Key Takeaways
- An independent Performance Improvement Review found the Treasury’s economic policy advice to be “weak,” while its budget and fiscal‑management functions were rated only “developing.”
- Contributing factors include pandemic pressures, high staff turnover, shifting ministerial expectations, and evolving priorities across the public sector.
- The review highlighted specific shortcomings in the Treasury’s monitoring of ACC and Health New Zealand, as well as doubts about its commercial advice on the Interislander ferries.
- Strengths were noted in the Treasury’s Budget process, financial‑statement production, and public‑engagement efforts on long‑term fiscal challenges.
- Secretary to the Treasury Iain Rennie and Finance Minister Nicola Willis acknowledged the need for deeper economic analysis, stronger strategic financial leadership, and more practical contributions to the government’s “Going for Growth” agenda.
- The review calls for clearer role definitions, improved stewardship across agencies, and a shift away from reliance on 1980s‑‑90s economic orthodoxy toward more innovative, evidence‑based policy advice.
Overview of the Performance Improvement Review
The Public Service Commission released the Treasury’s first Performance Improvement Review in a decade on Tuesday, commissioned by Secretary to the Treasury Iain Rennie. The assessment examined how the Treasury performs across a range of functions, services, and engagements. While the review recognised some areas of competence, it concluded that the department’s ability to deliver effective economic policy advice is presently weak, eroding ministerial confidence and prompting a self‑reinforcing cycle of reduced influence and talent loss.
Rating of Core Functions
The review rated the Treasury’s core functions of Budget and fiscal management, as well as system and sector performance, as “developing.” This indicates that while these areas are functioning adequately, they have not yet reached a level of consistent excellence. In contrast, the department’s economic policy advice received the lowest rating of “weak,” signalling a critical gap that needs immediate attention if the Treasury is to fulfil its advisory role to the Minister of Finance and the broader government.
Factors Undermining Economic Advice
Several contributory factors were identified for the weakened advice. Covid‑related pressures have stretched resources and diverted focus, while high turnover has disrupted continuity and institutional memory. Evolving ministerial priorities and changing expectations of what the Treasury should deliver have also created misalignment. Together, these dynamics have fostered a risk‑averse culture, reduced ambition, and diminished the department’s collective confidence, further weakening the quality of its economic analysis.
Shortcomings in Monitoring ACC and Health NZ
The review highlighted particular failures in the Treasury’s oversight of ACC and Health New Zealand. For ACC, the Treasury’s monitoring was described as having “failed to identify and escalate emerging performance issues,” which contributed to the need for multiple independent reviews. In the case of Health NZ, confusion surrounded the Treasury’s role in monitoring the agency’s spending, despite Health NZ holding the largest annual operating cost of any Crown entity. The report recommended clarifying roles and expectations across the system so that the Treasury can exercise its stewardship and system CFO functions complementarily, allowing the Ministry of Health to act as an effective financial monitor while preserving the Treasury’s independent fiscal‑risk advice.
Questions About Commercial Advice on Interislander Ferries
Ministers also expressed dissatisfaction with the Treasury’s commercial advice regarding the replacement Interislander ferries. The advice was deemed not robust enough, which lowered confidence in the Treasury’s capability to handle commercial transactions more generally. Interviewees consensus was that the Treasury’s performance in this area was not consistently meeting expectations, suggesting a need for stronger analytical frameworks and perhaps greater engagement with sector‑specific experts when evaluating large infrastructure projects.
Strengths in Budget Process and Public Engagement
Despite the weaknesses, the review identified notable strengths. The Treasury’s role in the Budget process, the preparation of financial statements, and its public‑engagement initiatives aimed at raising awareness of New Zealand’s long‑term fiscal challenges were judged effective. These functions demonstrate that the department retains core technical competence and can communicate complex fiscal information to a broad audience, providing a foundation upon which improvements in economic advice can be built.
Responses from Rennie and Willis
Secretary to the Treasury Iain Rennie welcomed the review’s identification of strengths but conceded that there is clear room for improvement and a need for faster change in several performance areas. He agreed with the recommendation to deepen economic analysis, provide greater strategic financial leadership across the system, and enhance engagement with New Zealanders on both long‑term fiscal challenges and the opportunities and barriers to economic growth. Finance Minister Nicola Willis echoed these sentiments, acknowledging that while the Treasury excels at costing policies and running the Budget process, it must contribute more practical ideas to the “Going for Growth” agenda. Willis noted that the Ministry for Business, Innovation and Employment (MBIE) has been leading the charge on new growth ideas and challenged the Treasury to lift its game in the economic debate.
Implications for the Going for Growth Agenda
The government’s “Going for Growth” initiative, which has already progressed over 100 initiatives to boost productivity and productivity‑enhancing investments, relies heavily on fresh, actionable economic thinking. The review found that the Treasury’s current thinking remains heavily influenced by 1980s‑‑90s economic orthodoxy, which, while still relevant, may no longer be sufficient to address contemporary challenges. To support the agenda effectively, the Treasury must develop more concrete, innovative policy proposals, strengthen its analytical depth, and move beyond traditional frameworks to embrace evidence‑based, forward‑looking advice that can directly inform growth‑oriented decisions.
Conclusion and Path Forward
Overall, the Performance Improvement Review paints a picture of a Treasury that is competent in procedural and fiscal‑management tasks but struggling to deliver the high‑quality, influential economic advice that ministers and the public expect. Addressing the identified weaknesses—through clearer role definitions, reduced turnover, renewed analytical rigor, and a shift toward more pragmatic, growth‑focused thinking—will be essential. If the Treasury can successfully implement these changes, it stands to regain trust, enhance its influence across the public sector, and become a more effective partner in driving New Zealand’s economic ambitions.