Meanwhile in other news

May 12, 2016

While the Panama papers and examining the entrails of The Bachelor are getting headlines the government books are in a healthier state than forecast:

The $167 million operating balance before gains and losses (OBEGAL) surplus for the nine months to 31 March was $334 million better than forecast, Finance Minister Bill English says.

Core Crown revenue was $206 million higher than forecast, largely due to core Crown tax revenue being $702 million higher than forecast by the Treasury in December.

These aren’t big numbers in relation to the government’s total finances. But given the global financial position and the impact of low dairy prices, this is an achievement.

This was partially offset by core Crown interest and dividend revenue being $456 million lower than forecast.

Mr English says because of sustained, moderate growth in the economy, the Crown accounts are in good order ahead of the delivery of Budget 2016 later this month.

“We’ve been successful in turning an $18.4 billion deficit in 2011 to a surplus last year. In Budget 2016 our focus is shifting more to repaying debt.

“Budget 2016 will reflect this Government’s continued commitment to responsible fiscal management. At the same time it will build on the good progress we’ve made over the previous seven Budgets, with further investment in a growing economy and public services.

“We measure success by results, rather than the level of spending.”

It’s not what they’re spending but the impact that spending that matters.

One area that always takes a lot of spending is welfare.

The government is taking the investment approach which means spending more in the short term for longer term social and financial gain.

A report from Deloitte and NZIER says that the investment approach needs to become a mainstream way of working across more of the social sector.

State of the State New Zealand 2016: Social investment for our future advocates broadening the use of the social investment approach to manage New Zealand’s future fiscal challenges and support better outcomes for Kiwis.

NZIER Deputy Chief Executive John Ballingall says the State of the State takes a close look at government finances and the burdens New Zealanders could face in the future.

“A combination of our ageing population, low productivity and revenue growth, and the need to reduce government debt will impose huge fiscal pressures in coming decades – particularly in social spending. More importantly, too many people in New Zealand are experiencing poor life outcomes and too many of their children are at risk of following them,” says Mr Ballingall.

Deloitte partner and public sector leader Dave Farrelly says it’s the sum of these factors which drove us to focus the report on social investment, an approach to funding social services focusing on root causes to prevent the need for these services in the future.

“For example, with social investment the task is not to deliver the next 100 prison beds for the same cost as the previous 50. It’s to remove the need for those new prison beds altogether,” says Mr Farrelly.

“Today social investment is like a start-up – a small number of people are working incredibly hard to bring a big bold vision to life. Tomorrow, social investment needs to become a mainstream way of working,” he says.

In the six months of research for the report, Deloitte and NZIER spoke to some of the most senior and influential leaders in the public, non-government and private sectors – all of whom provided a unique perspective on social investment.

State of the State proposes a package of bold reforms to realise the aspiration for social investment in New Zealand. The recommendations are:

1. Release, every four years, a government-wide statement to define the outcomes and targets for at-risk New Zealanders
2. Establish a new agency to commission specialist social services for people at risk of poor life outcomes
3. Embed the social investment approach to funding quality and sustainability in the new agency’s operating model
4. Enable better access to government-held data and detailed evaluation reports

“We suggest a structural reconfiguration that some will find challenging, while acknowledging we don’t yet have all the answers,” says Mr Farrelly.

“But we must be bold in tackling these challenges today to maintain our way of life in the future,” he concludes.

Social investment is working and the reforms Social Development Minister Anne Tolley is promoting will do more.

Trans Tasman notes:

. . . The reform being pushed through by Tolley is perhaps the most far-reaching undertaken by the Govt and could stand as its greatest legacy if it achieves its goals. Already it has made some headway in improving the lives of Maori children who are more than twice as likely as Pakeha children to grow up in households experiencing hardship, and fare worse in most indicators. A report by the University of Otago-based Child and Youth Epidemiology Service shows increasing numbers of Maori pre schoolers are getting early childhood education. There’s also been a halving of school suspensions for Maori students, an increase in immunisation rates, fewer young Maori smoking,and falling hospitalisation rates for Maori children for injuries from assault, neglect or maltreatment. Tolley is understood to have secured an additional funding, probably of the order of $500m in this year’s budget for the reform. . . 

