The Treasury has received its lowest possible performance rating for economy-wide policy advice in a review published today, the only red mark in a report that warns the agency has entered a cycle of decline.
The performance improvement review assessed the department's policy advice as weak, the bottom grade available. Finance Minister Nicola Willis said the Treasury recognises it needs to lift its performance.
"There are some things that Treasury does incredibly well – it's very good at costing policies, it's very good at running a Budget process," Willis said. "But I think there is improvement for them to make in terms of their contribution to economic debate and new ideas for the future."
A cycle of decline
Reviewers found the agency had entered a self-reinforcing downward trajectory, with time running out to restore its standing as a critical central agency. Recent years have seen performance fall short of expectations, driven by pandemic pressures, staff departures, and evolving ministerial demands.
As ministers grew less certain about the quality of Treasury counsel, the department's sway across government weakened. Talent left, institutional confidence dropped, and the agency became more cautious and less ambitious in its approach.
The review pointed to specific failings that eroded trust. Ministers did not consider Treasury's counsel on the replacement Interislander ferries sufficiently rigorous, undermining faith in its commercial transaction capability more broadly.
Monitoring and energy failures
The department's oversight of ACC missed emerging problems, leading to several independent inquiries and intervention by the Public Service Commission. On energy policy, the agency was late to grasp emerging challenges as gas and electricity prices became increasingly unstable.
Ministers told reviewers the Treasury often concentrated on minor efficiencies rather than the transformational change they sought. They wanted the department to combine critical analysis with clearer, more actionable recommendations.
Lacking practical growth ideas
The review found the Treasury's performance on economy-wide counsel has fallen below what was expected. Some interviewees, including Treasury staff, said the department had contributed too little on broad economic questions in recent years.
A persistent concern was that the agency was not offering sufficient practical thinking on the Government's productivity agenda. Multiple people told reviewers the Treasury had limited tangible proposals to advance growth, while others wondered whether its framework remained overly anchored to late-20th century international economic thinking.
The Treasury is one of five central agencies and has served as the Government's principal financial adviser for decades, overseeing the annual Budget process and managing a $600 billion Crown balance sheet.
Response from leadership
Treasury Secretary Iain Rennie accepted the findings and said the department had work ahead. Priorities include "focus on deepening our economic advice and analysis, providing greater strategic financial leadership across the system".
Rennie also pointed to long-term fiscal challenges, warning that "without proactive choices, an aging population, weak productivity growth and rising public expectations will place growing pressure on government finances".