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Treasury to advise on living standards when analysing policy decisions

Treasury to advise on living standards when analysing policy decisions

By Alex Tarrant

Treasury's policy advice will include greater consideration of living standards after the central government agency devised a formal 'Living Standards Framework' to use when formulating advice to Ministers.

The framework, realeased on the same day as the OECD released its Better Life Index, will highlight how human, social, natural and financial capital flows will be affected by a given policy, and how the flows related to each other, Treasury says.

Treasury had in the past focussed on how improved economic performance could enhance living standards, it says in a paper written by Ben Gleisner, Mary Llewellyn-Fowler and Fiona McAlister.

"However, while economic performance certainly contributes to raising material living standards and will continue to be a core focus, Treasury’s role as a central agency with oversight of issues across the entire state sector requires recognition that there are a broad range of factors that contribute to people’s standards of living. Thus, in its broadest interpretation, ‘higher living standards’ encompasses all the objectives of the state sector," it says in the paper.

Over the last 18 months Treasury said it undertook research to improve its understanding of living standards, to help it better determine the effects a given policy decision could have on the wellbeing of various groups in society and their standards of living.

"The Framework includes a range of different stocks within financial/physical, human, social and natural capital. It recognises that these stocks create flows of goods and services that contribute to the living standards of New Zealanders, and that when people ‘use’ certain capital stocks and flows, this can affect other forms of capital (and their associated flows)," it says in the paper.

"The distribution of these effects may differ across the population and through time. For example, increased investment in skills could increase future flows of employment and income across the population. However, this investment could reduce the financial wealth of government or require a reduction in other government-provided services, all of which would also have effects across the population," it says.

"Ultimately, decisions about acceptable levels of factors within the Framework, distributional choices, and trade-offs between competing goods are ethical and political in nature and are therefore not amenable to definitive policy solutions. However, highlighting these choices and trade-offs will help ensure Treasury’s advice is robust and that governments’ decisions are well-informed," it says in the paper.

'Not some road to Damascus recognition for Treasury'

Treasury Secretary John Whitehead said in a speech that the framework would mean a shift in how Treasury formulated advice.

"I want to begin by saying that the Treasury has not experienced some Road to Damascus type recognition of the importance of measures other than GDP," Whitehead said in his last public speech before leaving for a position at the World Bank at the end of the month.

"I know the sceptics will take that with a grain of salt.  But the truth is that we have been wrestling with this topic for some time now.  I can remember when living standards were first proposed as our vision.  The now disbanded Growth and Innovation Advisory Board, created in 2002 to provide independent advice on growth issues, immediately asked the question:  Why not well-being or quality of life?" Whitehead said.

"Well, I don’t think there is any point in getting into a semantic wrangle over the issue.  I believe the framework we are publishing today shows that the way we interpret living standards is probably quite similar to concepts of well-being, though we do focus the framework on particular values that are consistent with our role as the government’s lead advisor on economic and fiscal policy.

"The reality is that the framework reflects, in a number of ways, what Treasury has been advising over the last 10 years or so.  This is not a sudden lurch into new territory, however, it does seek to establish a broader intellectual basis for our work - one that provides a guide for how we should be thinking about the complex and multidimensional nature of living standards," Whitehead said.

"The framework will therefore mean a shift in how Treasury formulates its advice.  At the same time I, and the Treasury at large, would like to see a shift - hopefully quite a noticeable shift - in the way that we are perceived externally.  I see that as an important part of this exercise," he said.

(Updates with Whitehead comments, link to paper)

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Oooooooh , this is a good use of tax payers' money ,..  have Treasury monitor our happiness levels ..... Hmmm , and I thought they'd be wasting our time and resources on something frivilous . ... And now we have a " Living Standards Frame-work " to uphold . ....

.... it's as if Helen Clark , Michael Cullen , and all their Departments and Commissions  of  " Silly Shite "  never went away .

A vote for JK is still a vote for Labour !

Because treasury has to advise on money policies,not social/health/mental problems ,could

we please ask them to see if they could get to produce some accurate financial

advice,information, to the goverment of we the taxpayer.Lord love a duck ,we surely are

buffeted by ignorance inflated by ego in these "public" servants aren`t we?

basically, yes


Yet another set of stats Treasury will get wrong.....give the job to the IRD...


I thought NZInc had to tighten its belt!  What crap is this that Treasury has come up with? As every day goes by I think Key and his mates are just a waste of space. I voted National last time but I really dont think I can be bothered voting again. Both the main partys are hopeless! Is Brash the only one that deals with reality? A great little country that is going downhill fast. Cheers

You're getting the picture Bobby, except that NZ has already gone down the toilet. I think what we can all expect to see is the creep of government further into peoples live even more than the little state facsiests already have.