Turning around benefit dependency and all the financial and social costs that go with it will not be neither easy nor cheap but the investment approach is working and it’s a much better story than many of the others which are getting attention at the moment.

 


NZ 3rd for material living standard

July 31, 2015

Trans Tasman points out that child poverty lobbies are wrong on living standards:

Lobby groups which bleat about child poverty in NZ took a knock this week when independent research showed NZ households have the third highest material living standard in the world for households with a teenager. The research also dealt a blow to those who contend there is growing inequality in NZ society. Using a new measure for wellbeing, Researchers at Motu Economic and Public Policy Research found NZ ranks just behind the US and Canada, and ahead of Aust and all the Scandinavian countries.
Motu is a not-for-profit, non-partisan research institute and received funding for this work from the Marsden Fund of the Royal Society of NZ. Dr Arthur Grimes, one of NZ’s most respected economists, says “our new measure focuses on actual consumption of households, which is a better measure of living standards than income. What we found is that we have very high material wellbeing levels. I think this should call into question the widespread negative impression of living standards in NZ compared with other developed countries.” Grimes and Motu researcher Sean Hyland worked from a dataset of household possessions for almost 800,000 households over 40 countries, including all OECD countries.
“Our results show NZ is still a great place to bring up children, at least in material terms. Not only do we have wonderful natural amenities, but contrary to what GDP statistics tell us, most kiwi families have a high standard of material wellbeing relative to our international peers” The study also looked at the degree of inequality in household material wellbeing, which fell in most countries, including NZ, over the period 2000-2012. In 2012, NZ ranked twentieth of 40 countries in terms of inequality, with levels similar to those in the US, Canada and the UK.
Grimes points out most public policy concern is with the living standards of ordinary people, especially those closer to the bottom of the wealth distribution curve, whose living standards are well captured in the data. “If we look across the Tasman, Australia’s households are not quite as wealthy as their NZ counterparts but inequality in Aust. is lower than that in NZ. Overall, these figures suggest we may need to reassess how we look at this country’s economic performance.”

This doesn’t mean everyone has enough nor that we can ignore the needs of those who don’t.

But it does contradict the people who keep trying to tell us that inequality is growing and that up to one in four children are living in poverty.


Slower growth still growth

July 10, 2015

Chicken Little would feel right at home with opposition politicians and media who are wanting us to believe the sky is falling.

This season’s dairy payout was low and next season’s might not be much better but banks aren’t going to be forcing farmers out of business.

Providing farmers are prudent and work with their banks they’ll get through.

Dairying is a large part of the economy and those who service and supply farmers will find business tougher as farmers spend less, but the impact of that still won’t push us into the recession some of the gloomier forecasters would have us believe is coming.

Trans Tasman puts it into perspective:

“Complacency” is what Labour finance spokesman Grant Robertson called John Key’s attitude to the economy this week. His leader Andrew Little went further, saying NZ faces a “perfect storm” of economic bad news. Both called for the Govt to do something, although just what remained a bit vague, apart from a generalised call for more spending to stimulate the economy. Key’s “What? Me Worry?” persona can grate at times, but this is all a bit over-egged.

Much of the egging came from the media, of course, with broadcasters being the worst. One has come to expect a certain amount of arm-wavy economic illiteracy from TV news, but what was more surprising was hearing Radio NZ follow suit, discussing the economy as if a recession 
is imminent.

Essentially there is a buy-in to the Green Party co-leader Metiria Turei’s claim the Govt needs to “start spending again” to avoid a recession. It’s a statement which appears oblivious to the Govt loosening the fiscal purse strings in the May budget, and also of the fact no reputable economist thinks a recession is imminent. Rather, it is a slowdown from a bit more than 3% to probably around 2% growth in GDP.

This means both Treasury and the Reserve Bank’s most recent forecasts are wrong, and not in a minor way. The presumption of 3% GDP growth this year, and for the next two years, now looks just that – highly presumptuous.

But it is not a recession. Growth is still happening. It is just considerably slower than expected. Interest rates and the NZ dollar are adjusting – finally – to take account of this.

Growth may be slowly, but slow growth is better than no growth and still, thankfully, there’s no imminent danger of the sky falling.


