The Fiscal Strategy Model (FSM) projects the financial performance and the financial position of the government over a medium-term horizon and is published with the latest Economic and Fiscal Update.
Fiscal Strategy Model Projections
The principal purpose of the FSM is to produce the post-forecast fiscal projections.
The most recent version of the FSM was published with the BEFU 2019.
- begin from the end of the five-year forecasts in Economic and Fiscal Updates (EFUs) and normally cover a period of ten years beyond that
- are strongly influenced by the EFU economic and fiscal forecasts that provide their base
- 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
- apply an annual increment of $2.6 billion to the end-of-forecast operating allowance in the first projected year and increase this increment by 4.5% each year in later projected years
- apply an annual increment of $6.6 billion to the end-of-forecast capital allowance in the first projected year and increase this increment by 4.5% each year in later projected years
- illustrate potential future progress towards achieving the Government’s long-term objectives, including that net core Crown debt will be maintained at prudent levels, expenditure will be maintained within the recent historical range and that the Government will deliver sustainable operating surpluses, and
- are required to be published annually, as part of the Fiscal Strategy Report, under the Public Finance Act (1989).
The latest Fiscal Strategy Model is available below.
Also downloadable from the FSM section below is a note Projection Assumptions BEFU 2019. This provides further information about the post-forecast projections, including detailing some of the key assumptions and providing data tables for both economic and fiscal variable projections.
Other Treasury Models
The Long-Term Fiscal Model
Treasury produces another model that projects fiscal and economic variables beyond the forecasts.
The LTFM differs from the FSM in that:
- modelling for the LTFM extends at least as far as the year ending June 2060
- the LTFM's projections are not intended to assess the Government's fiscal strategy
- in regard to the last point, the LTFM projects individual operating and capital expenditure classes with their own particular cost drivers, such as changes in the recipient population and expense growth factors based on historical averages, rather than restricting their growth to a share of projected operating or capital allowances, and
- the LTFM has more modelling capability so that it can, for example, produce scenarios where debt is constrained and some other fiscal variable, such as expenditure or tax revenue, becomes the balancing output.
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.