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NZ Treasury says first go at living standards framework to be ready for Budget 2019

Wednesday 20th June 2018

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The Treasury says a "first version" of its living standards framework will be ready for the government to use in Budget 2019, although it expects to see the measures it uses evolve over time.

At the finance and expenditure select committee this morning, Fiona Ross, the Treasury's chief operating officer, and Tim Ng, chief economic adviser, gave a briefing on a proposal by independent economist Conal Smith on the Living Standards Dashboard. The Treasury is currently consulting the public on the document.

There are 13 dimensions of current wellbeing that the report says need to be measured: life satisfaction; material standard of living; housing; jobs and earnings; health; knowledge and skills; leisure and recreation; cultural identity/ūkaipōtanga; safety; environmental quality; civic engagement; social connections; and self and aspirations. There are also four capital stocks to measure - produced capital, natural capital, human capital and social capital.

The government plans to use the framework in the 2019 budget, and Ng said the new minister had asked the Treasury to accelerate the work it had been doing. In answer to questions from National's Amy Adams, Ross said the work wasn't being rushed.

"We will have the framework in a state that we believe we can put out for the public to see, and for the government to choose how it uses in the budget process," Ross said. "This government has said it will make a first go at a wellbeing budget, and it will take multiple budgets to keep working on that and building it. We don't believe we're rushing into it, we're using the best of the knowledge and evidence that we have in New Zealand and internationally."

Adams also asked how the Treasury could be sure the framework was objective and auditable. Ng said proposed wellbeing dimensions like housing and employment were measurable and objective, and other dimensions such as social connectedness could be measured through surveying. 

"They are necessarily subjective. Having said that, there is evidence of varying degrees of reliability about the connection between those subjective measures - what people report about their own feelings about social connectedness - and outcomes that actually matter, that you would measure as a government and as a policy analyst, things like participation in the labour force." 

Ng said New Zealand is not alone in testing wellbeing tools, with Sweden, Italy and the United Kingdom also doing so, but New Zealand is further ahead as the government wants to use those measurements to frame policy. He stressed that the proposed framework is a first version which Treasury anticipates will evolve with time. 

"How do we assure the public that this is an objective, well-founded, credible, empirical measure of how we're doing as a nation? Think of the analogue with GDP - and with generally accepted accounting principles - it's now part of the furniture in New Zealand that you measure national income with GDP. it's an international standard, everyone accepts it, nobody questions the numbers. They question what the numbers are telling you. We want to move towards that type of feel with these domains and aspects. 

"I'm comfortable we've got enough to go on. We're by no means there yet - it's taken GDP 40, 50 years to get to the point it is, and it's still being revised every five years or so, similarly with accounting standards, but they're fit enough for the purposes to which they're put."

Ross said Treasury expects to see the framework impact how public sector management operates and to get agencies to work more horizontally on issues that affect multiple agencies, along with how government considers ministerial portfolios.

Additionally, Ng said he would like to see the framework give agencies a "more concrete and systematic evidence base" for procurement proposals, and Ross said Treasury would have a clearer understanding of the outcomes it wanted agencies to deliver.

Committee chair Michael Wood said the committee wants Treasury to brief it again after it closes public consultation on July 31, and would want to get further briefings from Conal Smith, the paper's author, as well as other organisations.

"We're wanting to be very proactive around this issue and to really understand it, to tease out some of the issues in terms of our parliamentary function and what is quite an important piece of direction in terms of economic and social policies," Wood said. 


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