Rising to challenges, now

The world has always been changing, but in the last couple hundred years it has changed enormously, and the rate of change is increasing. Somehow we have to adapt to these changes without stuffing up the economy or the planet.

Rod Oram (Newsroom):  Be bold to thrive in a changing world

As it happened, 1980 was also the year we Kiwis began to realise our tried and true economic orthodoxies were failing us. So, we made radical changes in that decade, which helped us prosper in the following two.

This year we must make even bigger decisions about our economy, society, environment and international relations. But the orthodoxies we learnt in the 1980s and 90s continue to largely define our debates today. Thus, we believe some tweaks to business as usual will keep us going.

Yet evidence from around the world shows us the present, let alone the future, is no approximate continuation of the past. Economies are stagnating, politics are polarising, societies are shattering and environments are degrading. Only fundamental changes will turn those around. Any nation failing to respond constructively will be far worse off.

Social change has been pronounced too. We’re less conservative and more ambitious; we’re more ethnically diverse, yet more confident in our ethnicities and our Treaty relationships; and MMP has made our politics more representative and our governments and policies broader-based, and in some ways more effective.

We’ve considerably degraded our ecosystems, as Environment Aotearoa 2015, the Government’s first comprehensive report across land, fresh water, air and marine domains showed us. Many measures continue to deteriorate, subsequent updates confirm.

The world keeps changing. We have little influence on those changes, so New Zealand has to try to adapt to those changes.

Resolving the big debates

Setting us on the right course will take innumerable initiatives by individuals and myriad strategies by organisations, with the help of many key policies by Government. In turn, effective policies are best shaped by rigorous, broad and informed debate involving all the people affected by them.

We need urgent resolution of many of those debates. Here are snapshots of six of them:

Capital gains tax:

Any economy is distorted if one source of wealth generation is favoured over others. In our case, the lack of tax on most capital gains feeds the housing market, starves business investment and disadvantages wage earners.

Fair pay agreements:

Our businesses and their employees need to become far more sophisticated and flexible so they can keep up with, or better, exploit warp-speed changes of business skills, technology and markets. A fair pay agreement is a bottom line in a sector which encourages employers and employees to be ambitious.Good companies and their people will far excel the low bottom line of a fair pay agreement.

Wellbeing budget:

In May our government will announce its first cut at a Wellbeing Budget, based on the Living Standards Framework Treasury has been developing since 2011. There’s a fair measure of support for this from some business leaders.

No doubt, though, this partial and rather simplistic first version will be criticised as being far too complicated, a distraction from pure economic measures, and an unrealistic attempt to measure the unmeasurable.

All good progress is hard.

Zero Carbon Act:

To tackle our monumental challenges of climate change and related aspects of unsustainability we need a very long-term goal for drastically cutting greenhouse gasses, a system for setting interim targets and a way to measure our progress towards them.

My column last week described the unassailable logic of this and the great benefits other countries are reaping from it.

Resource management reforms:

When we passed our Resource Management Act in 1991 it was world-leading for its twin goals of promoting economic development while protecting the environment. Many amendments since have improved it in some respects and hindered it in others. Overall, though, it has failed to adequately deliver on either ambition.

Given our vastly increased economic activity and the resulting escalation of demands we’ve put on our environment in the past almost 30 years, further attempts to modify the RMA simply won’t work.

…we need a fundamental redesign.

Relations with China:

China has changed hugely over the past decade. Its economic scale and technological prowess, and its global influence and sense of power have grown dramatically. Yet, it has become more authoritarian in political and social terms, while reasserting the clout of state-owned or influenced corporates over private enterprises.

Consequently, economic and political tensions between China and the US, EU and many other countries are escalating fast.

Now and for evermore we need to be very clear what our values are and who we share them with; if that causes some slowdown in our growing ties with China that will help us from becoming too dependent on China; that in turn will make us less vulnerable to adverse pressures from it and will help preserve our options and resilience.

The first five sound like a pro-Government manifesto. China is a problem the Government has in part created and has to find a way of dealing with.

Housing is barely touched on under CGT and not even mentioned under the RMA.

Rising to all of the challenges above, and many more, is utterly daunting. If we are so timid as to believe tweaking business as usual will get us there, we’ll fail. But if we boldly embrace the wonderful opportunities for us in this fast-changing world, we’ll succeed.

So if we do what Oram and the Government says they want to do we should be good.

