THE TREASURY’S LIVING STANDARDS DOCUMENT: NEW WINE OR OLD BOTTLES?

In May the Treasury published a paper Working Towards Higher Living Standards for New Zealanders.

It corresponds loosely with similar exercises by the OECD (on which I blogged recently) the IMF, the US Treasury and the Australian Treasury.

It’s not immediately obvious what’s new in the Treasury’s thinking.  The paper makes the conventional points that GDP as a measure of welfare has its limitations and that in framing policy, factors such as equity, environmental quality, the benefits of leisure and social cohesion need to be taken into account.  All these have been well-accepted principles of public policy in New Zealand for as long as I can remember.

Somewhat more prominence is given to individual rights and freedoms than in past Treasury writing.  However, the authors’ grasp of relevant concepts seems a little unsteady.  At one point the paper observes:

Some of the rights and freedoms that institutions should protect can be considered absolute and should not be traded off for another person’s wellbeing.  For example, the United Nation’s Universal Declaration of Human Rights (United Nations, 1948), to which New Zealand is a signatory, sets out rights that are intended to be alienable and indivisible.

But this is immediately followed by the claim that “the right to one’s property is not an absolute right.”  Presumably the authors have not stumbled on Article 17 of the declaration which reads:

(1) Everyone has the right to own property alone as well as in association with others.

(2) No one shall be arbitrarily deprived of his property.

Australian economist Winton Bates (who spent some time in the New Zealand Treasury) blogged on the paper here.  He makes a good point when he says:

… it would be hard to find a better indicator of relative living standards as perceived by New Zealanders and Australians than net emigration to Australia. Net emigration to Australia seems to me to be a highly reliable indicator because the preferences that people show about where they live must be heavily based on their assessments of living standards.

The relevance of this indicator was not considered in the paper.

At the launch Treasury was asked how its new framework differed from the OECD’s framework for its New Zealand reviews.  No differences were identified.  The operational significance of the new framework appeared to be a blank space.

Winton Bates observed that:

In launching the framework the Treasury Secretary, John Whitehead, certainly did not try to hide the fact that an important objective of the exercise, as he sees it, is to bring about a shift in the way NZ Treasury is perceived externally. He said:

“Misperceptions of the role Treasury has played since the 1980s have limited our ability to be persuasive when talking about what matters most for living standards.  Some have never got beyond believing that we are the root of all New Zealand’s economic evils.  Others see us as little more than the defenders of fiscal virtue …”

Winton commented:

I find that baffling. In the 1980s the NZ Treasury played an important role in saving that country from economic ruin. Why is that not more widely understood and appreciated in New Zealand?

I find that baffling too.  The Treasury seems to be at pains to tell the outside world that it is much nicer than people think.  As a demonstration of how nice it is, it will acknowledge that GDP is not a fully satisfactory welfare measure.  And because it is fundamentally nice it deserves a better hearing and more influence.

This seems a Quixotic hope.  If Treasury is doing its job properly it will not be loved – by interest groups seeking political favours, and by ministers and government departments whose spending plans are thwarted.  What the Treasury should aspire to is not love but respect – for the quality of its work on behalf of taxpayers, consumers and the community at large.  It has lost a good deal of respect on account of sub-standard work in recent years.  There is ground to be made up.