How future governments' policies and spending priorities will be shaped by both wellbeing and GDP being factored into their decision-making

By Jenée Tibshraeny

Were the Canterbury earthquakes good for New Zealand?

Of course not.

185 people lost their lives. Many more lost their homes, their livelihoods, and their abilities to sleep soundly at night without waking up every time so much as a truck drives past emulating "that" rumble.   

Yet from a traditional economic perspective, the rebuild that has followed the quakes has been great. It has boosted the building industry and created jobs. New Zealand’s gross domestic product (GDP) would’ve been lower had it not been for the quakes.

This is the cold hard economic truth. 

So did the National-led Government do a good job managing the recovery and rebuild in the seven years following the quakes?

If GDP was your sole measure, the answer would be an outright, yes.

Yet ask a Cantab, and their response would be less definitive.

They might comment on how effective EQC has been repairing their home, the amount of funding they’ve received to access health services, the way the management of school closures has impacted their kids, or how the influx of more male than female workers from overseas has affected the social dynamic of their community.

Yet up until now, governments here, and overseas, haven’t used a consistent and robust “wellbeing” approach when making policy.

Accordingly, there hasn’t been a framework against which the public can assess a policy’s successes and shortfalls - holistically - considering both GDP and wellbeing.

Sure, in reality recent governments haven’t been completely fixated on increasing economic output at all costs. But the argument is that a wellbeing framework would result in more transparency and accountability.

A world first from NZ

It is on this basis that the Labour-led Government would like to assess bids for budget spending against a wellbeing framework in its 2019 Budget. This would be a world first.

Treasury has been working in this space for some time, but the Government’s commitment to releasing a ‘wellbeing budget’ has put the spotlight on it.

Treasury has drawn on the OECD’s ‘How’s Life?’ analysis to create a ‘Living Standards Framework’. This is based on four capitals - natural capital, social capital, human capital and financial/physical capital.

By the end of the year it intends to develop a dashboard of indicators “suitable for understanding intergenerational wellbeing”.

This will include “best evidence indicators” that enable New Zealand to be compared to other countries, “New Zealand specific indicators” that consider the Treaty of Waitangi and other aspects unique to New Zealand, and indicators for “current policy priorities”.

Treasury is releasing a tranche of papers it’s seeking feedback on, so that it can refine its ideas.

So what does this all mean?

Not the end of capitalism

Peter Wilson, the New Zealand Institute of Economic Research’s principal economist who previously spent 17 years at Treasury, says policymakers will need to have a more complex discussion.  

They will have to weigh up a number of indicators, rather than just one.

“You’ve got to sit there and say, if they’re in conflict, how do you trade them off?”

He notes a lot of the trade-offs are currently done implicitly, but under a wellbeing framework will be done more explicitly. This creates more transparency and thus better policies.

“Complexity is a feature, not a bug, when it comes to wellbeing,” he says.

Does an official move to consider wellbeing, rather than just economic output reflect a move away from capitalism? Wilson thinks not.

“Wellbeing isn’t saying that capitalism has failed,” he says.

“In 10 years’ time, you’ll still have most economic decisions in New Zealand made in markets by people buying and selling stuff. What you might see is lots of changes at the margin that make things looks slightly different.”

Cross-government support

What about the argument that it’s all fair and well for a centre-left government to get on board a wellbeing framework, but would it be palatable for a centre-right government?

“To an extent, yes,” Wilson says.

He notes different governments might put emphasis on different components of the framework. The main thing is that the trade-offs are more transparent.

“You can’t just say this is either black or white, you either like GDP or you like wellbeing. It’s all about what weight you put on various dimensions.”

Wilson notes the OECD has made a point of not inferring that any one combination of wellbeing is better.

Furthermore, he points out the previous National-led Government’s targeted social investment approach was completely in line with the wellbeing approach.

A process, not a revolution

Since the country’s fiscal position has stabilised in recent years, he says the Government has been able to broaden its view beyond GDP.