Ardern adulation at Davos but ‘self-awareness and problem-solving sorely lacking’

This isn’t reporting, it is over the top adulation from Joy Reid at 1 News:  Jacinda Ardern has been ‘absolutely phenomenal’ in Europe, generating ‘huge’ media interest

Prime Minister Jacinda Ardern’s performance in Europe has been “absolutely phenomenal”, according to 1 NEWS Europe Correspondent Joy Reid.

The Prime Minister was the big-ticket item in Davos, Reid told TVNZ1’s Breakfast today.

“Everyone has wanted a piece of her, she really has been the big hot ticket over here, especially in Davos, she was invited to all sorts of events, she was also invited to speak on some pretty high-level forums alongside Prince William, alongside David Attenborough,” Reid said.

The Prime Minister’s words were being used by big media outlets to sum up the pro-reform sentiment at the World Economic Forum in Davos in Switzerland, Reid said.

“The Financial Times has just written a piece summing up Davos, they used the Prime Minister’s quote to end the article, basically saying, ‘we don’t need to start again, but we do need to change the way we do things,’ using her to sum up the entire sentiment of Davos.”

Reid also said there was huge media interest in Ms Ardern.

There has certainly some media interest, especially here in New Zealand, but Ardern hasn’t been the star of the show everywhere. She still doesn’t rate a mention on the Reuters web page covering Davis: https://www.reuters.com/davos

Ardern did get a mention at CNN yesterday but she has disappeared from their page covering Davos today: https://edition.cnn.com/business/live-news/davos-2019-live-updates/index.html

CNN’s 5 top moments from Davos 2019

  1. China reassures: Chinese Vice President Wang Qishan downplayed fears about his country’s economic slowdown, arguing that growth remains “significant.” “There will be a lot of uncertainties in 2019,” he said. “But something that is certain is that China’s growth will continue and will be sustainable.”
  2. Soros blasts Beijing: George Soros didn’t mince words in a speech on Thursday, calling Chinese President Xi Jinping the “most dangerous enemy” of open societies. “Instead of waging a trade war with practically the whole world, the United States should focus on China,” he said. He also called on the United States “to crack down” on Chinese tech companies Huawei and ZTE.
  3. No love for AOC’s tax plan: A tax on the rich proposed by US lawmaker Alexandria Ocasio-Cortez was greeted with skepticism by some at Davos. Check out the awkward moment when Michael Dell was asked about it.
  4. Second vote on Brexit? That was the question posed to a large crowd in Davos on Thursday. Almost every hand shot up in support of a second referendum, apart from Bank of England Governor Mark Carney, who abstained.
  5. The king of conservation sits down with Prince William David Attenborough was one of the stars of this year’s Davos. In an interview on Monday, the naturalist and the British prince discussed the effects humans have had on the natural world since Attenborough started his career six decades ago.

Ardern shared platforms with both Prince William and David Attenborough but is overshadowed by both.

Ardern’s ‘wellbeing budget’ was of interest but perhaps more a curiosity than a revolution in  the making.

Searching Google news for ‘Davos’ gets no mention on Ardern there until the third page, and that links to one Stuff article on her – Jacinda Ardern showcases New Zealand’s wellbeing budget at Davos

While Ardern performed well, the reality is that like New Zealand she is not a big player in world politics and economics.

Davos was a dream for Ardern’s networking and PR, but there are question marks about her self awareness and her actual problem solving skills.

She may measure up, eventually. This year’s first ‘wellbeing budget’ may be the beginning of a real new way of doing economic management with kindness. But Ardern is a long way off being ‘absolutely phenomenal’ as a Prime Minister – and her Government has been far from it this week, with KiwiBuild looking more like a big KiwiBluster and KiwiBumble.

Ardern promoting untested ‘wellbeing budget’ at Davos

Jacinda Ardern is promoting the New Zealand ‘wellbeing budget’ approach as economic some sort of economic revolution, but at this stage it is little more than a political promise, with little tangible sign of what it actually means in practice. It is little more than an unproven theory.

We won’;t see the first ‘wellbeing budget’ until this May, and it will probably take years to see how it works out.

Prior to heading to Davos for the World Economic Forum Ardern said that New Zealand’s wellbeing budget approach was “generating significant international interest” and “I hope other leaders will come to see more compassionate domestic policy settings as a compelling alternative to the false promise of protectionism and isolation”.

Stuff: PM Jacinda Ardern pumps NZ’s ‘wellbeing budget’ at World Economic Forum

The world is watching the Government’s first “Wellbeing Budget” as economic leaders in Switzerland pressed Jacinda Ardern for details on addressing stability through tackling inequality.

