The nation's financial system could be strengthened by measures including requiring banks to hold more capital and the Treasury recommends amendments to the fiscal responsibility provisions of the Public Finance Act to add emphasis to macroeconomic stability and "fiscal structure dimensions".
It also suggests the government consider using tax reform to reduce distortions to New Zealanders' savings and investment decisions and encourage more saving. Retirement income provisions could also be reformed, it says.
The state sector should be down-sized, with more emphasis on actively managing cost pressures in health, welfare, education and justice.
The Treasury recommends reforms to the education system, including cost cuts and targeting early-childhood education funding at lower-income households. School teacher quality could be improved by measures including "consolidation of the school network."
The department also recommends reintroduction of interest on student loans.
Welfare reforms could include contracting out of work done by Work and Income, "where appropriate," alignment of benefit payments with work expectations and reducing the age of the youngest child at which work testing of solo parents would apply.
The Treasury also suggests tightening eligibility for the Supported Living Payment. A section of the recommendations of the Better Public Services Advisory Group Report was deleted from the public version.
The Treasury suggests measures to make New Zealand's business environment more internationally competitive, including cuts to personal and company tax , improved relationships with Australia, the US, China and India.
Reforms of the Resource Management Act to allow more efficient management of natural resources including "market structures to facilitate more efficient use of water" and reduced costs of the Emissions Trading Scheme.
It also urges continued investment in infrastructure and what it calls a "realistic" longer-term recovery strategy for Christchurch.
