New Zealand is still a rockstar economy, according to Paul Bloxham, the HSBC economist who first awarded us the accolade in 2014. But Finance Minister Grant Robertson isn’t a fan.
Speaking at the annual pre-Budget lunch held by the Wellington Chamber of Commerce, Robertson said that while he was flattered by the label, he thought it was one “best avoided”.
“For many New Zealanders the use of this phrase was jarring when they heard it several years ago,” Robertson said.
“Sure we had – and have – GDP growth rates that many other countries around the world envied, but for many New Zealanders, this GDP growth had not translated into higher living standards or better opportunities. How could we be a rockstar, they asked, with homelessness, child poverty and inequality on the rise?” Robertson said.
Robertson made the case for broadening economic measurements from just GDP to try and measure how the economy interacts with people, not just how fast it grows.
The 2019 Wellbeing Budget will report on GDP growth as well as things like homelessness, the state of the environment, and the number of children in poverty. The Government will be able to make Budget decisions based on this framework.
Robertson compared the approach to making difficult trade-offs in a business environment.
“I’m sure many of you will have experience in making difficult trade-offs in the business world. Perhaps you’ve had to weigh up a payoff in the short-term and reputation impacts on your brand in the longer-term,” he said.
“A wellbeing approach is about taking a wider view, recognising and weighing up the overall pros and cons of government policy on all of the things that enable New Zealanders to live lives of purpose and value,” he said.
Robertson said the wellbeing analysis forming the key point of difference between this Budget and previous Budgets did not necessarily tell the Government what it should do, but indicated where “interventions” were most needed.
The focus areas for government intervention have been announced ahead of the Budget itself, which will be delivered on May 31.
These focus areas form the Budget’s five priorities: transitioning to a low-emissions economy; digital innovation; reducing child poverty; mental health, and lifting incomes for Māori and Pacific people.
Robertson has asked ministers to relook at 1 percent of their baseline spending, which was of lowest priority. Ministers then had to either justify this spending or reallocate it to other policies.
Robertson said the process had turned up over $1 billion of spending to be reallocated – nearly 20 percent of which has come from one single initiative: the fees-free programme.
An underspend, due to low uptake, had meant $197 million would be reallocated to Education Minister Chris Hipkins’ reform of vocational education.
Robertson also tried to contextualise the recent slowing in the New Zealand economy by placing it against the backdrop of the softening global economy. He noted the IMF’s projections for New Zealand’s growth of 2.5 percent this year and 2.9 percent in 2020 stacked up well against the same statistic in the US, UK, Japan, Canada, Australia and the Eurozone, which will all grow more slowly.
But the international slowdown is only part of the picture. Last week’s Monetary Policy Statement from the Reserve Bank, which functions as a quarterly “check up”, placed most of the blame for New Zealand’s slowdown on the international scene, but said slowing household spending and declining immigration were also partly to blame.