28 May 2009
Media Statement
Immediate Release
Treasury improves fiscal risks process
Treasury has introduced improved rules and processes to identify the fiscal risks published as part of today’s Budget.
The changes were made in response to The Ministerial Inquiry into Disclosure of Funding Shortfall in the ACC
Non-earner’s Account and an undertaking by Treasury Secretary John Whitehead to put a new process in place for Budget
2009.
Treasury Deputy Secretary Dr Peter Bushnell said the changes go well beyond the recommendations of the inquiry and
involve collecting information on all likely risks before making decisions at a senior level about what constitute
defined “specific fiscal risks”.
“What we did before was use the specific fiscal risks disclosure rules as a filtering mechanism as information was
collected. Under the new process the rules are not applied until a Fiscal Risks Committee of senior Treasury managers
meets. The Committee considers the full range of information and determines whether and how matters are to be disclosed
- guided by the revised rules and discussion with the Minister of Finance on the likelihood of matters being approved by
the Government.”
Previously the specific fiscal risks were focussed on policy decisions the Government had not yet taken. The new rules
broaden this to include all circumstances that are likely to have a material effect on the fiscal and economic outlook.
The other major change is the interpretation of the likelihood of a risk materialising – previously whether or not the
matter was under “active consideration” by Ministers. In most instances this was taken to mean that a paper had been
presented to Cabinet about it. The new rules replace this with a judgment around the certainty with which a risk can be
quantified, and the possibility or probability of the matter being approved or occurring.
“It is subjective, but the rule of thumb used now is that matters with greater than 50% likelihood would make it into
the Budget forecasts and those with more than a 20% possibility would be considered for inclusion as fiscal risks.” 2
ENDS