Other jurisdictions have done the same, with Wilson noting the French Government in 2008 commissioned economists Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi to investigate how the wealth and social progress of a nation could be measured without resorting to narrow metrics like GDP.

What Treasury is doing now is moving from “hand-waving about better lives to saying, what does it mean in practice?” Wilson says.

“It’s certainly an important event in public policy in New Zealand, but it’s one that’s been cooking for quite some time. The new Government has given a pretty big boost to doing this and is instructing the public service to spend a lot of time and effort getting this right.

“So yes, it’s a big thing.

“Whether it’s as big as the Public Finance Act reforms, or the Reserve Bank Act or labour market deregulation, we’ll see. It’s not a revolution…

“This is a process, not an event.”

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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26 Comments

The history of 'wellbeing' inclusion on policy-making in GodZone is not encouraging.

Local Government - in the Sandra Lee-led 2002 version - had the 'four well-beings' - social, cultural, economic, environment/infrastructure - firmly entrenched as the basis for planning and spending. What it led to was LG soft spend on the Social and Cultural axes: because any and every human activity possible under the sun, can neatly slot into one of those two. And, because it is not possible top spend the same munny twice (unless yer from Goldman Sachs), that left less for tangible assets and essential maintenance, as Christchurch found out after the earthquakes, which exposed a raft of 'failures to keep things up'. And it left the ratepayers - they of the Inexhaustible Pockets - firmly on the hook for such essentials as the Hamilton V8's, the Ellerslie Flower Show, and doubtless many other fripperies. And all the while, water wells had unprotected well-heads (Hastings and Christchurch), rates increases well above inflation (pick yer local TLA and check That out) and staffing volumes blossomed without much apparent increase in - ta-da - Ratepayer Financial Well-being.

National ditched the Four Wellbeings for LG in the 2012 Amendment Act, but I see, without enthusiasm given the above, that there's a Bill to put 'em back.

So I am afraid I've a very jaundiced view of this proposal. It is an open invitation for the usual suspects - SJW's, identity groups, and the like - to march on Parliament with their hands out. Because undoubtedly, (and who is to tell them different because Feelz), some Wellbeings are either being withheld, infringed, dribbled out too slowly or to the Wrong Groups.

It's a lovely academic proposal from well-meaning folk.

But in the current atmosphere of ever-fractionating identity groups, extreme polarisation, name-calling and general lack of cohesion, I fear it's a recipe for Rocks Ahead.

And we cannot disembark from this Ship of State....

It's certainly true that many citizens like to put their hands out for more spending (by other people) on the things they like, and that many pollies like to throw (other people's) money at lovely cuddly things. They accompany this with remarks like "lovely cuddly things, no matter what it costs" and "how can you put values on such lovely cuddly things" and "lovely cuddly things are more important than mere money".

If Treasury get this initiative right - which is a very substantial "if" - such irresponsible behaviour will actually become more difficult, not less. That is because it will make clear and transparent, the value of what is being bought with the money, and the value of other things that could have been bought with the same money.

In other words, it damn well does matter what it costs, and this initiative may help to make that clearer

I love your comment with the lovely cuddly things, but I tend to prefer lovely hard infrastructure and cuddly maintenance like drain repairs and concrete. However I know that is a freakish opinion and certainly contrary to most NZ council staff. John Oliver's comedy piece on infrastructure https://www.youtube.com/watch?v=Wpzvaqypav8 or tldr movie trailer (well worth it) https://www.youtube.com/watch?v=XTopVi1hVVM Unfortunately there is no reward &media articles for good maintenance on local infrastructure so councillors and staff de- prioritize and under fund the necessary core stuff even after something breaks, floods, slips and detrimentally affects residents and businesses.

Hmm I dont agree here, generally NZ councils do a pretty good job, unlike the USA. I mean its not often bridges fall down here in NZ.

I'd love to share your optimism that better transparency will expose, and eventually lessen, the idiocies of soft spend.

But I spent decades of my life working in, consulting to, and submitting (oh, what a Freudian word That is..) to plans of, TLA's. I know the Byzantine corridors only too well. Central Gubmint is little different, except that it lacks the immediate connection between Rates and My Ratepayer Pocket, so is much less responsive to cries of Grief and Woe from its funders.

