Chris Trotter asks whether Treasury is suggesting we change everything – so nothing changes

By Chris Trotter*

Rewind the clock 40 years. It’s 1986. The economic reforms of the Fourth Labour Government are just kicking-in. There is no Internet. Smartphones are still a long way off. Social media has yet to take over our lives. The Soviet Union and its Warsaw Pact satellites are still going strong. Geopolitics remains frozen in the Cold War. Iraq is an ally of the United States. Saddam Hussein is waging a brutal war against Iran on behalf of the Reagan Administration. China is still poor. At night a single skyscraper towers above the dark streets of Guangzhou. Nobody sensible believes that history is about to end.

Forecasting the shape of a world moulded by the events of forty consecutive years is a ridiculous exercise. In a global society shaped by continuous technological innovation and all the social, economic, and political changes that follow in its wake, predicting the future is an exercise better suited to charlatans than economists and politicians.

Undaunted by the absurdity of the exercise, the New Zealand Treasury has for the past 24 years devoted time and resources to compiling what it calls  He Tirohanga Mokopuna - the Long-term Fiscal Statement. To be fair to its authors, this four-yearly exercise is not presented to its readers as a prediction of the future. The document is simply a description of what the fiscal situation would look like 40 years hence “if spending and revenue policies were left unchanged”.

Get that? This is what the economic models developed by the Treasury are projecting for New Zealand if nothing changes.

The opening paragraph of this essay is intended to remind us of how little even the most talented “futurists” of 40 years ago could see of what lay ahead.

How far back would we have to go in history to encounter societies in which nothing changed?

If by “nothing changed” we mean no developments that altered to any fundamental degree the technological, economic, social, and political experiences of ordinary people, then we would certainly be looking at societies operating prior to the modern era.

For long periods in the medieval and classical eras the experiences of one generation did not differ significantly from the experiences of either the generations that came before them or those that came after them.

To encounter what might be called “steady-state” human societies, however, we would have to travel back to pre-history; those vast stretches of time before the advent of agriculture and animal husbandry; before cities and writing.

In the steady-state hunter-gatherer communities of homo sapiens, many centuries could pass without the general shape of human lives undergoing anything even vaguely resembling the changes we accept as basic to modernity.

It is sobering to think that out of the 250,000 years homo sapiens have roamed the earth, significant change of any sort did not become a feature of human society until about 10,000 BCE. In other words, the percentage of human existence subject to fundamental change of any sort comes to about 4.8 percent. The fraction of the 12,000 year period in which the changes fundamental to the shape of our present world unfolded is about the same – one twentieth.

All of which makes the Treasury’s assumptions and projections appear even more absurd. From the Sixteenth Century onwards the pace of change has only quickened. Indeed, mapped graphically, the rate of change looks exponential. Confronted with this exponential curve, any projections based upon the assumption that nothing will change makes no sense at all.

So why make them?

Why is Treasury projecting that by 2065 Government debt will have risen from 40 to 200 percent of GDP?

One very uncomfortable explanation is that Treasury has released these projections in confident expectation that, in spite of their warnings, they will be treated by journalists and commentators, as predictions. Indeed, experience suggests that in very short order they will be presented as facts.

Remembering always that this department of state is the principal guardian of the neoliberal flame: hardly surprising, given that it was Treasury that lit the flame in 1984!

Having released six of these Long-Term Fiscal Statements since 2002, Treasury is now well aware of how their contents will be used. Those areas of expenditure highlighted in its “Statements” as presenting serious fiscal challenges cannot avoid becoming the targets for journalistic, academic, and political attention.

The cost of NZ Superannuation and the rising percentage of health spending that will need to be spent on the elderly are Treasury’s favourite targets. Without significant adjustments the fiscal burden represented by older New Zealanders is projected to become fiscally unsustainable. Over 24 years, these observations have provoked jeremiads of ever-increasing alarm and despondency. Very much a case of “Ignite the blue touch-paper and stand well clear.”

The most obvious at-least-partial solution to this “problem” – raising taxes – is alluded to with trepidation. Treasury makes it clear that the tax increases required would be substantial.

“Meeting expenditure pressures through tax increases alone would require the average tax rate on labour income to gradually increase from 21% in 2025 to 32% in 2065. Alternatively, goods and services tax (GST) would need to increase to 32% by 2065.”

Hard-pressed already, the ordinary taxpayer quails before Treasury’s projected increases.

Inevitably, the arguments in favour of transforming NZ Superannuation into something less generous and more affordable gain additional traction.

Missing from Treasury’s “projections” of the future are collective solutions to economic and social problems. Little space is afforded to policies aimed at lifting the productive capacity of the elderly and bolstering their independence. Similarly absent are policy initiatives aimed at reducing the incidence of currently widespread and expensive conditions such as hypertension and diabetes. Encouraging an end to unhealthy human behaviours is likely to prove a lot less costly than continuing to pay for their consequences.

Reading the latest Long-Term Fiscal Statement one is soon assailed by the suspicion that the world Treasury is projecting 40 years from now, a world based on the assumption that existing spending and revenue policies are left unchanged, is being presented to us in such a way that we can see no alternative to adopting the radically constrained spending and revenue policies implicit in Treasury’s observations. That this would keep the balance of power in New Zealand society essentially unaltered, and that this is precisely what Treasury favours, is a conclusion difficult to avoid.

How different this 2026 Treasury’s preference for preserving the status quo is from the 1986 Treasury’s determination to press ahead with the revolutionary transformation of New Zealand it had begun, with Labour’s support, in 1984. Those bureaucratic revolutionaries could not foresee the changes that would shape the next 40 years, but they were all irrevocably committed to the idea that matters could not remain as they were.

There is a mighty difference between changing the wider world for the betterment of everyone, and changing it to make sure that for you, your family, and your class, everything remains the same.

*Chris Trotter has been writing and commenting professionally about New Zealand politics for more than 30 years. He writes a weekly column for interest.co.nz. His work may also be found at http://bowalleyroad.blogspot.com.