Presentation of the 2019 OECD Economic Survey of New-Zealand

OECD ECONOMIC SURVEY OF NEW ZEALAND Improving well-being through better policy processes, housing and migration policy Wellington, 25 June 2019 https://www.oecd.org/eco/surveys/economic-survey-new-zealand.htm

@OECDeconomy @OECD

Improving well-being through inclusive and sustainable growth

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Well-being is generally high, with some exceptions

This chart shows New Zealand’s relative strengths and weaknesses in well-being compared with other OECD countries.

For the current well-being wheel, for both positive and negative indicators (marked with an “*”), longer bars always indicate higher well-being, and shorter bars worse well-being.

Source: Adapted from OECD (2017), How’s Life.

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Income inequality is above the OECD average

Source: OECD, Income Distribution database.

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Māori and Pasifika have lower life expectancy

Source: Stats NZ, New Zealand Period Life Tables 2012–14.

5

Labour productivity has failed to catch up with leading OECD countries

1.

Population-weighted average for the top 17 OECD countries for labour productivity, calculated using 2010 purchasing power parity exchange rates.

Source: OECD, Productivity database.

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Economic growth has stabilised and the labour market is tight

Source: OECD, Economic Outlook database.

7

Proposed new capital requirements exceed those in other OECD countries

Source: Bank of England; European Systemic Risk Board; Australian Prudential Regulation Authority; Bank for International Settlements; The Office of the Superintendent of Financial Institutions (Canada); Financial Services Agency (Japan); Norges Bank (Norway); Financial Services Commission (Korea); Finansinspektionen (Sweden); and FINMA (Switzerland).

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The minimum wage is high relative to the median wage and increasing

Source: Stats NZ; OECD, Labour Earnings database.

9

Environment-related taxes are low

Source: OECD, Environment Statistics database.

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Key recommendations to promote inclusive and sustainable growth •

Prioritise improving well-being for Māori, Pasifika, sole parents and children, through better targeted policies.

•

Maintain an accommodative monetary policy stance for the time being.

•

Continue to support well-being through prudent fiscal policy.

•

Monitor the labour market effects of minimum wage hikes, especially on women and youth, and slow the increases if the effects are negative.

•

Increase bank capital requirements, as warranted by the Bank’s forthcoming cost-benefit analysis, and carefully monitor the impacts.

•

Introduce deposit insurance up to a specified limit.

•

Agree iwi (tribal)/Māori rights to water. Subsequently expand water pricing or permit trading to achieve water quality and quantity objectives.

•

Increase the emissions price to a level consistent with New Zealand’s intended transition to a low emissions economy.

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Announce a date for inclusion of biological emissions in the NZ ETS or alternative pricing and regulatory measures to reduce them.

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Integrating a well-being approach in policymaking

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An international perspective on New Zealand’s well-being priorities

Good

High employment rate Strong social support and civic engagement Strong social capital High life satisfaction Good air quality

Falling cognitive skills at age 15 Rising long-term unemployment

STRENGTHEN

COUNTERACT

Bad

International comparison: Current OECD ranking

Change over time since ~ 2005 Worse than before Same or better than before WATCH CLOSELY SAFEGUARD

High economic vulnerability, rising household debt, and rising labour market insecurity Low housing affordability High and rising obesity prevalence Mental health problems High per capita greenhouse gas emissions, threats to water quality and biodiversity

Rising disposable household income and earnings Fewer people working long hours Increased feelings of safety Low investment in R&D

Inequalities REDUCE LARGE INEQUALITIES IN: Health and educational outcomes Employment and material well-being outcomes Child well-being

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The NZ and OECD well-being frameworks have much in common

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The Living Standards Framework Dashboard has a middling number of indicators…

POL FRA GBR (Wellbeing Bulletin) ITA (short set) SWE AUT CAN FIN (Strategic Government Programme Indicators set) SVN (National Development Strategy 2030 set) NOR GBR (Measuring National Wellbeing) Wales NLD DEU OECD Well-being Framework Northern Ireland NZL (Treasury LSF Dashboard) LVA AUS (Australia’s Welfare) LUX BEL ISR Scotland KOR SVN (Indiactors of Well-being set) FIN (Findicators) NZL (Stats NZ IANZ) ITA (full set) AUS (Measures of Australia's Progress set)

Well-being measurement, monitoring and reporting Well-being policy application

NZ policy application (Treasury)

NZ measurement, monitoring and reporting (Stats NZ)

0

20

40

60

80

100

120

140

160

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… and follows good international practice – with a few data gaps still to fill Overlap of LSF with indicators in other national well-being approaches (% of frameworks with moderate or strong overlap) 70

60

Moderate

50

Strong

40 30 20

NZ’s unique context is also recognised

Note: Moderate overlap indicates that up to 33% (and more than 0) of the LSF Dashboard indicators are covered by another framework. Strong overlap indicates that >50% of the LSF Dashboard indicators are covered by another framework.

Source: Fleischer, Frieling and Exton (2019).

