Working Towards Higher Living Standards for New Zealanders (TP11/02)

Abstract

Working Towards Higher Living Standards for New Zealanders describes how Treasury thinks about and works towards its vision of "higher living standards for New Zealanders".

Treasury's understanding of the term living standards goes beyond the narrow material definition - often proxied by GDP - to incorporate a broad range of material and non-material factors such as trust, education, health and environmental quality.  In taking a broad approach to understanding living standards, Treasury is in line with other economic institutions internationally. For example, the Australian Treasury acknowledges that "analyses of economic development or progress that only take income into account neglect other important determinants of wellbeing" and has thus developed its own wellbeing framework, while Stiglitz, Sen and Fitoussi's 2009 report for President Sarkozy's commission into Measuring Social and Economic Progress highlights the gap between "the information contained in aggregate GDP data and what counts for common people's wellbeing".

Treasury's understanding of living standards is encapsulated in its 'Living Standards Framework'. The Framework is centred on four main capital stocks - financial/physical, human, social, and natural - from which we derive flows of material and non-material goods and services which enhance living standards. The Framework describes the interrelationships among the stocks and flows, and highlights the need for responsible management in order to improve the living standards of both current and future New Zealanders. It also emphasises the importance of the way living standards are distributed across society, and argues that considering the distributional impacts of policy choices should be a core part of policy advice.

While the Framework is not intended to provide the final word on what matters most for living standards, it does highlight the trade-offs that are often necessary between various stocks and flows, and in doing so aims to generate debate about what matters for New Zealanders.

Acknowledgements

We would like to thank Norman Gemmell, Jeremy Corban, Vicky Robertson, Simon MacPherson, Grant Scobie, Geoff Lewis, Warwick Terry, Brock Jera and Matthew Gibbons for their support of and guidance on this work. We would also like to recognise the contribution that Rachel Pettigrew has made from inception to publication, and the input of Gary Blick and Peter Wilding in the early stages of its development.

Disclaimer

This paper reflects the current views, conclusions and recommendations of the New Zealand Treasury. It is intended to contribute the Treasury's views on current public policy debates.

Access to data used in this study was provided by Statistics New Zealand under conditions designed to give effect to the security and confidentiality provisions of the Statistics Act 1975. The results presented in this study are the work of the New Zealand Treasury and not Statistics New Zealand.