Quote of the day

May 22, 2015

. . . An enormous gulf has opened up between what used to be the core Labour voter, particularly in provincial regions, and the metropolitan elites, with their state-funded salaries and public sector pensions. The consequence is the current generation of Labour politicians are stumped when it comes to enunciating policies for the delivery of a better life for working people.

There is now a fundamental unease in the NZ population the collectivism inherent in the original concept of the welfare state doesn’t necessarily deliver the results originally envisaged. It is based on evidence the safety net the welfare state was intended to provide has been turned almost into a lifestyle for many who spend years on benefits. Now when the Govt says testing for spending effectiveness (in welfare programmes) will be core to the new processes it is introducing, and funding will be re-prioritised to providers to get results, Labour doesn’t seem to have an answer, or an alternative. . . Trans Tasman


Quote of the day

May 1, 2015

. . . Even among some voters friendly to National there is querulous criticism the Govt does not have a “plan.” The demand is for more “visionary” policy. This is to overlook the essence of conservative philosophy: what it is not necessary to change should not be changed, a conservative attitude is always the baseline for true progress.

This Govt’s success stems from the policies it has implemented in putting NZ back on the road to sustainable growth. NZ has now experienced solid economic growth for five years and it has been achieved without any inflationary pressures building up. Even though the dairy industry has been hit hard by plunging global prices, the rest of the economy is showing no sign of slowing up. But the Govt now has to battle a media which views the current state of the Govt, and its leadership, through a different lens. . . Trans Tasman


Quiet revolution in Budgeting process

January 30, 2015

Trans Tasman notes Finance Minister Bill English is driving a quiet revolution in the Budgeting process:

Cabinet Ministers are getting to grips with the new spending processes Finance Minister Bill English is introducing in this year’s budget. Where departments previously put in bids for the amount they thought would be needed to finance particular programmes, they will now be expected to match the bid with an assessment of the return on the investment. This follows the changes initiated in delivering better public services, when departments were instructed to publish results their programmes were achieving. In effect the Govt is seeking to revolutionise the way ministries operate.

It requires different departments to work together, rather than in isolation, particularly in the field of health and community services. The Govt accepts the new processes will have to resolve complex problems such as privacy issues but the objective is to push Ministries towards targeting the money available to achieve tangible results. The Govt argues it has a duty to ensure funds raised from taxpayers are applied to maximise outcomes, rather than just for “nice-to-haves” Ministers or bureaucrats advanced in competition with each other.

The duty becomes more onerous as the Govt strives to bring the Crown accounts back into long-term surplus, without any nasty spending blow-outs from programmes initiated in earlier years. An example where unintended consequences can spring out of the woodwork to damage spending projections lies in Employment Court decisions related to the care of aged people and the definition of work, as well as in pay equity. One decision concerned the definition of work as including driving to and from the places where aged-care providers are working, and another involves the principle of equal pay, with the concept aged care workers should be entitled to the same hourly rates as those in the Corrections Department. How the Govt deals with these complex issues will have long-term budgetary impacts.

National is often criticised for having no plan by people who don’t understand that a lot of what it is doing is being done quietly, like this requirement for a return on taxpayer investment.

 


Radical incrementalism is working for NZ

December 12, 2014

Quote  of the day from Trans Tasman:

. . . The trust voters have in the Govt has been built up over six years of patient delivery of what National promised. And the trust will only be eroded when the Govt stops delivering on what voters expect of it.

This is why many commentators are missing the stand-out element in the political equation. The policy the Govt is following of “radical incrementalism” is what NZers want, and is delivering the rising prosperity most NZers seek. The new normal is low inflation, low interest rates and stable growth which is sustainable. It’s an economic environment unfamiliar to many NZers, but so attractive it is drawing many expatriates back to their homeland. NZ’s performance has been in sharp contrast with Aust’s, and the big challenge for the country will be to keep winning against its neighbour (and we’re talking not just about the Rugby World Cup in 2015). . .

Sustainable growth is something New Zealand hasn’t seen for decades.

It doesn’t mean there are not still problems to address and there are too many people who have yet to benefit from the growth.

But it does mean that radical incrementalism is working for New Zealand.


Follow

Get every new post delivered to your Inbox.

Join 1,869 other followers

%d bloggers like this: