'Measuring success differently': New Zealand budget's shift in economic thinking

By David Donaldson

May 18, 2018

The Ardern government in New Zealand is articulating a bigger role for government in society, talking up wellbeing over traditional economic measures — while still playing on the standard “fiscal responsibility” narrative. 

New Zealand’s Labour-led coalition government has handed down its first budget, highlighting health, education and housing as areas of focus.

“Our priorities are different from the previous government. We are determined to turn the page on the ideology of individualism and a hands-off approach to our economy that has left too many people behind,” said Finance Minister Grant Robertson.

“Our plan will grow and share our prosperity, so that our whole society is lifted up, and everyone has access to good quality healthcare, education, housing, and other social services.

“That is why, in this budget, the government is prioritising those investments that will rebuild the critical social and physical infrastructure in New Zealand, and address the long-term challenges we face.”

For health, the budget includes a boost of around $4 billion for things such as lifting the cut-off age for children to access free doctor’s visits to 14 and making doctor’s visits cheaper for around half a million people, as well as more money for maternity services, disability support, air ambulances and bowel screening. The finance minister said this would be the biggest investment in health in a decade.

Education receives around $2 billion to address increasing demand for early childhood education and schooling, as well as support for students with higher and complex needs.

New Zealand, alongside Australia, has some of the least affordable housing in the world. The government will spend money to increase public housing by more than 6000 homes over the next four years to address a “severe shortage” of public housing. To help address homelessness, it will expand the Housing First Initiative, a program with tailored wrap-around support, by 550 places.

These build on other big items announced in the December mini-budget, including the KiwiBuild program to boost housing supply and free tertiary education.

And while Australia promises tax cuts, New Zealand is reversing “untargeted” tax cuts proposed by the last government.

The finance minister expressed scepticism about widely accepted measures of economic development such as GDP, which will drive an overhaul in how subsequent budgets are put together. The government will announce how it intends to build a “wellbeing approach” into the budget later this year.

“These changes are about measuring success differently. In the past we have used GDP and traditional fiscal indicators as the only signs of success. And yet, real success means much more for New Zealand and New Zealanders.

“Of course, a strong economy is important. But we must not lose sight of why it is important. And it is most important for allowing us all to have better lives,” he said.

“That is why our government is making a formal change to move beyond narrow measures of economic growth and broaden the scope and definitions of progress and success.

“Next year we will be the first nation in the world to deliver a wellbeing budget reporting our annual progress against a range of measures that highlight the health and well-being of our people, our environment and our communities. We will use the Living Standards Framework developed by the New Zealand Treasury to help develop our budget, and to measure our success.”

Yet despite this left-wing rhetoric, they’re still playing by the standard budget rules, with the operating surplus forecast to grow from $3.1 billion to $7.3 billion by 2022.

The finance minister emphasised that they were being “fiscally responsible”, with Stuff’s political editor even calling it a “National-lite” budget.

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