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Working paper

Automatic Fiscal Stabilisers: Implications for New Zealand (WP 01/10)

Issue date: 
Saturday, 1 December 2001
Status: 
Current
View point: 
Document Date: 
Publication category: 
JEL classification: 
E62 - Fiscal Policy
H61 - National Budget; Budget Systems

Abstract

Automatic fiscal stabilisers, or the cyclical components of the budget balance, are larger in New Zealand than in the average OECD country, reflecting both higher sensitivity to the economic cycle, and a more volatile cycle. Fiscal vigilance is especially important in New Zealand. Large projected operating surpluses could easily disappear if lower economic outcomes are mistakenly assumed to be cyclical. But, automatic stabilisers are difficult to use in a policy framework as empirical estimates of the cyclical budget balance vary significantly. While the estimated trend in automatic stabilisers is broadly similar, the level varies significantly, such that at any point in time a 'structural surplus' may be dependant on the estimation method.

Last updated: 
Wednesday, 24 October 2007