The Government's books are still in good shape and it's time for New Zealand to get into shape too, according to the Finance Minister.
Grant Robertson has laid out his plan for next years 'Wellbeing' Budget. Bids to the minister for Budget cash will not only need a cost-benefit analysis attached, but wellbeing impact summaries will be required.
"Economic growth is an important contributor to wellbeing but it is not an end itself," he said.
"It's a shift away from Government departments from making bids on their own appropriations, instead having a focus on outcomes with a collaboration with others."
The Government will now measure things through four lenses:
- human capital - our people and skills
- social capital - our connections
- natural capital - our environment
- financial and physical capital - our built and financial assets.
Mr Robertson says he's taking an "all of government approach" focusing on "outcomes" rather than input and output.
All Budget bids will need to fit into one of the priorities Mr Robertson has identified, including:
- creating opportunities for businesses, regions, iwi and others to transition to a low emissions economy
- innovation, social and economic opportunities in the 'digital age'
- lifting Māori and pacific incomes, skills and opportunities
- reducing child poverty, improving child wellbeing and family violence
- supporting mental health with a specific focus on under 24-year-olds.
He says for example, housing is not mentioned in these priorities but plays a critical role in reducing child poverty and supporting mental health.
The priorities were set by analysis of data through the newly developed Living Standards Framework.
The Finance Minister admitted the Government needs better data to track wellbeing.
The priorities were set out as part of the Half Yearly Economic and Fiscal Update. It's where the Treasury predicts the economic forecasts for the next five years.
What the books show:
- Surplus drops from $5.5 billion to $1.7billion in 2019. It's forecast to rise to $8.4 billion in 2023.
- Crown expense are forecast to drop from 29.5 percent of GDP in 2019 to 28.3 percent in 2023.
- Net debt is forecast to be 19 percent of GDP in 2022.
- Operating allowances over the next four Budgets will stay at $2.4 billion per year.
- Wages are forecast to increase by over 3.3 percent per year across the forecast period.
- Export growth is around 3 percent a year.
- Unemployment is expected to stay low at around 4 percent.
Despite the positives, a number of risks to New Zealand's economy have been presented by Treasury.
Local risks
Business confidence
Treasury has outlined concern about the continuing flailing in business confidence.
"The impacts of sentiments are hard to gauge. A key risk to growth in 2019 is the extent to which weaker confidence affects business investment and household spending decisions."
Construction
The tight capacity pressures of the construction industry are a concern which can limit growth in residential investment.
"Policies aimed at alleviating the capacity constraints in the sector can affect residential investment, house prices and productivity."
International risks
US and China
The US China relationship is a major concern for the Finance Minister.
"I continue to keep a wary eye on the US China trade dispute".
Treasury had its own analysis, warning again that the escalating trade war presents a real risk to New Zealand.
"Rising trade tensions between the US and China are a major risk to New Zealand's economy."
Brexit
"The ongoing negotiations between the United Kingdom and the European Union on the UK's exit has resulted in uncertainty surrounding Europe's economic outlook."
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