Wellbeing needs economic foundation

The government plans to produce a wellbeing budget next year.

The NZ Herald points out that economic growth is the foundation needed for wellbeing:

. . .A “wellbeing” approach to budgeting has been under study by the Treasury for many years but clearly did not excite the previous Government. It does excite this one. In essence it means economic growth will not be the most important measure of the 2019 budget, it will be just one of several measures of national progress. Of equal importance will be indicators such as child poverty reduction, inequality and climate change.

Delivering this philosophy last Thursday in its Budget Policy Statement 2019, the Treasury said, “Recent history shows that too narrow a focus on economic growth can be associated with negative outcomes such as growing income inequality and economic degradation.” That may be so but it is important that pursuit of social and environmental goals does not stop economic growth.

The fact is, economic growth is the engine that makes all other policies possible. Growth gives business the confidence to invest and expand and employ more people whose earnings create more demand for goods and services and whose taxes have to pay for most of the “wellbeing” the Government wants to provide.

It is only in good times that a government has the luxury to pretend all these elements of wellbeing are equally important. If its policies cause the economy to turn sour it will soon be struggling to deliver its “wellbeings”. If it overspends and puts the budget back in deficit and too much labour regulation discourages employment, a falling exchange rate will soon cause prices of imported goods to rise, depressing consumption, causing widespread lay offs, declining tax revenue and rising welfare costs.

In that event, improvements in other “wellbeing” figures will be cold comfort.

Of course, economic growth alone is not the goal of good government but without it, all the other goals would elude us.

The world could bring us economic problems enough next year without us losing our focus on sustaining economic growth.

It’s no coincidence that wealthier nations have better standards of living with better educated and healthier people. They also generally have cleaner water and higher environmental standards.

National is often mistakenly characterised as focusing on the economy rather than people. The reason for focusing on the environment is because a strong and growing economy is the only way to provide sustainable services and infrastructure for people.

If government policies don’t only not put a hand brake on economic growth but actively enable growth, its determination to improve wellbeing will be nothing but hot air.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: