Borrows Chester: Public Finance (Fiscal Responsibility) Amendment Bill — Second ReadingText is incorporated into the Bound VolumeBorrows Chester: Public Finance (Fiscal Responsibility) Amendment Bill — Second Reading[Sitting date: 25 June 2013. Volume:691;Page:11248. Text is incorporated into the Bound Volume.]Hon CHESTER BORROWS (Minister for Courts)on behalf of theMinister of Finance: I moveThat the Public Finance (Fiscal Responsibility) Amendment Bill be now read a second time . I would like to thank the Finance and Expenditure Committee for its careful consideration of these important reforms. The committee has recommended by majority that the bill be passed and has suggested some useful amendments. Fiscal responsibility first and foremost involves prudent management of the Crown’s finances but it also means ensuring that New Zealand’s fiscal institutions and practices remain fit for purpose and as transparent as they can be. To ensure that our institutions remain a sound guide for future policy-making we need to check regularly to ensure that we are learning from our real-world experiences and practices and adapting reporting requirements where incremental strengthening opportunities are identified. That is what the amendments proposed by the Public Finance (Fiscal Responsibility) Amendment Bill are about.The bill amends the fiscal responsibility provisions in Part 2 of the Public Finance Act 1989. The fiscal responsibility provisions are perhaps best thought of as a set of guidelines for how the Government should conduct fiscal policy combined with regular reporting requirements. The provisions currently have a focus on fiscal sustainability. This focus has served New Zealand well. Since the provisions were introduced in 1994 successive Governments have focused on maintaining low or prudent public debt. Public debt was at historically low levels in 2008 which put New Zealand in a relatively stronger position going into the recession of 2008-09 than we would otherwise have been in.The genesis of this bill was a review conducted by Treasury of the effectiveness of the fiscal responsibility provisions in encouraging good fiscal policy decision-making. The review found that fiscal responsibility provisions had been very successful in encouraging Governments to focus on the need for low public debt but the review also found that there was room to strengthen the provisions to encourage greater transparency around the interaction of fiscal and monetary policy and the impacts of current policy on future generations in managing resources efficiently and effectively. The additions to the fiscal responsibility provisions in the bill aim to address these and other gaps.I will point out two of the changes the Finance and Expenditure Committee recommended in its report on the bill. The bill as introduced proposed a new principle of responsible fiscal management that Governments should formulate fiscal strategy with regard to its interaction with monetary policy. To avoid misinterpretation of the intent of this new principle the committee recommended by majority that it be reworded so that it requires Governments to formulate fiscal strategy with regard to the interaction between fiscal policy and monetary policy. The Government supports this recommendation. The committee’s concern was that the original wording could give the mistaken impression that the relationship between fiscal and monetary policy is one-way—that is that fiscal policy should take monetary policy into account but not the reverse. Of course the relationship between fiscal policy and monetary policy is two-way and the revised wording is clearer on this point.By majority the committee also recommended that certain other requirements in the current fiscal responsibility provisions be updated to reflect the fact that the internet is now the primary way that the public gets information on fiscal policy. The current Act requires a notice to be published in theGazette upon the publication of certain documents including the Fiscal Strategy Report and the Budget Policy Statement. Asamended by the Finance and Expenditure Committee the bill would remove this requirement and replace it with a requirement for these and other documents to be published on Treasury’s website.The Public Finance (Fiscal Responsibility) Amendment Bill is an important step in ensuring that New Zealand’s fiscal institutions continue to be world leading. I commend the bill to the House.