The central government economic agencies are products of the previous three decades of thinking. Our agencies are still prioritising financial liabilities over future planning. Much of our infrastructure is at breaking point due to historical underinvestment. The results in New Zealand speak for themselves.
Many successful countries that we often wish to emulate have very different approaches to investing, revenue, and debt.
Since Budget 2018, the Government has moved to delivering Wellbeing Budgets. This is a welcome change as they take a wider view of progress than the narrow view of economic growth provided in GDP figures. However, there remains a disconnect between the aspirations of the wellbeing approach and the delivery of the policy. The indicators get brought out once a year at Budget time but have little traction in between.
“The gross national product does not allow for the health of our children, the quality of their education, or the joy of their play”
Robert F. Kennedy, USA presidential campaign Trail - 1968.
We know we must do better. We can link the programmes of economic development to those of the wellbeing agenda. Wellbeing and the Māori economy are about much more than GDP and standard economic indicators associated with dollar values, it includes the choices people make to support their whānau and community through unpaid labour. We can examine whether fiscal settings are fit for purpose and determine if new structures could better achieve wellbeing goals and better enable and support for Māori-by-Māori approaches.
Challenge: Reimagining our model of growth from measuring economic production to measuring security and wellbeing.
“For me wellbeing means giving people the capabilities to live lives of purpose, balance and meaning to them. For too long we have defined our success as a country solely on our rate of GDP growth”
Hon. Grant Robertson[1]
The economy is a large and complex system. Making it work effectively is one of the central opportunities facing the country and the government. But making it work for its own ends is not enough. We need to grow the good outcomes we get from the economy.
We know that economic development and mental health go hand in hand. Increasingly insecure and flexible economies have had a profound impact on rates of anxiety.[2] The resulting economic costs of mental illness are substantial. Recent estimates for OECD countries are that mental illness reduces the size of our economy by approximately 5%, leading to unemployment, work absenteeism, and reduced productivity.[3] Our model of growth after COVID-19 needs to change so that our economic framework incentivises and provides greater security and greater wellbeing.
When it comes to assets, the wealthiest 1% control a quarter of the nation's wealth.[4] These embedded disparities contribute to widening social dysfunction, deprivation, and poor health. Since the 1980s, large economic disparities have become a feature of New Zealand's political landscape. During this time income disparities rose quicker than in any other developed nation.[5] It is no surprise that child poverty doubled in that time.
Inequality between ethnicities, particularly between Māori and Pākehā persists. One of the major underlying causes for this disparity can be traced back to the widespread nineteenth-century confiscation of Māori land and policies that limited Māori access to capital.[6] Alongside this, the impacts of the 1980s restructuring reforms disproportionately impacted Māori workers, and are still being felt today, a generation on.
According to recent data, 125,000 children are living in material poverty in New Zealand – missing out on items like shoes, meals, and heating.[7] This is largely due to benefit cuts and inadequate wages. 40% of children from poor households (AHC) have a parent in full-time work.[8] [9]
The current government's drive to address child poverty has made only small inroads. Creating a fairer economy needs more far-reaching policies than those currently employed. We need to bring together our wellbeing goals with our economic goals, so they are not traded off against each other.
Policy proposal: Work with Central Government Economic Agencies to build and embed a genuine wellbeing approach to economic development
Our ability to plan for long-term solutions to education, health and housing are lacking. Currently, we care about the cost of everything, but the value of nothing. It’s time for that to change.
We propose:
- Consider the role that each of the central government economic agencies can play to better understand if we are truly coordinating our economic policy in a way that delivers on our wellbeing goals.
- Developing a better understanding of how other countries operate in this area, and the extent that their structure and establishment improves performance.
- Working on a better value for money approach within the government. One that makes clear not only the financial consequences of investment but the social and community consequences.
- Value for money should also highlight the cost of non-investment – with an estimate produced of the ‘liability’ the Crown faces for future expenditure set alongside the debt and operating balance figures.
Footnotes
[1] Beehive Press Release. (2019, May 14). Wellbeing Budget to tackle long-term challenges. https://www.beehive.govt.nz/speech/wellbeing-budget-tackle-long-term-challenges
[2] Economic insecurity: A socioeconomic determinant of mental health, SSM - Population Health, Kopasker, Montangna, Bender, https://www.sciencedirect.com/science/article/pii/S2352827318300594
[3] Mental Health and Work: New Zealand. OECD https://www.oecd-ilibrary.org/social-issues-migration-health/mental-health-and-work-new-zealand_9789264307315-en
[4] Max Rashbrooke, Too Much Money, BWB, 2021.
[5] Max Rashbrooke (ed.), Inequality: A New Zealand Crisis, BWB, 2013.
[6] Rashbrooke, R. Rashbrooke, G & C, Albert. (2021). Wealth inequality in New Zealand An analysis of the 2014-15 and 2017-18 net worth modules in the Household Economic Survey. Working Paper 21/10. School of Government Victoria University of Wellington
[7] Child poverty statistics: Year ended June 2021, Statistics NZ. https://www.stats.govt.nz/information-releases/child-poverty-statistics-year-ended-june-2021/
[8] NZ child poverty statistics come from the Household Economic Survey (HES) which defines After Housing Cost income poverty rates as the percentage of children living in households with less than 50% of the median equivalised disposable household income after housing costs are deducted.
[9] Bryan Perry, Household Incomes in New Zealand, MSD, 2019.