Generational Accounting in New Zealand: Is There Generational Balance?
INTERNATIONAL TAX AND PUBLIC FINANCE, Vol. 4, No. 2
Posted: 6 May 1997
This paper uses a recently developed technique, called "generational accounting," to assess New Zealand's long-term fiscal position. Generational accounting has become a popular alternative to traditional deficit accounting because it provides a more accurate picture of the intergenerational distribution of fiscal burdens and the associated macroeconomic effects, particularly in the presence of demographic transitions and large unfunded public transfer programs. Past studies have suggested the existence of significant generational imbalances in several countries. 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.
JEL Classification: H6
Suggested Citation: Suggested Citation