A little noticed reference in the 2012 budget speech to
strengthening the Public Finance Act has the potential to influence
the shape of all future budgets so deserves close
attention.
The government is proposing changes to the PFA which will
require governments to:
- consider the impact of their fiscal strategy on the broader
economy, in particular interest rates and the exchange rate
- set out their priorities for revenue, spending and the balance
sheet
- take into account the impact of fiscal policy decisions on
future generations, and
- report on the successes and failures of past fiscal
policies.
It will also consult other political parties about the possible
introduction of a cap to restrict spending increases to population
growth and inflation. The spark for this is ACT which negotiated it
into its 2011 confidence and supply agreement with National. ACT
favours a variation of the hard-line Colorado Taxpayer Bill of
Rights (TABOR), of which more later.
