Download Treasury - Government Economic Network

Opportunities and challenges for New
Zealand's economic performance: a
perspective from the Treasury
Presentation to GEN
November 2014
© The Treasury
© The Treasury
We’ve been thinking...
2004
2008-2010
• Growth
State of
Play
2013
• Economic
narrative
refresh
• Series of
productivity
papers
2014
• BIM,
including
Holding On
and Letting
Go
Dec 2010
• MicroMacro
Narrative
2011
• Briefing to
the
Incoming
Govt (BIM)
- Engage externally (e.g. today).
- Build our capability to provide
better advice (e.g. BIM).
- Help focus our resources (e.g.
medium-term investment
priorities).
© The Treasury
...and we’ve been listening...
Our work has been made much richer by the extensive
dialogue we have had with a variety of New Zealanders
around the country:
Collaborative
workshops
Treasury
Guest
Lectures
Seminars on
alternative
perspectives
Crossgovernment
panel
Regional visits
Ongoing
engagement
© The Treasury
...and this is what we’ve heard.
We used what we heard to support us in broadening our
strategic economic story to have a wider focus on a
prosperous and inclusive New Zealand that is well prepared
for the future.
National vision
Living
standards
framework
Improved
education
Child poverty
NZ is part of
the global
economy
NZ is not your
average
country
© The Treasury
Global trends create challenges and opportunities for New
Zealand…
Projected changes in the world economy over time
Percent share of world economy
© The Treasury
...in lifting our economic performance and living standards.
PROSPERITY
Economic growth
SUSTAINABILITY
INCLUSIVENESS
Social infrastructure
Increasing equity
6
Economic growth
Sustainability for the
future
Managing risks
Social infrastructure
Increasing equity
Sustainability for the
future
Managing risks
© The Treasury
Inclusiveness is about helping all New Zealanders play
their part...
Expected years children will spend in benefit-dependent households
Percent of total number of children aged between 0 and 14 years
6% of children spend their whole childhood
(13 to 14 years) in a benefit dependent household.
7 to 12 years:
14% of children
3 to 6 years:
13% of children
0 to 2 years:
21% of children
No contact:
45% of children
...and investment in quality public services has an
important role to play.
© The Treasury
© The Treasury
Sustainability is about good management of all our capital
stocks...
Breaking down tradable and non-tradable activity
9
© The Treasury
...to shift from a rock star to a rock solid economy.
© The Treasury
Making New Zealand more prosperous means overcoming
the challenges of size and distance...
New Zealand’s geographic challenge
Selected countries distance from world markets and population
© The Treasury
...to boost our international connections.
© The Treasury
Summary of our advice on policy priorities
Short-term
Inclusion:
lifting
outcomes for
disadvantaged
New
Zealanders
Sustainability:
moving to
export and
investmentled growth
Prosperity:
boosting
productivity
and
international
connections
Medium-term
Long-term
Reducing child poverty and supporting inclusion: expanding smart
social sector investment and helping those on the lowest incomes.
A continued shift towards investment in effective social sector interventions
that improve long-term outcomes, reduce long-term economic, social and
fiscal costs and focus on those most in need.
Sustaining
economic
performance
Managing
pressure on
interest and
exchange rates in
the upswing
through fiscal
restraint.
Microeconomic and state
sector reform
Increasing the
responsiveness of housing
supply, improving natural
resource management and
lifting state sector
effectiveness.
Environmental and
fiscal challenges
Managing the risks and
costs to New Zealand
of climate change and
demographic fiscal
pressures.
Internationallycompetitive business
environment
Continued strengthening of
international connections
and ‘behind the border’
policy settings.
Long-term
productivity
Tertiary education and
infrastructure are two
key priorities for longterm productivity
performance.
Medium-term investment priorities
INTERMEDIATE OUTCOMES
Applying an Internationalisation
Perspective
Internationally connected &
competitive business
environment
Productivity and Competitiveness
People have the skills & support
to participate in the economy
Applying the international lens to other areas of domestic policy
Understanding aggregate, industry and firm productivity performance
Water allocation and quality
Improving Resource Management
Improving returns from tertiary
education and skills
Child Poverty & Inequality
Improving Outcomes for Maori
Identify key issues in tertiary education system (especially low public
& private returns) and medium term policy responses
Understanding vulnerable populations and how they interact with the
system
A focus on education, economic development, housing and water
Improved outcomes for Maori
Improving State Sector through a
system-wide focus
The State sector delivers results
for New Zealanders
The Crown Balance Sheet is
Managed Efficiently and
Effectively
Treasury (State Sector) Narrative
Crown Balance Sheet
Capital Markets
Managing the Cycle
The economic cycle is managed
so that pressures in interest
rates and the exchange rate are
moderated
Housing
Fiscal Policy
Supporting effectiveness in social sector purchasing through
coordination and advice; Develop a contestable Social Housing market
Develop the 2013 State Sector narrative story to the BIM
Asset performance metrics & aggregate risk modelling
Understand how capital markets can support firms’ funding of investment
Focus on the supply, demand and intermediation of financial capital.
Options for reducing pressures on tradable sectors
Address barriers to supply in Auckland
Understand the impact of fiscal policy on the economy & vice-versa
Developing appropriate tools