Public Finance Act Overhaul to Boost Fiscal Transparency and Accountability

In a sweeping move aimed at enhancing the transparency and accountability of New Zealand’s financial governance, the Government has introduced amendments to the Public Finance Act. The changes, announced by Finance Minister Nicola Willis, are designed to ensure greater clarity around fiscal risks and eliminate the potential for future governments to obscure the state of the nation’s finances.

The Public Finance Amendment Bill, which passed its first reading in Parliament on Saturday evening, is part of a broader legislative and procedural effort to instil greater fiscal discipline, improve economic reporting, and recalibrate the focus of the Treasury toward core financial responsibilities.

Addressing Hidden Fiscal Risks

At the heart of the proposed amendments is a revision to how specific fiscal risks are identified and disclosed in government forecasts. Currently, the Public Finance Act mandates that fiscal forecasts—produced by the Treasury—include a statement of specific fiscal risks. However, upon assuming office, Minister Willis found the disclosures to be insufficiently clear.

“I found that the statement of fiscal risks could be somewhat opaque. That did not support public understanding of risks that have the potential to impact the government’s books or the provision of public services,” Willis explained.

Since then, the Treasury has taken steps to improve its descriptions of fiscal risks, particularly by highlighting issues such as time-limited funding and capital cost escalations. The amendment bill will now require this kind of categorisation by law, ensuring transparency becomes a statutory obligation, not a discretionary measure.

Eliminating the Wellbeing Objectives Requirement

Another major change is the removal of requirements for governments to outline their wellbeing objectives in the annual Budget and for the Treasury to publish a Wellbeing Report every four years.

Introduced by the previous government, these requirements aimed to incorporate broader social and environmental considerations into fiscal policy. However, Minister Willis has expressed scepticism about their efficacy and necessity.

“The previous government thought it was the first government ever to consider the wellbeing of its citizens,” said Willis. “While Treasury should, and does, have a broad perspective, I would like the bright and talented minds at the Treasury to focus on economic and financial advice, rather than preparing reports on whether people have friends and whether their life has meaning and purpose.”

Critics of the wellbeing reporting framework have argued that it risks diluting the Treasury’s core fiscal responsibilities, a sentiment reflected in the current Government’s approach to redefining Treasury’s mandate.

Improved Tax Expenditure Reporting and Election Transparency

The bill includes several additional provisions aimed at increasing the quality and accessibility of financial information for the public:

• Enhanced Tax Expenditure Reporting: The amendment mandates more comprehensive and transparent reporting on tax expenditures—tax breaks and exemptions that function like government spending. This aims to provide a fuller picture of fiscal activity.

• Earlier Pre-Election Fiscal Updates: The window for releasing the Pre-election Economic and Fiscal Update (PREFU) will be moved forward by five days. This adjustment is intended to ensure voters are better informed about the government’s financial position ahead of general elections.

• Flexibility in Fiscal Strategy Reporting: The amendment will permit governments to express their fiscal strategies using alternative fiscal variables. While governments will still be required to explain their choice of indicators, this flexibility is designed to reflect diverse economic conditions and policy priorities.

Complementary Non-Legislative Actions

The proposed legislative changes are being introduced alongside a suite of non-legislative reforms aimed at bolstering fiscal responsibility. These include:

• Agency Performance Plans: New planning tools will help government departments better manage medium-term spending and link performance with outcomes.

• Improved Investment Reporting: More detailed disclosures on investments and major Budget decisions will support informed public and parliamentary scrutiny.

Minister Willis underscored the Government’s commitment to responsible economic stewardship, saying, “These changes are about ensuring we have a public finance system that is not only more transparent but also more resilient and better aligned with the core mission of government—to serve the long-term interests of New Zealanders.”

Next Steps in the Legislative Process

The Public Finance Amendment Bill has now been referred to the Finance and Expenditure Committee, where it will be subject to public submissions and detailed examination. If enacted, the reforms are expected to significantly reshape how fiscal responsibility is implemented and understood in New Zealand.

The Government’s reforms signal a clear shift in fiscal philosophy—away from broader socio-cultural metrics and back toward a focused, economically-driven framework for public financial management.