Human capital

Financial & physical capital

Social capital

Natural capital

Health

Subjective well-being

Jobs & earnings

Income & consumption

Knowledge & skills

Environment

Safety

Civic engagement & governance

Housing

Time use

Social connections

0

Cultural identity

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New Zealand’s 2019 Budget embeds well-being evidence at each step Cabinet agrees Wellbeing Budget priorities through an evidence-based and collaborative process which anchors Budget 2019 Impact analysis and evaluation of policies inform evidence-based priorities in future Budgets

Ministers and agencies develop initiatives targeting intergenerational wellbeing outcomes and present expected wellbeing impacts

Budget documents present the impact of Budget decisions for improving the wellbeing of New Zealanders

Assessment of initiatives includes consideration of their impacts for the LSF wellbeing domains and capitals

Cabinet agrees Budget package that best supports wellbeing outcomes, as advised by Cabinet Committees

Source: New Zealand Government (2018), Budget Policy Statement, Budget 2019, www.budget.govt.nz/budget/2019/fiscal-strategy/bps2019.htm.

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Key recommendations to integrate a well-being approach in policymaking •

Strengthen measurement of natural capital, innovation, human capital, cultural identity and integration of indigenous perspectives, within the Dashboard or the Stats NZ Indicators Aotearoa New Zealand database.

•

Ensure sufficient resources to collect key indicators on a regular basis and with appropriate granularity.

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Review experiences from Budget 2019 and further develop the methodological guidance on the preparation and assessment of spending bids.

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Integrate well-being into other policy advice and tools, such as regulatory impact assessment, and evaluation.

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Improving well-being through better migration policy

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A large income gap with Australia emerged over the 1960s-1990s

Source: The Conference Board, Total Economy database, April 2019.

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Emigration from New Zealand has been high since the 1970s

Source: Stats NZ; Statistics Canada; and Australian Bureau of Statistics.

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Nevertheless, net immigration has been high in recent years

Note: Annual as of June. Data from 2002-14 are experimental series, 2015-18 are new series.

Source: Stats NZ. 22

Immigrants in New Zealand tend to be well educated

Note: Highly-educated is tertiary (ISCED 5-8) attainment. Canada and New Zealand include people still in education. Immigrants are determined on the basis of nationality in Japan.

Source: OECD (2018), Settling In 2018: Indicators of Immigrant Integration.

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Immigrants tend to have better wellbeing outcomes than elsewhere

Source: OECD (2017), How's Life in New Zealand.

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Temporary labour migration is high

Note: The data consist of inflows of seasonal and non-seasonal (interns, intra-company transfers and working holidays) foreign workers who obtained a working visa.

Source: OECD, International Migration database and Annual Labour Force Statistics database.

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Key recommendations to improve migration policy •

Require employers to be accredited before they can recruit migrant labour. Revise job checks to ensure that migrant labour is only recruited where there are genuine shortages.

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Align the immigration, education and welfare systems to encourage training and employment of New Zealanders.

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Make it easier for migrants on employer-assisted temporary work visas to modify their visa so that they can more easily change their employer.

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Complement Regional Skills Matching Programmes by mentoring and bridge programmes.

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Improving well-being through better housing policy

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House prices have soared, stretching affordability

Source: OECD, Economic Outlook database.

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Expenditure on housing is very high

Note: Includes actual and imputed rents for housing, expenditure on furnishings and equipment, maintenance and repair of the dwelling. Imputed rents are likely to be biased upward for New Zealand because rental properties used as a proxy are not stratified by location, giving a higher weight to Auckland where rental properties are both more common and more expensive.

Source: OECD, Bette Life Index - Edition 2017 database.

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Most low-income renters pay a high share of their income in rent

Note: In Chile, Mexico, New Zealand, Korea and the United States, gross income instead of disposable income is used due to data limitations.

Source: OECD, Housing Affordability database.

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New housing supply has failed to expand to meet demand

Source: Australian Bureau of Statistics; Reserve Bank of New Zealand (2015), Financial Stability Report, May, Figure 4.3 updated.

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Homelessness is high and social housing stocks are low A. Living rough, emergency or homeless accommodation

% of total population 0.5

B. Social rental dwellings

% of housing stocks 35 30

0.4 25 0.3

20 15

0.2

10 0.1

NLD

AUT

DNK

FRA

GBR

FIN

KOR

SVN

NZL

AUS

NOR

USA

CAN

DEU

JPN

CAN

NZL

FRA

AUS

USA

AUT

SWE

IRL

DNK

ESP

NOR

PRT

FIN

0.0

5 0

Source: OECD, Affordable Housing database.

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Key recommendations to improve housing outcomes •

Replace strict regulatory containment policies (such as restrictions on multi-dwelling units, minimum lot sizes, density controls and minimum parking requirements) with clear rules around overshadowing, building size according to location and green spaces.

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Increase user charging for water and roads, and remove barriers to greater use of targeted local taxes on property value increases resulting from changes in land use regulation or from infrastructure investment.

•

Re-focus KiwiBuild on enabling the supply of land through aggregating fragmented land holdings and de-risking development sites. Give greater priority to new rental housing.

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Increase social housing provision in areas with shortages, including through expanding partnerships with non-governmental organisations and reallocating funding from KiwiBuild.

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This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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