detail in Annex 4: Projection Assumptions of the Budget 2009 Fiscal Strategy Report (28 May 2009).

Other Treasury Models

Differences between the Fiscal Strategy Model and the Long-Term Fiscal Model

Treasury produces a second model of projections of fiscal variables in the Long-Term Fiscal Model (LTFM).

The LTFM differs from the FSM in that modelling for the LTFM is for a minimum of 40 years and is not intended to assess the Government's fiscal strategy. In particular, the use of an operating and capital allowance ('Top Down' approach) to model new initiatives in the medium term (FSM) allows assessment of the Government’s stated intentions for future policy against its long-term objectives. In contrast, the LTFM grows individual expenditure classes based on 'Bottom Up' cost drivers, such as changes in population and assumed expense growth factors.

New Zealand Superannuation (NZS) Fund Contribution Rate Model

The projected required contributions track from the Treasury's New Zealand Superannuation (NZS) Fund Contribution Rate Model is an input into the LTFM and the FSM.