I freely admit to being an old, pessimistic, cynic on such initiatives. But if Pollyanna does ride into town on her white horse and revolutionise policy by reference to Wellbeings, who am I to say her Nay? Or, perhaps, Neigh?

A well-being budget is simply nonsense, another pie in the sky idea dreamt up by someone with an imagination that would make Walt Disney look like a dullard .

It would only work if we were is a truly socialist state where everyone earns same, everyone has the same value systems , everyone has the same needs ( and wants) everyone was the same age , everyone was at the same level of good health and everyone has the same stuff .............. and in true communist style .........everyone is poor

Its nonsense for the following reasons :-

Firstly humans are not stupid , we know when things are good or bad, and our wellbeing is at different stages , at different ages.

Secondly how do you measure well-being ?

Will the "standard " be arbitrary ?

[PARAGRAPH DELETED BY EDITOR]

Thirdly , my well-being predicated on freedoms and rights ........ freedom of speech , freedom of association , freedon of expression , freedom to choose to have private health insurance, freedom to have my children attend private schools , legally entrenched property rights , the rule of law , and financial security , and may be a measure of safety , protection and prosperity

From those perspectives ......... my personal wellbeing and that of my family is in the high 90% range

Now my neighbours wellbeing may be measured by a whole host of other things of import to him or her.

So the whole thing is just nonsense .......... for which a team of highly paid researchers on the taxpayers payroll in Wellington are going to get their snouts into a really nice trough .

I might want to join them ........... it could improve my financial wellbeing significantly

Please keep the conversation respectful Boatman. 

Lucky you can get private healthcare insurance, partner and family are denied that "freedom" due to discrimination (trust me I have made the calls and all companies deny access). Then there is property rights which are not enforceable when a neighbour decides to bulldoze away 1/3 of land & prevent access to site so that was a nice "freedom" to lose. (You need a sizeable chunk of money for a basic legal case these days). How about freedom to have employment, nope most if not all employers will discriminate against someone with a minor disability (many still looking and still not finding any roles available even post interview with the right skills, disability discrimination is rife in NZ). Freedom of speech & association are subjective as there are several forms of speech and association against the law and criminal to participate in, (e.g. harassment), so you can cross those off the list just for being poorly thought out & clarified...

You know I really think your list can be corrected down a bit. "Freedom to die alone" there, fixed it for you.

Trust me if you have never begged a food bank for aid, gone dumpster diving you likely have take for granted freedom to live and survive which is often only available to those who can afford private medical care when needed and living necessities. Poverty kills a lot of people faster, much like contaminated water. If you think the government offers aid to those with physical disabilities then you can thank the discriminatory crowd for claiming all disabled people must be benefit bludgers and stripping them of any access & options for housing. At best a disabled family can beg now for some garage space (no bathroom) and dumpster dive for food, that usually can last for a few months before any serious health issues start cropping up. No medical access (the hospitals are under funded so appointments are delayed even for serious issues until death).

Welcome to your NZ. The NZ where even fresh tap water can kill people (Just check the gravestones from Havelock North). A few decide to take the faster & cleaner way out esp in cases of cancer or incredible pain. Some are lucky and they have been maimed through work or accident so go through ACC, or are retired and get access to the ageist benefit (because after 65 it is not bludging or greed it is a decision that regardless of tax paid or not, or ability to work, or even income the money must roll in after the magic 65 - to be increased & dropped in future generations). But wait better not get comfortable because any benefit must be below the basic level of living costs (cannot leave those beneficiaries too comfortable to live even if they have no effective freedoms or independence).

So people in South Auckland don't enjoy Moet Boatman? Hysterical. As someone who has lived in both the North Shore AND South Auckland for significant periods of time, all I can says is...you need to get out more!

I'm with the Robertson on this btw.

The proposed approach is better than a single focus on GDP as long as the spending is prioritized via socioeconomic business case assessments.
The government needs to require this, otherwise some of the issues waymad and boatman have raised will appear.