I don’t know how much of the world is watching. Ardern is not mentioned in the current Davos coverage from Reuters – https://www.reuters.com/davos

US President Donald Trump, French President Emmanuel Macron and Prime Minister May were all absent from the forum as they all dealt with domestic crises.

However, it was the relative destabilisation across a number of democracies that developed a large amount of discussion around New Zealand’s first “Wellbeing Budget”, to be delivered by Finance Minister Grant Robertson in May.

“I think in part it might be because other countries, for a number of years, have had scorecards, they have done analyses. But what we’re doing with the wellbeing budget is we’re trying to embed it in the way we make decisions.

“And even re-tooling things like the Public Finance Act so it’s kind of a step further again. And also, as I said to Professor Schwab, there’s a discussion going on here about the destabilisation that we’re seeing in some democracies around the world,” Ardern said.

There were a number of different indicators and reasons as to why that was happening.

“But ultimately, it all bring us back to the same question which is people are feeling dissatisfied, and what’s the cause of that?

“If we can put into our system, new ways of operating that try and get to the heart of what it is people are seeking from their politicians, from elections, then perhaps we can get to the heart of some of that destabilisation that we’re seeing,” Ardern said.

“I think one way to look at it, is one of the big headlines coming out of Davos is the downgrading of expectations out of global growth. And why is that – well, one of the reasons they’re pointing to is of course what’s happening with global trade. And why is that – well, at a local level politicians are responding to people’s dissatisfaction and trade has become a proxy for that.”

Ardern also had a high-level meeting with forum founder and chair Klaus Schwab, where the pair talked about his priority issue deemed the “next industrial revolution”.

“And the response from the global community to issues of digital transformation, to wellbeing and essentially agendas that we’ve been pursuing back in New Zealand.

“He was certainly interested in our wellbeing budget work,” Ardern said.

A deliberately-timed op-ed from the prime minister also ran in the Financial Times overnight, espousing the “economics of kindness” to a global audience.

Ardern is talking big internationally on this, more so than in New Zealand. While there may well be interest in what she is vaguely suggesting I think there will largely be a wait and see approach in other countries.

But Ardern is making some noises about it here. NZ Herald – PM Jacinda Ardern: If a minister wants more money they need to prove how it will better wellbeing

“If you’re a minister and you want to spend money, you have to prove that you’re going to improve intergenerational wellbeing.”

I’m not sure how they can prove something in advance of it happening.

Ardern spent much of her time explaining why her Government was introducing a wellbeing budget this year – a world first.

She made it clear that any minister from her Cabinet would need to keep the Government’s new approach top of mind and ministers would need to work with each other to ensure this was the case.

“So the Minister of Health might want to work with the Minister of Child Poverty and start delivering interventions that make a difference 30 years down the track.”

Ardern is the Minister of Child Poverty Reduction.

May’s budget will measure and report a broader set of indicators, such as child poverty and housing quality, to show a “more rounded version of success”, alongside expected GDP growth.

Although the panel, including Ardern, agreed GDP was still a good way of measuring economic growth, they agreed there were many elements of a country’s wellbeing it did not capture.

But Ardern said the Government’s new approach to wellbeing does not mean GDP would become irrelevant.

“I don’t think it’s the end of GDP, I think it’s the beginning of doing things differently. We distil it down, in New Zealand, to say that for us, it’s about bringing kindness and empathy to governance.”

In terms of New Zealand’s economy, she said the country is doing well – low unemployment, solid GDP growth and a healthy Government surplus.

“But we have homelessness at staggering rates, one of the highest rates of youth suicide in the OECD and our mental health and wellbeing is not where it should be.”

She stressed these are the sorts things the wellbeing budget would measure and her, and successive Governments, could work to address.

It is not revolutionary for a Government to consider the wellbeing of people, that is pretty much what they are supposed to do, and it’;s been that way since governments were invented.

The difference, so far at least, is the focus and emphasis on wellbeing.

This is an admirable approach, but we will have to see what this means in practice, not just in how it may improve the wellbeing of New Zealanders, but what it will cost and what impact it will have on the economy over time.

The wellbeing of the people is inextricably intertwined with the wellbeing of the economy. There has to be a balance between what people would like (for their ‘wellbeing’) and what the country can afford. Labour and Finance Minister Grant Robertson have also promised responsible and prudent budgets.

We will get a first look at what the wellbeing budget agenda means in May. It sounds good in theory, but at this stage it is unproven in practice,

Robertson signals 2019 ‘Wellbeing Budget’

In his speech to the Labour Party conference this weekend Minister of Finance Grant Robertson has pre-labelled his next year budget as a ‘Wellbeing Budget’.

