GENERATIONAL ACCOUNTING IN NEW ZEALAND: IS THERE GENERATIONAL BALANCE?
This paper uses generational accounting to assess New Zealand's long-term fiscal position. Generational accounting determines the fiscal burden that a country's current policies will impose on different generations, and whether these current fiscal policies are sustainable. We find that behind New Zealand's projected budget surpluses, there is indeed a sound fiscal picture. Even under the base case scenario, which entails substantial short-run tax reductions, the burden on future generations (relative to income) is projected to fall slightly below that on current newborns. New Zealand appears to have avoided the large fiscal imbalances plaguing the United States and other OECD countries not by placing large tax burdens on young current generations, but by limiting the size of its commitments. Its fiscal health, therefore, is contingent on the maintenance of such spending discipline.
Alan J. Auerbach, University of California, Berkeley
Bruce Baker, The Treasury, New Zealand
Laurence J. Kotlikoff, Boston University
Jan Walliser, Boston University