Members of the finance and expenditure select committee are looking to push the Government further on the Living Standards Framework, potentially paving the way for a radical rethink of the economy, Thomas Coughlan reports.

Jacinda Ardern gave a landmark speech in February signalling the direction of her Government beyond its first 100 days.

With Finance Minister Grant Robertson by her side, she gestured towards a radically new way of drawing up Government Budgets.

“By Budget 2019 Grant and I want New Zealand to be the first country to assess bids for budget spending against new measures that determine, not just how our spending will impact on GDP, but also on our natural, social, human, and possibly cultural capital too,” she told the crowd.

But submitters to the Finance and Expenditure Select Committee want the Government to go further, and they seem to have the ear of some committee members.

How do you allocate $80 billion?

Budget 2019 will be the first “wellbeing budget”. To draw this up, Treasury along with Statistics NZ has been busy working on how to measure and assess aspects of life ignored by traditional economic indicators.

By placing indicators like GDP alongside environmental and social indicators, like the depletion of ecological resources, measurements of poverty, and health, the Government hopes to develop a deeper and more meaningful picture of New Zealand’s economy and society. The flow-on effects will be enormous. The indicators will be used to make choices about how the Government allocates bids for its $80 billion budgets.

But critics argue that the indicators being used are failing to capture vital unpaid work being done, mainly by women.

“When a man marries his housekeeper, GDP goes down”

The Finance and Expenditure Select Committee, chaired by Labour’s Michael Wood, has been hearing from submitters on the Living Standards Framework.

One submission came from Marilyn Waring, who chaired the committee (known then as the Public Expenditure Committee) when she was a National MP under then-Prime Minister Robert Muldoon.

Waring argued that while some of the indicators would give a more detailed picture of the economy, they did not adequately capture the value of unpaid work in the economy, particularly the work done by women.

She said that when the system of national accounts was first drawn up in the past, unpaid work was excluded because it was too inconvenient to measure and take account of. Waring told the committee this should no longer be an excuse for failing to measure the value of such work.

“Convenience doesn’t stack up in terms of making good public policy.”

Currently economic indicators ignore important work that is going on, giving an inaccurate picture of the size and shape of the economy, Waring said.

She used an example of a man and a housekeeper.

“When a man marries a housekeeper, GDP goes down because there’s no longer a payment involved”.

In other words, once the work becomes free, it is no longer captured by GDP indicators even though it still takes place.

This leads to poor policy-making, as Governments driven by a narrow picture of the economy fail to make policy for important activities that go unrecognised in the traditional economy because they are unpaid.

This included vitally important work like pregnancy, child-rearing, breast-feeding, and caring for the elderly, Waring said. The “reproductive” economy was not included in the “productive” economy even though it was the most essential part of human life.

She noted that Australian economist Duncan Ironmonger estimated that if unpaid work was included in Australia’s GDP it would be the largest sector in the economy.

“It would exceed all mining and mineral extraction by a multiple of three,” she said.

Support on the committee

Waring’s submission appear to have the interest and possible support of some members on the committee.

Conal Smith, Senior Associate at Victoria University who prepared a paper on the Living Standard’s Framework for Treasury was questioned by Michael Wood about including time use surveys in the framework.

Fellow Labour MP Deborah Russell asked the importance of breaking down the distribution of indicators across age, gender, and ethnicity to show how different parts of the economy were distributed.

Labour has a majority on the committee and could make recommendations to Parliament in a report should it so choose.

Wood told Newsroom that if the committee takes up the opportunity of writing a report on the briefings, it would do so in the “next couple of months”.

It could, at this time, potentially offer a recommendation on the framework to Parliament, which, if Government agreed, could inform the Living Standards Framework.

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