The government has revealed plans to amend the Public Finance Act to rein in spending decisions by ministers, including a spending cap, and reporting on fiscal policy successes and failures.
Finance minister Bill English proposed introducing a spending limit based on the rate of growth in inflation and population as set out in National's confidence and supply agreement with Act.
This would exclude spending on natural disasters, finance charges, the unemployment benefit and asset impairments.
“Under the proposal, if a government decided to temporarily exceed the limit they would need to clearly explain the reasons and outline how they intended to ensure future expenses remained within the limit.”
Other changes would include requiring governments to consider the impact of fiscal strategy on the broader economy, in particular interest rates and exchange rates; impact on future generations; reporting on the successes and failures of past fiscal policy; and setting out priorities for revenue, spending and the balance sheet, rather than focusing narrowly on debt.
He said there would be consultation with other political parties on the proposed changes, which would be included in a bill to be introduced around the middle of the year.
English also reiterated the government's commitment to returning to surplus by 2014-15 despite a $1 billion worsening in Crown finances in preliminary budget estimates.
He said the government would be running very close to a zero budget and continuing with $1 billion of public sector savings over the next three years, as announced in Budget 2011, due to begin on July 1 this year.