Our Outcome Contribution (Continued)
Improved Overall Economic Performance
Treasury Roles
Economic – Financial – Central agency
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Treasury's Outcome
Improved overall economic performance
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Sub-outcome
Ministers, the Government and government agencies give due consideration to policies that are important for economic growth and the connections between overall economic performance and other desired outcomes when developing strategies and evaluating intervention options.
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Treasury's Contributions
To achieve this outcome, the Treasury will:- provide analysis and advice to Ministers on broad economic strategies to promote economic growth and their impact on living standards
- analyse the drivers of productivity growth and advise Ministers on the policies, regulations and institutional arrangements that best achieve improved overall economic performance
- provide advice on the relationships between these and other government outcomes.
In doing this, our emphasis will shift toward a more dynamic growth story, as well as growth accounting analysis, about economic performance that is strongly evidence and framework based. This means explicit identification and ongoing testing of the results that matter for the economy to ensure our advice remains current and draws on latest information.
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3-5 Year Results Areas
We will concentrate our effort on those policy areas, which are most significant and pervasive for New Zealand’s economic performance. The most significant and pervasive issues are likely to be those that span many markets and decision-makers, and will in turn have a large growth impact. On this basis, the Treasury expects to undertake work over the next three to five years in the following 12 areas.- Financial markets, investment and savings
- Competition and regulatory frameworks
- Sustainable environment, particularly climate change
- Skills acquisition and schooling outcomes
- Social mobility
- Taxation
- International connections
- Infrastructure: energy, telecommunications, transport
- Innovation
- Auckland
- Labour market performance
- Measuring and monitoring economic performance
Why economic performance is important
Economic growth is important for increasing New Zealanders’ living standards. Through its economic transformation theme, the Government is seeking to progress New Zealand to being a high-income, knowledge-based market economy, providing an improved quality of life for all New Zealanders.
We work with other government agencies to achieve our outcomes. However, the Treasury’s unique contribution towards these goals is to provide an overall perspective on economic growth that incorporates analysis of institutions, macroeconomics, microeconomics and the economy as a system, complementing the contribution of other government agencies. Combined with ongoing monitoring of the New Zealand economy’s performance, the Treasury is able to identify and advise the Government on the pervasive and significant economy-wide issues that matter most for New Zealand’s economic performance. As part of this process we seek to identify the key results that matter for the economy and monitor the performance of policy settings against achievement of these.
Because we look across the entire State sector and both the macro and micro economy, we are able to make links between sectors and can offer a strategic “helicopter” view to the Government on the priorities for policy change.
The Treasury seeks to focus its analysis on those policy issues that are most significant and pervasive – and to do so in a way that brings together frameworks, empirical analysis and on-the-ground evidence of regulatory performance.
New Zealand’s economic performance
The primary challenge in improving New Zealand’s economic performance is to improve productivity performance.
- Per capita GDP by country compared to OECD total
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- Source: OECD. Data periods vary between countries. For New Zealand, data is as at year ended 31 March. For most other countries, data is for previous calendar year (eg, 2005 data point is 2004 calendar year).
New Zealand’s per capita Gross Domestic Product (GDP) relative to the Organisation for Economic Co-operation and Development (OECD) average declined from the 1970s through until the early 1990s. Since then, our per capita economic growth rate has been similar to or slightly better than the OECD average, leading to a gradual relative improvement. Despite this slight improvement, New Zealand’s per capita GDP was approximately 88% of the OECD average in March 2005.
This performance is reflected in the productivity measures for the New Zealand economy. While New Zealand has improved its per capita economic growth performance since the early 1990s, growth in New Zealand’s labour productivity rates remains slow. The OECD estimates that New Zealand’s labour productivity rates grew at an average annual rate of 0.8% between 2001 and 2005, whereas the average for all OECD countries is estimated at 1.5% for the same time period. While New Zealand’s labour productivity performance may have been affected by the increase in labour utilisation that occurred during this period, measures of productivity suggest that there is a large gap between the level of labour productivity in New Zealand and that of upper-income OECD countries.
In advising on policy changes to improve New Zealand’s productivity performance, the Treasury’s advice over the next three to five years will consider key social and international trends, including:
- Globalisation. This continues to pose both threats and opportunities to New Zealand, with the opening up and integration of capital and product markets and increasing labour mobility.
- Environmental sustainability, including climate change. The response of New Zealand and other countries to this challenge will affect consumption trends internationally, and the competitiveness of New Zealand’s exports.
- Ageing population. This will alter the profile of New Zealand’s labour supply and consumption trends. Ageing populations in other developed countries are also likely to affect New Zealand through changes in consumption, capital markets, and the profile of immigrants to New Zealand.
- Innovation and intellectual property. Intellectual property is increasingly important as a source of value in products and services. Globalisation and increased speed of information flows pose a challenge to protecting intellectual property.