Makes no difference who you vote for, you get the same result. Kiwis working for their country independant of party ideals or corporate blackmail is about all that will help NZ to halt it's slide.

Shame because I love my country....

Bobby - totally agree with you, this is a load of nonsense. Quality of life is important but I think Treasury should prioritise getting their forecasts right for a change - how many years has it been wrong now along with their Kiwisaver take up number estimates.

I acknowledge times are unpredictible but come on, if there forecast are so out so often then perhaps we are better getting rid of them all and reverting to crystal ball gazing (actually I think National are doing that already ...)

Absolutely correct... NZ is going downhill rapidly..

Have been completely dismayed at the general state the country is now in since moving back from Sydney a year ago. I want to believe in and feel excited about living in this country again but it just feels like we are going backwards, getting poorer and (just) hobbling along with no ideas / fresh thinking / new economic policies being driven forward.

I don't think we need any radical policies or extreme shifts.
All we need to do is stick to an oldie but a goodie, making sure the government and also the public live within their means and don't go down a big debt spiral like we are doing right now, and have done over the last 10 years.
Ruining the chances of a wealthy future.

Although that may seem pretty radical to both our main politcal parties.

I do wonder whether the bloats in Treasury read this they realise how little value we see in their dart throwing exercises...they consume nearly 5 thousand million dollars a year just to come up with policy advice that seems to be ignored by the fools in the what's the bloody point of the splurge. We could shut the joint down and save $4700oooooo a the F##$ do they get through $4700oooooo every friggin year, do they do it?


The time gaps between my 'you've got to be kidding me!' moments are getting shorter and shorter these days. This is unbelievable!!! Definitely my personal winner for the week.

So we are now going to have some more policy analysts analysing some other policy analysts analysis?!

Just get some of these numbnuts out of their Wellington ivory towers and into the real world for a year would be a good start before unleashing them on analysing analyists policy analysing analysis in self perpetuating loops.

Hamish - they're talking of accounting Natural Capital.

That IS the real world.

For nearly two centuries (and the holding of ideas is a generational thing) we've been fooling ourselves, essentially that we didn't have to count Natural Capital at any more than the opportunity cost. See a stand of 1000-year-old Rimu, turn it into house-framing, only cost extraction, milling and transport.

D'you see the problem with that?

Sadly, the vast majority in the affluent world, believe the horseshit, so it's going to be a painful metamrphosing for some folk. There will presumably be a blame-shifting phase, a: "nobody told us" phase.

This is a brave start though - someone like Espiner should ask Key where it goes....

(Or BH      :)

10-11 years ago I was working at an SOE and they were meant to be rolling out triple bottom line accounting. Heavy emphasis on 'meant to be.'


Don't hold your breath PDK. If there's any sure fire way to help senior management teams not have to make any hard decisions, it'll be by throwing some more analysts in the mix. Especially when they're looking at each others work and not lined up. It's just theory upon theory, modelling scenarios without ever really knowing if they've made account for all the variables. What would be better is if they were to make some decisions, put a stake in the ground, observe what happens, refine from there, make some more decisions. What I see though is just another merry-go-round of whiteboard brain dumps, vision statements blah blah blah...

Look at the bleating losers above!

This is Treasury acknowledging that this time it is indeed 'not the same'.

Words like 'Natural Capital' are important.

Economics (a recent phenomenon) was an immature discipline, as in: half-baked. Physics folk sometimes say that it (economics) appears to be at the stage Physics was, after Newton, but before Thermodynamics.

It applied on the upside of the Gaussian, is in trouble across the top, and doomed on the downside.

They have their work cut out - as the above posters make clear, there are a lot of 'you can grow forever' brainwashed folk out there, but it's the correct wqay forward. Whitehead was clearly not stupid.

It's worth listenig to the interview of hin on Morning Report.

"You don't want to use up all your resources, so that your children and grandchildren don't have any".

It's the quote of the day, perhaps of the year.

Well said, that man.

more correctly - economics is at the same state as aristotle

Mystic mumbo jumbo requiring belief rather than evidence


They havent even hit Newton yet

" Look at the bleating losers above " , yes , you are in there , PDK ! ...... Nicely put .

the gnomes wouldn't know happiness if it hit them on the head!!


They will again try and break something that is not measureble into an artificial measurement framework that in the end will destroy what ever value there is


Let those that understand happiness measure it:

who are they - the individual people who are contented wiht what they have and dont try and compare it to others

Thats why measurement will always fail - to be essentially happy, is comfortable wiht ones lot (albeit good or bad)  To measure automatically changes the state of happiness to unhappiness as you compare yourself to another. 

The mere act of measurement destroyes the concept


As Gnomes go anononano they do pretty well on the fat salaries they get...go figure how Treasury could go through $4700oooooo in one year.....ONE FRIGGIN YEAR  !

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Days to the General Election: 36
See Party Policies here. Party Lists here.