Managing in a Changeable Operating Environment
Our operating environment
Key challenge: working smarter rather than harder
The Treasury's view is that raising our country's long-term productivity growth rate is New Zealand's biggest economic challenge. A problem since the 1970s, raising productivity – and incomes and standard of living – relies on investing in new capital, increasing skill levels, encouraging entrepreneurial activity, and managing natural resources better.
Turning around the productivity underperformance dating back 30 years relies on the performance of firms and individuals, and the government also has a key role to play in providing an environment that enables and encourages productivity gains. New Zealand's capacity to raise the standard of living depends on the ability to raise output per worker – the amount of goods and services each worker produces and the value they add.
New Zealand is currently 22nd out of the 30 OECD countries, as measured by GDP per hour worked (a measure of productivity) and GDP per capita (a measure of welfare). Our labour utilisation rate is now one of the highest in the OECD. Our labour productivity levels, on the other hand, look relatively low. Making the best use of international connections will also be key to productivity growth, due to the country's distance from markets and its small domestic market. An ongoing focus on regulation and tax incentives is also important, but they will not by themselves lift productivity growth to the levels to which New Zealanders aspire.
To understand the issues influencing the achievement of government outcomes now and into the future, the Treasury examines New Zealand's economic and fiscal performance to date, scans the horizon for issues that are likely to influence performance in the future, and engages with Ministers and stakeholders in the public and private sectors. This work helps us identify key leverage points for improving what the Treasury can do to help the Government achieve its priorities.
The Treasury's activity choices and focus take a longer term view of achieving desirable impacts. In most cases our achievements will be dependent upon successful collaborative effort within the State sector and through engaging with the private sector.
Economic analysis, modelling and forecasting are core activities for the Treasury. By these means, we seek to identify key results for the economy and monitor the performance of policy setting against achievement of these results. We use our resources and focus (SRAs) to address those aspects of the productivity drivers in which it has been identified we can have the greatest impact in the next two to five years. Our ongoing review of the environment will gather information on change and identify areas of risk and opportunity.
Managing risk
The Treasury has developed an overall risk management framework modelled on the Australian/New Zealand Risk Management Standard [AS/NZS 4360:2004]. It is being integrated with the Risk Management policy into the internal control, audit, policy, planning and quality frameworks currently operating within the Treasury to identify and manage our strategic, operational and project risks.
Under our Risk Management Policy, risk management is the responsibility of all staff, with identification and mitigation of risk a part of planning at all levels of the organisation. In future all policy advice is to be measured by our quality framework Treasury Quality Standards for Policy Advice. This sets out the dimensions of quality to be measured and a measurement process. The details of this framework are presented at the end of this Statement of Intent.
The Treasury also undertakes a number of specialist functions and roles where additional risk management frameworks and processes are utilised. These include:
- the NZDMO – with the use of specialist risk management roles, a specific risk management framework for the portfolios managed by NZDMO and an independent Advisory Board to provide quality assurance on NZDMO's activities, risk management framework and business plan
- the NZECO – with the use of expert underwriting analysis by international specialists who have institutional knowledge to assist in the assessment of risk, and an independent Advisory Board of specialists in finance and insurance risk assessment, pricing and risk management to review the final analysis and make recommendation for approval of each transaction and ongoing monitoring.
The Treasury has a key role to play in helping the government manage the impact of a national or regional emergency. As a central agency our role includes facilitating an all-of-government response. In addition, as an organisation we must be prepared for adverse events that might disrupt our own operations, or affect the safety of our staff or visitors. The Treasury has a Crisis Plan outlining the crisis response structure, roles and people required to ensure we respond effectively to a significant emergency affecting us or the New Zealand economy.
