Treasury's refreshed views on New Zealand's economic strategy: a review article

ABSTRACT

At the 2014 election, the New Zealand Treasury's briefing papers included a document containing the Treasury's refreshed views on New Zealand's economic performance and strategy. This paper tests the evidence, analysis and strategic perspectives presented in that document, some of which are not well-founded. The paper builds on the Treasury's analysis of prosperity, sustainability and inclusiveness, but advocates a strategic objective of ‘value-added growth’ rather than ‘export-led growth’. A major theme is that New Zealand's economic strategy must be grounded in its own particular geography, history and resources to take advantage of specific opportunities in the global economy.

KEYWORDS:

• Economic strategy
• New Zealand
• well-being

Acknowledgements

Parts of the paper were presented to a joint workshop on working together for higher living standards, hosted by Statistics New Zealand and the Treasury on 26 November 2014. An early draft was presented to the annual conference of Australia and New Zealand Regional Science International at the University of Technology Sydney, 1-4 December 2015, and was discussed at a seminar at the New Zealand Treasury hosted by Girol Karacaoglu (Deputy Secretary, Macroeconomics and Research) on 22 January 2016. This version was presented at the New Zealand Association of Economists conference, Auckland University of Technology, 29 June to 1 July 2016. We are grateful to participants at all of these events and to our colleagues in the Agribusiness and Economic Research Unit for their insightful comments. We also thank Bryan Perry (Ministry of Social Development) for his very helpful suggestions on the use of low income data in his report Household Incomes in New Zealand: Trends in Indicators of Inequality and Hardship 1982 to 2014. Finally, we thank two referees, an associate editor and the editor of New Zealand Economic Papers for insightful feedback on two earlier drafts. The views expressed in this paper are our own and should not be attributed to any of the persons or organisations mentioned in these acknowledgements.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. In their guide introducing the HLSF, the Treasury (2015, p. 15) reinforce this pre-eminence, saying ‘we put economic growth at the top (after all we are the Government's lead economic advisor)’. This was also a major element in the Speech from the Throne at the opening of Parliament following the change of government at the 2008 general election (Satyanand, 2008): ‘The driving goal of the new Government will be to grow the New Zealand economy in order to deliver greater prosperity, security and opportunities to all New Zealanders’.

2. See, for example, Dalziel and Saunders (2014b). Output per capita will also be higher if physical capital depreciates at a lower rate or if the population grows more slowly. The model's implications for raising the sustainable growth rate through increases in national savings rates and labour productivity are widely adopted in policy advice; they were, for example, the two medium-term policies advocated by the International Monetary Fund (IMF, 2015) after a recent official mission to New Zealand.

3. Treasury (2014, p. 17). Note that this reward for such a radical transformation is not high. A 3% increase in GDP in 2060 can be compared to the data in Figure 2 that per capita GDP might be expected to increase by 2.5% in a standard year.

4. The trick of standing upright here, published in Colquhoun (1999).

Additional information

Funding

Ministry of Business, Innovation and Employment [grant number AGRB1201].