Abstract:
Existing methodologies for estimating a government's structural budget balance are reviewed and applied to the case of New Zealand. Besides the conventional cyclical adjustment, an assessment is made of other possible non-structural elements to the budgetary position, including the terms of trade, asset prices and unbalanced growth. A key result is that the terms-of-trade boom, which began in the late 2000s, is associated with around 1% of GDP in tax revenues that may not be structural. Uncertainty surrounding cyclically-adjusted balance estimates is presented using fan charts.