Budget 2018 was called Foundations for the Future, and I am proud of what we are building. But, there is more to do. More to do to build an economy that is fit for purpose for the middle part of the 21st century; an economy that is focused on future generations: more productive, more sustainable and more inclusive.

To that end, in Budget 2019 we are making a significant change that will embody our values. Budget 2019 will be New Zealand’s first Wellbeing Budget.

It will be the first budget with that label, but it won’t be the first budget by a long shot that has tried to improve the wellbeing of New Zealanders.

Last year, and the year before that (and the year before that), I have spoken about the limitation of tracking our success on a narrow measure such as GDP growth. Well, now we are doing something about it. We are moving beyond GDP to not just look at our financial health, but also the wellbeing of our people, the health of our environment and the strength of our communities.

As the Minister of Finance I will report on all of those measures at Budget time, including on how we are tracking at reducing child poverty.

It is essential that this is based on a robust and credible framework. At the core of our approach will be the Living Standards Framework developed by the Treasury, based on the work of the OECD. It is grounded in core economic concepts to assess the stock of our wellbeing. So, you will hear about financial capital, human capital, natural capital and social capital.

Next month the Treasury will release its first Living Standards Dashboard. This will show a range of indicators of our current wellbeing as a nation. It includes the tangible, like incomes and home ownership, but also the intangible like life satisfaction and cultural wellbeing. It is a work in progress. We need to make sure it is truly reflective of Aotearoa New Zealand, and all that makes us unique. It will evolve over the coming years. But it is a great start to a new way of thinking about what counts as success.

The Living Standards Framework is designed to outlive any particular Government. It will be a critical input to our Wellbeing Budget, but it will not be the only one. We are using the Child Wellbeing Strategy, evidence from here and overseas about intergenerational success and the advice of experts such as government science advisors.

And that is the critical difference in our Wellbeing Budget. Not only are we going to measure our success differently, we are putting our Budget together on a wellbeing basis as well.

We have identified five core priorities that will define our first Wellbeing Budget. I will announce the detail of these during the Budget Policy Statement next month, but they cover the areas where we think the outcomes will make a substantive difference to both our current and future wellbeing.

These priorities will include sustainably growing and modernising our economy, lifting children’s wellbeing, and yes, we will finally be giving mental health the priority and focus that it deserves.

As we speak, my Ministerial colleagues are working together to produce initiatives that will be squarely focused on long-term intergenerational outcomes. This means we are breaking down the silos of government to form a long-term view.

And we have already started.

He gives some examples.

When we first came into Government we faced a decision about what to do with Waikeria Prison. We were told that we should build a 2,500 bed American mega-prison because it had the cheapest per-prisoner cost. But maybe, just maybe, we could do better if built a smaller prison, with a mental health unit attached to address the underlying causes. And if we focused on more drug and alcohol rehabilitation and more on prisoner housing to support re-integration. That is what we have done and that is a wellbeing approach.

Better mental health support and drug and alcohol rehabilitation have been talked about for a long time, and attempts had been made to address these issues more effectively, but of course better can be done if adequate resources are made available. It will cost more initially, but as Bill English used to promote, it is a social investment that will pay dividends in the longer term.

And just this week the Prime Minister, Phil Twyford and Kelvin Davis announced a once-in-a-generation community renewal in Porirua. Now, this could have been a project just to build more houses, but we see it as a major integrated urban development plan – including education, recreation, social services, and yes, lots of houses. And delivered in partnership with iwi and local council. That is a wellbeing approach.

Al of those things are done now, but perhaps it is new to take an integrated approach to a whole community renewal at the same time.

And we are serious about embedding this approach. Chris Hipkins and I are both working on the most fundamental change to the State Sector and Public Finance legislation in thirty years. This will ensure that collaboration and wellbeing is embedded in how our government agencies work.

Again i don’t think this general approach is new, but if more emphasis is put on improving the wellbeing of people then it could make a real difference – as long as they can avoid getting bogged down with bureaucracy and they can break cycles of dependency.

So delegates, 2019 will be the Wellbeing Budget, and the first steps in changing our yardstick of success.

With finances looking healthy it is a good opportunity to invest (spend more) to achieve longer term gains in wellbeing and in costs of providing state care and assistance.

We will get a better idea of what Robertson is aiming at next May when his ‘wellbeing budget’ is announced.

However if he gets the targets and balances right it may be years if not a decade before the results will be apparent. Wise investments take time.

Full transcript of Robertson’s speech:

http://www.scoop.co.nz/stories/PA1811/S00028/grant-robertson-speech-to-labour-party-conference.htm