An independent performance review has found that New Zealand’s Treasury is failing to provide the high-quality economic advice required by government ministers, leading to a decline in ministerial confidence. The report, commissioned by the Treasury itself and authored by former public service chief executive Murray Sherwin, identifies significant weaknesses in the department’s economic forecasting and policy development capabilities.
Why is the Treasury facing criticism?
The review, released in late 2024, characterizes the Treasury’s recent economic output as "weak." According to the findings, ministers have expressed frustration that the department’s advice often lacks the depth and practical application necessary to support the government’s "Going for Growth" agenda.
The report highlights that the Treasury’s long-term economic forecasts have frequently missed the mark, leaving ministers feeling ill-equipped to make major fiscal decisions. While the Treasury remains a central pillar of the New Zealand public service, the review suggests that its internal culture and analytical processes have become disconnected from the current government’s policy priorities.
How does this affect government policy?
The primary consequence of this misalignment is a breakdown in the working relationship between ministers and their primary economic advisors. Because ministers no longer view Treasury advice as sufficiently robust, the department risks being sidelined in favor of external consultants or alternative advisory channels.
The review points to a "siloed" approach within the Treasury, where technical modeling often takes precedence over strategic, outcomes-focused advice. This has created a gap between the Treasury’s traditional economic modeling and the political realities faced by the current administration.
What are the Treasury’s next steps?
In response to the review, the Treasury has acknowledged the need for a significant "up-skilling" and a cultural shift. Secretary to the Treasury Caralee McLiesh has indicated that the department will implement a series of reforms to improve the quality, timeliness, and relevance of its advice.
The proposed changes include:
- Refining Forecasting Models: Adjusting the methodology used for long-term economic projections to better account for volatile global and domestic market conditions.
- Increasing Ministerial Engagement: Establishing more frequent, informal feedback loops between Treasury officials and ministerial offices to ensure advice aligns with policy intent.
- Operational Restructuring: Breaking down internal silos to encourage cross-departmental collaboration on complex economic issues.
Understanding the context of the review
This performance assessment serves as a critical benchmark for the Treasury’s performance under the current legislative cycle. While the Treasury has historically been viewed as the lead agency for economic strategy in New Zealand, this review suggests a period of transition is necessary to regain the trust of the executive branch.
The findings echo broader concerns raised by some political commentators regarding the efficacy of the core public service in delivering on ambitious reform agendas. By identifying these systemic weaknesses, the government aims to ensure that the Treasury remains a reliable source of evidence-based policy, rather than an obstacle to economic growth. Moving forward, the department will be measured by its ability to translate these internal recommendations into tangible improvements in the advice provided to the Beehive.