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Addressing social challenges

There are ways for governments to respond to social inclusion challenges.As discussed in previous Sections, macroeconomic, labour market and institutional settings can provide an economic environment that helps individuals achieve their aspirations. This is true for all New Zealanders, including those who experience social exclusion. For example, such settings can support employment, and having a job helps people to feel valued and to support themselves and their families. But some people, for example those with health and disability problems, will not thrive without effective social services.

Social investment involves targeting resources to where we know we can make the biggest difference to improve living standards. Around 70 percent of government spending is on health, education, welfare, and superannuation.[109] Economic and social benefits can increase even if a small proportion of this money is used more effectively. Social investment puts the needs of people who rely on public services at the centre of decisions on planning and resourcing. This includes identifying people for whom early investment will improve long-term outcomes, and better understanding their needs.

This Statement includes long-term scenarios that use data on current outcomes to estimate the potential impact of improved future social outcomes. Previous Statements have analysed future cost pressures and modelled increased taxes or reductions in services to reduce cost pressures. Section Six of this Statement and the background paper The benefits of improved social sector performance supplement those analyses with social investment scenarios that estimate both the fiscal and non-fiscal outcomes of improving the effectiveness of social services. These scenarios identify that social investment can bring substantial improvements to people's outcomes while also delivering improved fiscal outcomes for the country.

The social investment modelling demonstrates that the state sector can act to improve outcomes by responding to the challenge of changing how it operates. For example, relatively small reductions in the risk of poor outcomes for our most at-risk children could considerably improve their outcomes in life.[110] Figure 4.3 shows the potential change in costs from marginally reducing the risk of poor outcomes for the 10 percent of children at highest risk to equate with that of the next 10 percent.

The effectiveness of social investment will depend on the flexibility of the system to use data more effectively and implement policies and programmes that better target resources. This will include being more responsive to new information, better at moving resources to where they can make the most difference and more willing to co-operate across government agencies, between government and non-government agencies and with the community. The benefits of social investment will not be realised unless we find these better ways of operating.

Improving state services through a focus on social investment will contribute to improved outcomes, particularly for our most disadvantaged. However, government cannot improve social inclusion and outcomes for New Zealanders by itself – it needs to be working with the broader community. This includes working more in partnership with communities, and may mean supporting changes that improve transparency, interaction, and participation of the public in improving outcomes for all New Zealanders. In the Treasury's view, such involvement underpins social inclusion.

Figure 4.3 – Potential fiscal impacts of improved outcomes for the most vulnerable children
Figure 4.3 - Potential fiscal impacts of improved outcomes for the most vulnerable children.
Source:  See the background paper prepared for this Statement: The benefits of improved social sector performance.

Note: This figure relates to Scenario E in Figure 6.3 of this Statement. Fiscal impact is the percentage point of GDP change in costs relative to the Historical Spending Patterns scenario, in 2060.


  • [109] See 2016 Budget website at:
  • [110] See the background paper prepared for this Statement: The benefits of improved social sector performance.
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