Budget 2019: Goodbye 'NZ Inc' and welcome to the world of wellbeing

Friday, 24 May 2019

Prime Minister Jacinda Ardern explains how the Government's Wellbeing Budget will work.

Don't expect Finance Minister Grant Robertson to break out the crystals and incense when he releases the first 'Wellbeing Budget' on Thursday.

But he has promised this year's Budget will be 'different', looking beyond traditional measures such as GDP growth to a wider set of indicators of success.

The Government's critics have responded that finance ministers before him have never put all the emphasis on dry and narrow economic targets either.

Last year it was the '100 days' Budget - this time the buzzword will be wellbeing.

The Wellbeing Budget looks like being a common-or-garden budget, but with more spin and lower-than-usual expectations for any major policy announcements, they have suggested.

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Like every year, analysts and reporters will be scrambling through the Budget releases and national accounts on the day, trying to sort out the nuggets of 'new' news from the chaff of previously released initiatives – and trying to predict what it may mean for trajectory of the government deficit and interest rates.

If 'wellbeing' is the new 'GDP', should we just be considering humans, wonders Otago University philosopher professor Andrew Moore.

Otago University philosophy professor Andrew Moore – whose research interests have centred on ethics and wellbeing – nevertheless argues that the arrival of the Wellbeing Budget does say something about the way we think about society, and how that may be changing.

'John Key used to talk about countries as economies.'

Just think back to the days of 'NZ Inc'.

'If you consider things that way, you might think of traditional economic measures as being good ways of capturing how well a country was doing, and the nice thing is lots of businesses measure that stuff so you don't need to do anything 'extra'.'

Given that the Budget of a country is 'one of the central expressions of what the Government of the day is trying to do', repitching it in terms of wellbeing is a pretty significant step in itself, he argues.

Treasury chief economist Tim Ng explains the Government hasn't attempted to come up with a single unified measure of wellbeing.

That means there will be no 'mark of 10' for wellbeing that could knock economic growth forecasts off their perch in the public eye.

Instead, the Treasury has developed what it calls a Living Standards Framework (LSF) Dashboard to attempt to measure and track changes in wellbeing.

The Treasury publishes the 'LSF dashboard at a glance' on its website.

But Ng concedes it is not instantly illuminating.

The eight cobweb-style graphics displayed under sub-headings such as 'not in a family nucleus' might be more aptly titled: 'The Living Standards Framework Dashboard at a long, hard puzzled stare'.

What sits behind the confusing imagery is 60 measures of wellbeing.

These range from entirely subjective measures of wellbeing, such as people's own assessment of how satisfied they are with their life and the degree to which they feel they have a purpose, through to traditional 'hard data' such as the unemployment rate, housing overcrowding and life expectancy.

In the middle sit wellbeing targets that are difficult but arguably possible to objectively quantify, such as people's 'social connectedness'.

'We have deliberately tried to avoid the interpretation that you can boil wellbeing down to a headline single number, like a 'wellbeing index', because that would require you put ratings on the indicators and they are all in different units and pretty value-ladened,' Ng says.

How much one person values 'safety', health or housing might differ from another, he points out.

The dashboard is a tool that the Treasury developed for its own purposes, rather than to inform the general public, he says.

'We used it to support conversations with agencies about the bid process that goes into Budgets.

'It is true it is going to be impenetrable to most people, but at least it is there for the enthusiasts. The purpose of putting it out there in public is for transparency.'

The OECD provides an easier-to-digest assessment of Kiwis' wellbeing, versus other countries, through its 'How's Life' index, which measures much of the same information as the Living Standards Framework Dashboard.

That index shows Kiwis scoring well on most measures of wellbeing, including life satisfaction, 'social support', people's perceptions of their health, and wealth and employment.

Intriguingly, New Zealand ranks near the bottom for housing affordability but has among the highest number of rooms-per-person in the OECD.

Moore cautions that there is often a big trade-off between measuring wellbeing well, versus measuring it badly but cheaply using data that is already collected.

'You have to be careful not to take it too seriously because your first attempts can be fairly stumbling.'

How might the choices the Government made differ if it did focus solely on maximising wellbeing?

'There are lot of examples where maximising GDP can come sharply apart from maximising wellbeing,' Moore says.

'Given how much of New Zealand's activity involves breeding and killing animals and shaping them to our needs, if we thought that non-human animals could have wellbeing, as well as human-beings, that would lead to some differences.'

But he agrees that kind of change in thinking might take more than a few Budget cycles.

Canterbury University philosophy lecturer and fellow ethics expert Michael-John Turp says definitions of wellbeing tend to encompass how well people judge their life to be going, and whether they are 'flourishing', as well as their happiness.

It is possible to try to weigh the different factors that make up wellbeing 'against the same coin' by asking people about the choices and trade-offs they might make.

'There are attempts to gauge 'subjective expected utility' – which is how much good we expect is going to come about from some sort of action, and then feed that into some sort of decision framework,' he says.

'In principle that sounds okay but it is really hard to do in practice.'

So measurement is difficult.

But he agrees with Moore that the dashboard could still be a good tool and that the focus on wellbeing is valid, if not entirely new.

'Government isn't only concerned with GDP and the like. It is also concerned with other features of wellbeing – and it is basically a good thing to be explicit about that.'

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