How does the Treasury’s Long-Term Fiscal Model work, and what is our initial analysis showing?
Speech delivered by Girol Karacaoglu Chief Economist, the Treasury
Affording Our Future Conference 2012
Victoria Business School, Wellington
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10 December 2012
Good Morning.
It is with pleasure that I address this morning’s session following Professor Bob Buckle and the Government
Statistician, Geoff Bascand.
As the Secretary indicated in his opening, Bob Buckle has been an outstanding Chair of an independent Long-Term Fiscal
External Panel the Treasury established earlier this year to test and challenge our initial modelling assumptions and
analysis. Geoff has been an extremely valued member of that Panel and I am grateful to both for giving their precious
time and expertise to assist the Treasury meet its Public Finance Act reporting requirements to produce a Statement on the Long-Term Fiscal Position before the end of October next year.
I think it is fair to say that sustainability is a concept that many people are much more familiar with these days than
they were 40 or 50 years ago.
In the context of the Crown’s finances, Bob has outlined ways of thinking about what is and isn’t fiscally sustainable. Geoff has focused on projections relating to the structural changes occurring in New Zealand’s population, labour
force and productivity in the decades ahead.
I will seek to tie together some of the critical, broad threads arising out of these two presentations. In doing so, my
aim is to assist a better understanding of how the Treasury goes about putting together a set of very long term
projections for the Crown’s finances.
What is the Long-Term Fiscal Model? It won’t surprise anyone to know that the Treasury has a Long-Term Fiscal Model. And
it won’t surprise anyone either that the quality of what comes out of the model is constrained by the quality of what
gets fed into it.
So let me outline to you some of the critical assumptions that we put into our model.
ENDS