Date posted: 13/06/2019 5 min read

NZ Wellbeing Budget an ‘evolution’, not a revolution

NZ’s 2019 Wellbeing Budget has been welcomed, but chartered accountants want hard metrics for evidence-based decision-making.

In Brief

  • New Zealand’s first Wellbeing Budget was announced on 30 May 2019.
  • Although the intent of the Budget is welcome, leading CAs thought its measures and accountabilities need strengthening.
  • Improvements could include regular scorecard reporting and more granular tracking of measures to check progress.

By Pattrick Smellie

Budgets are the super-tankers of fiscal policy: huge, unwieldy and slow when altering course. So the New Zealand government’s first WellBeing Budget – a document intended to build in measures of human fulfilment as well as conventional economic success – was always going to be a work in progress.

Early judgement on the 30 May document from chartered accountants is accordingly reserved.

“While the Budget is projected as a ‘wellbeing’ budget and it is the prerogative of government to badge their budgets as they like, my sense is that this was more evolutionary than revolutionary,” says Deloitte New Zealand chief executive Thomas Pippos CA.

Grant Robertson, New Zealand finance minister.Grant Robertson, New Zealand Minister of Finance.

Committing to the Living Standards Framework

Central to the Labour Party-led coalition government’s new approach is a Living Standards Framework (LSF), which the NZ Treasury has been developing all this decade.

So far, the LSF comprises 61 indicators across ‘four capitals’ of wellbeing: natural, financial/physical capital, human and social.

However, only two new, hard metrics for measuring improvements in wellbeing appeared in this Budget. They are in a new Child Poverty Report, which is now required to be published along with the Budget. The targets seek reductions in child poverty on a before and after housing costs basis between now and 2028.

There is a lot of work still to do. The Budget allocates an additional NZ$20 million to the Treasury to continue working on the LSF.

Hard metrics needed to track Wellbeing Budget progress

Reforms to NZ’s Public Finance Act to enshrine wellbeing principles in fiscal policy are in the works but the quality of information for evidence-based decision-making is on CA ANZ members’ minds.

“It is important that the government releases the evidence so that it can be tested,” says KPMG senior tax partner John Cantin CA.
He is looking for “accurate baseline measurement, measures that avoid the worst of any perverse incentive problems and being brave enough to publish the results.”

Pippos says that “the measures and accountabilities need strengthening” and “the document needs to be more fulsome and transparent across all the different lenses that stakeholders are looking for Budgets to set out, rather than just skewed to the expenditure narrative, which this one was.”

He wants to see more use of “lead and lag indicators that allow more granular tracking of progress” and “regular scorecard reporting, confronting as this may be”.Less visible is the changed process the government adopted for Budget decision-making, which required funding bids to include a formal wellbeing assessment and cross-portfolio team bids.

Examples included the largest ever injection of new funding into mental health services in a single Budget and funding for sustainable land and water use that involved six ministers spanning the environment, climate change, agriculture, forestry, conservation and scientific research portfolios.

However, PwC tax partner Elly Ward CA suggests there’s “high level clarity about where the money’s being directed but no indication whether that’s the best use”.

“[There’s] high level clarity about where the money’s being directed but no indication whether that’s the best use.”
Elly Ward CA, PwC tax partner

“This is a start, and hopefully the start of something where we improve in terms of harder numbers,” she says.

There was “very little detailed analysis” on the child poverty initiatives and no guidance on how wellbeing priorities not touched in this Budget will be addressed, especially as new spending is forecast to slow after the next two years.

And with 61 indicators in the Living Standards Framework, the government may struggle to make it meaningful to voters.

Where will the money come from?

With plans for a capital gains tax abandoned earlier this year, Ward notes that “the tax landscape is very static”, yet the government is likely to need new revenue sources.

Cantin says there is “an emerging view that growth might not be as forecast in the Budget” if, as predicted, the economy slows.

However, the NZ Crown accounts remain very strong by global standards. The government’s self-imposed Budget Responsibility Rules require fiscal surpluses over the business cycle and net Crown debt of between 15% and 25% of GDP after 2022 – a wider target than the current 20% of GDP target.

There is no credible threat to achieving those targets at present.

Read more:

Business not totally left out of the Wellbeing Budget

Read more analysis of the NZ Budget 2019