Do you really, truly think the previous Government had a "single focus on GDP"?

Yes MdM. I for one "really truly think the previous Government had a single focus on GDP". Because I had a number of conversations with Nat Cabinet Ministers about that very point.

Look at what they actually did, not what some of them said in conversation.

Would a Government solely focused on GDP growth have raised benefit levels? Instituted systematic measurement and reporting of water quality? Continued to fund the Department of Conservation?

How many of the 2025 Task Force's recommendations to increase NZ's GDP were actually implemented?

Well no, they also wanted to screw ppl over, but otherwise yes as it fooled ppl into thinking they were not being screwed over.

Give three examples of actions by the previous Government whose only intention was to screw people over.

Seriously, the fact that this even makes print is a joke. Many of us hardworking Kiwis would leave this country if this sort of stuff was rammed down our throats. Pie - in sky stuff! Spare me.

You wrote that last year. You were enthusiastic about GPD but the evidence is GPD per capita is not growing as fast as other OECD countries. However I do like some quotes from your article:
""The number of less-skilled migrants would be cut, the calibre of skilled migrants would be increased, and 'transformation' migrants would be targeted.""
and
""“It does not make sense to provide permanent residence to people working in low-earning retail management jobs or those in the tourist and hospitality industries.""
and
""“There would also be value in making the immigration process easier for small numbers of very highly skilled people.""

Makes sense to me but I see no evidence either National or Labour have been persuaded. In fact our immigration policies seem to be a race to the bottom with corruption, rorts and widespread corruption being the result of our current immigration policies. Little evidence Mr Lees-Galloway is changing direction.

I also wonder if they have been nobbled by the immigration scam that masquerades as the international student sector. The revenue generated by that sector is big, but it’s all based on an immigration rort allowing large numbers of low skilled low wage migrants into nz. It’s good business, but it’s politically and socially unsustainable, and the immigration privileges given to those “students” need to be shut down.

I do wonder about that revenue generated - how is it calculated? Does it include airfares? Is it just pure profit with no expenses and if so who is making this easy money?

Good to hear some of the ideas resonated with you Lapun. Those quotes were actually from a paper Peter Wilson (quoted in this story) and economist, Julie Fry, wrote.

I should clarify that I wasn't enthusiastic about GDP. Rather I was trying to use migration to make the concept of a wellbeing framework easy to understand, in the same way I have used the Canterbury earthquakes to do so in this article. 

GDP avoids inconvenient measures - among them the exponentially-accelerating draw-down of finite resources, the over-use of renewable resources, and the failure to fully mitigate use of both.

So GDP is essentially a lie.

Even 'well-being' isn't enough. The yardsticks should have been no draw-down of finite resources and an equilibrium-state in terms of renewable resources. They you work out what level of consumption you want to live at, and that gives you the population that can be supported.

Interesting to see the same apologists still promoting short-term gain for a small minority.

Agree. However even the Green rank and file are too blind or stupid to see these workings, too busy drooling over the latest EV that will salve their conscience. I got sick of being called "Hitler" and wanting to "punish the poor" and inflict "forced abortions on ppl just like Mao so I quit them.

The problem is of course for generations we have been promised growth will fix all our problems its almost inn ppls DNA.

WB btw.

Welcome back, PDK. It's been a while....

Good to have you back Murray, I hope you are doing well. You will be a welcome addition back here on this forum to balance things up.

GDP is pretty flawed, and leads to some pretty daft decisions. Like policies that inflate GDP but not GDP per capita and create massive future expense and a degradation of functionality. Like the excessive immigration policy that is promoted as a Most Wonderful Thing and a blind eye turned to all possible downsides, like homelessness and a stuffed up roading network.

So holding our silly politicians and bureaucrats to account in an objective manner could be a very good thing indeed.

We really do not need them to set up such future horrors as honour killings, acid attacks, and this chilling stuff either:
https://www.independent.co.uk/news/uk/crime/telford-child-sex-abuse-scan...