Politics

Jacinda and Grant’s new Budget goalposts

Jacinda Ardern and Grant Robertson plan to transform the way Government measures success in next year's Budget. Their 'Wellbeing' Budget will go beyond GDP, surpluses and debt. Bernard Hickey reports.

Prime Minister Jacinda Ardern and Finance Minister Grant Robertson strode down Willis Street from his Wellington electorate office to St Peter's Church with a smile last evening, knowing they were about to signal a major change in the way the engine room of Government works.

Hooted and cheered by passing motorists -- 'Congratulations on your baby Jacinda' -- they walked into the old wooden church with a speech they hoped would set the direction for the Government for the rest of their first term after a hectic 100 days.

Initially, Ardern announced her formal targets for child poverty reduction over the next decade, including roughly halving the rate of child poverty to five percent and lifting 100,000 children out of households with less than 50 percent of the median income over the next decade. That in itself didn't appear massively ambitious, given the Government estimated in December that its first families package would lift 88,000 out of poverty and then-Prime Minister Bill English promised in the election campaign to lift 100,000 out of poverty within three years. 

Ardern assured journalists later that the five percent target would make New Zealand one of the world's best performers on poverty and that international experts had said moving below five percent was very difficult.

But the centre-piece of her agenda setting speech was yet to come.

"We want to go a step further than child poverty measures. We want to introduce, by 2019, a tool and framework that will make the wellbeing of our people a measure of our economic success," Ardern said.

"We want New Zealand to be the first place in the world where our budget is not presented simply under the umbrella of pure economic measures, and often inadequate ones at that, but one that demonstrates the overall wellbeing of our country and its people," she said.

"Till now, the country’s economic progress has been measured solely by tracking GDP. But organisations like the OECD and the IMF have, for a while now, urged countries to take a different view of what constitutes a successful economy beyond a strong balance sheet and a strong economy – as important as that may be."

Robertson said he had asked Treasury to accelerate its recent initial work on building a Living Standards Framework. Treasury has been working on it for several years, but it was not used by the previous Government.

"By Budget 2019 Grant and I want New Zealand to be the first country to assess bids for budget spending against new measures that determine, not just how our spending will impact on GDP, but also on our natural, social, human, and possibly cultural capital too," Ardern said.

"It will no longer be good enough to say a policy is successful because it increases GDP if, at the same time, it also degrades the physical environment, or drives down wages or fractures a community."

The drive for a 'Wellbeing' Budget lines up with a drive among economists overseas to look beyond GDP per capita as the core measure of economic success, given the current issues around climate change, poverty and environmental degradation.

Ardern's speech received a standing ovation and was given shortly after TV3 broadcast the results of its Reid Research poll showing Labour up 5.4 percentage points in the latest Reid Research poll to 42.5 percent, just behind National on 44.5 percent.

Beefed up Living Standards Framework

Earlier in the day, Robertson previewed the shift to a 'Wellbeing' Budget framework when announcing the date of Budget 2018 on May 17.

He told the Finance and Expenditure Select Committee the Government remained committed to its Budget Responsibility Rules around reducing core debt to GDP to 20 percent of GDP within five years, and running a surplus.

But he said the living standards tool was still being developed and would not be ready for this year's Budget. By next year it would be able to create the ability for the Government to assess the wider effects of policies, beyond what it meant for economic growth and the Government's finances.

"This is a new and better way of discussing the Budget than just the financial forecasts," he said.

After the committee hearing, Opposition finance spokesman Steven Joyce said he would prefer Treasury stuck to its core job of assessing the Government's finances. (Corrected from Opposition Leader in an earlier version)

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