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Working Towards Higher Living Standards for New Zealanders

Using the Framework in policy advice

The Framework is intended to be used as an input to the policy process, rather than an analytical, prioritisation or decision-making tool in itself. Its main value is in the way it encourages a broad understanding of living standards.

When applied to policy advice, the Framework emphasises consideration of:

  • Levels

    Considering aggregate levels of the factors in the Framework is important because it allows Treasury to compare New Zealand's living standards with those in other countries, and to track how they are changing over time. A snapshot of the levels of New Zealand's living standards is provided in Annex 1.

  • Distribution - now and into the future

    As well as considering aggregate levels of the factors, it is important to be aware of their distribution among individuals and groups in society. This allows Treasury to provide empirically-based advice to help governments' achieve their distributional priorities. Annex 1 provides a snapshot of how living standards are distributed across individuals and groups in New Zealand.

  • Interactions

    Finally, identification of interactions among factors in the Framework is important. Some of these interactions are mutually reinforcing synergies, for example, trust leads to voluntary exchanges and good economic outcomes that in turn reinforce the original trust. However, some interactions will require complex trade-offs. Natural capital, for example, can be consumed to build up physical and financial capital, but this may not be desirable where this results in reductions in non-substitutable stocks. Other trade-offs may occur between short and long term outcomes, between individual and societal outcomes, or between efficiency in increasing aggregate living standards and the equity of their distribution.

Decisions about acceptable levels of factors within the Framework, distributional outcomes, and trade-offs are ultimately political in nature and thus beyond the realm of policy advice. However, highlighting them will ensure Treasury's advice is robust and theoretically grounded and that governments decisions are well-informed. As such, the Framework will improve Treasury's ability to fulfil its core role as the government's lead advisor on economic, fiscal and regulatory issues, as well as its role as a central agency that has oversight over all significant policy areas.

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