New financial indicators aim to promote long-term decision making.
The New Zealand Government has made significant changes to its financial measures, Finance Minister Nicola Willis announced on December 17. The updates aim to promote long-term decision-making and avoid incentivizing short-term fiscal strategies.
According to Willis, the operating balance before gains and losses (OBEGAL) will be replaced by a new measure called OBEGALx, which excludes Accident Compensation Corporation's (ACC) revenue and expenses. This change is intended to prevent governments from raising taxes or reducing spending in response to ACC deficits.
The multi-year capital allowance (MYCA) framework has also been discontinued. Instead, the Government will set single-budget capital allowances for each budget period, allowing for flexibility to vary them according to circumstances. This approach is expected to be easier to understand and communicate than the previous framework.
These changes follow reviews of OBEGAL and MYCA announced at the Budget. The updates aim to provide a more accurate picture of the Government's financial situation and promote long-term fiscal decision-making.