New Zealand is set to go to the polls in late 2020, and voters will yet again vote in an election where the major policies and promises have not been independently costed.

While it is great that the proposed Parliamentary Budget Office (PBO) will come into being in mid-2021, it’s a pity it won’t be in place for the 2020 election.

This is particularly the case if, as speculated, the government’s unexpectedly large surplus produces election-year promises and a spend-up.

(The NZ$7.5 billion surplus came, in part, from the government collecting NZ$2 billion more in tax than it forecast at the budget in May. That leaves it plenty of room to promise an election-year tax cut.)

The PBO will help voters sort out fact from fiction. It will comprise experts who can independently examine budget and fiscal issues raised during elections. Once established, it will be an invaluable resource not just for all sides of the political divide, but also for business, the public and the media.

“The Parliamentary Budget Office will help voters sort out fact from fiction. It will comprise experts who can independently examine budget and fiscal issues raised during elections.”

Independent financial bodies like this are the norm within the Organisation for Economic Co-operation and Development (OECD), with more than two-thirds of member countries having already established them.

Among other things, these bodies provide independent, impartial costings to political parties on policies and election manifestos, monitor compliance with targets, and ensure financial forecasts are robust and credible.

Why a Budget Office is a good idea

Chartered Accountants ANZ has expressed strong in-principle support for establishing a New Zealand PBO. In a recent submission to the Treasury, we argued that it is in the public interest to:

• strengthen independent oversight of fiscal policy in New Zealand
• assist the opposition and minor parties to cost policies more effectively and accurately
• provide another means to hold government to account
• better inform and improve the quality of debate on New Zealand fiscal policy.

While it would have been ideal for New Zealand’s PBO to be up and running in time for the next election, we accept it’s more important that the agency is set up well from the outset. It would not be wise to hit the start button early on an agency that isn’t ready; it could result in mistakes or other issues that could undermine confidence in the agency’s whole process.

Independence and transparency matter

That said, New Zealand’s government still needs to map out how this agency will be funded, whether its services will be free to political parties, and if its costings and findings will be confidential.

Improving and supporting effective scrutiny of public finances and fiscal policy will help New Zealanders better understand the implications of a government’s fiscal direction.

The PBO should also be a useful agency for business. Its outputs could be a particularly valuable tool for accountants who are advising organisations and clients on the pros and cons of various parties’ electoral policies.

On a cautionary note, New Zealand’s parliament must ensure the establishment of the PBO does not in any way weaken or undermine the Public Finance Act and the work of Treasury.

Clearly defined roles and functions need to be outlined early on, with the PBO’s role being complementary to that of Treasury, not creating unnecessary duplication or hindering the fiscal policy process.

The PBO should improve fiscal transparency in New Zealand, and better inform and improve the quality of economic debate. That, in turn, will strengthen democracy – and that’s a good thing for all New Zealanders.

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