Wellbeing Budget Scorecard: Measuring wellbeing through shared prosperity

PROF. CHRISTOPH SCHUMACHER

Photo by Dawid Zawiła on Unsplash

The Wellbeing Budget burst onto the scene on 30th May 2019 with much hype and promises of delivering more than your average budget. However, creating sustainable wellbeing involves more than throwing money at a problem, it is about addressing the fundamental and growing gaps in society. Massey University’s Knowledge Exchange Hub has developed the Shared Prosperity Index (SPI) which calculates wellbeing in terms of how different segments of society have benefited (or otherwise) from New Zealand’s growing economy. So how did the Wellbeing Budget do in terms of addressing shared prosperity?

The latest SPI data suggest that the areas in real trouble in New Zealand are health and housing. This is in line with the public’s view, at least from a poll from Chartered Accountants Australia and New Zealand (CAANZ), which shows healthcare is the number one issue Kiwis hoped Thursday’s Budget would address (46.7%) followed by Housing (33.8%), with Poverty (30.7%) and Education (30.6%) close behind.

In terms of healthcare, the state of mental health services is a major issue in New Zealand. The SPI shows there has been a sharp rise in adult mental health issues since the early 2000s, which can take a huge toll on individuals and their families, society, and the economy. Similarly, over that time there has been a sharp rise in anxiety disorders and depression. The rate of suicides has actually dropped since the 1990s but there seems to be an upward trend since 2015. The government has earmarked a sizeable $1.9 billion for mental health. They have also pledged $21M over 2 years for the ailing ambulance services.

As for housing, housing affordability measures for owning and renting houses have steadily decreased in the last decade. Unsurprisingly, according to the SPI home ownership has also fallen as segments of the population are priced out of the housing market. In 1991, 73 percent of households were owner-occupied, a figure that had dropped to 63 percent by 2018.

Housing affordability is a hot topic particularly since the 2018 budget announcement that KiwiBuild would deliver 100,000 quality, affordable homes throughout New Zealand within a decade. The government has said it will only deliver 266 new homes by 1 July 2019, and last week it was forced to buy back seven Kiwibuild homes that had failed to sell on the open market. The 2019 budget allocates no new funding to Kiwibuild.

Housing affordability aside, the 2019 budget has given a boost to the homeless population through its Housing First programme. The government has pledged help for an extra 1044 long-term homeless. The aim was to reduce the time the most vulnerable “priority A” clients (those with the highest need) on the social housing register spent waiting for a home, by 20 percent by 2021. This is a good thing as the median number of days spent waiting for social housing has increased under the Labour Government from 49 to 106 days. The SPI also highlights the sharp rise in priority A housing applicants and the levels of homelessness since 2000.

In terms of safety and security, the SPI indicates that violent crime and the chances of being a victim of violent crime have been falling in New Zealand over the past 25 years. While violent crime has decreased, the percentage of prisoners in remand and post-sentence offenders has steadily increased since 1999. From a shared prosperity point of view, there is a strong link between inequality and rates of imprisonment.

The budget has pledged a major $98 million to try and break the cycle of reoffending and imprisonment amongst the Māori population, including helping troubled youth move from state care or the youth justice system into independent living. Recognising a large component of violent crime in New Zealand is family or partner violence, the government has also pledged $320M towards preventing family and sexual violence.

The SPI highlights the problem of poverty in New Zealand, especially child poverty and poverty amongst the elderly. Reducing child poverty is one of the government’s five priority areas. What we haven’t seen is a commitment to the poverty of the elderly population. In a society where prosperity is less well shared, the more vulnerable, like the elderly, may be disproportionately impacted. The elderly are also a category of the population that can end up “asset rich and cash poor” with money tied up in assets like property while existing on a low income. The only small concession to the elderly in this year’s budget is the $7.7M to upgrade Supergold card.

The SPI also shows that the Māori population, in general, are receiving inadequate income to effectively share in the country’s prosperity. The government has earmarked $56.1M over 4 years for the Whenua Maori Programme. This investment recognises the challenges facing Māori freehold landowners and the value of pursuing opportunities which will lead to the sustainable and inter-generational development of the land and its people.

Education has been brought into sharp focus in the lead up to the 2019 budget with the largest-ever teachers strike affecting 770,000 school children and their families. At the primary and secondary level, the government has announced $95M to boost the number of teachers. The will also provide funding support for schools who agree to drop requests for donations and have removed the NCEA fee, both of which will help low-income families. At the tertiary education level, The government has announced it will be scraping their two-year-old policy of paying the first year of university fees. Even though it seems this policy did not meet the stated aim of increasing the numbers of students entering tertiary education (coupled with needing to save money because of NZ’s worsening economic position), cancelling it will worsen student university fees and loan debt balance on leaving study. The numbers of students entering tertiary study have dropped from 13.5 percent in 2005 to 9 percent in 2017, which is concerning as higher levels of education are becoming even more important in order to access fulltime or steady employment.

So where does all of this leave the government in terms of balancing the competing demands of the populace? On balance, the government seems to have got it about right for improving the level of shared prosperity in New Zealand. In terms of a scorecard the only two areas where they “could do better” is in the commitment to fix housing affordability and state housing demand and in recognizing and addressing poverty in the elderly population.

To find out more about how New Zealand fared on all the Shared Prosperity Index dimensions, go to www.sharedprosperity.co.nz. An online dashboard shows how the country is performing across each of the eight dimensions, as well as an aggregate index for measuring New Zealand’s overall shared prosperity over time.

GDPLive is a world-first real-time GDP forecaster, which uses big data and AI to form estimates of economic activity in NZ. Go to: www.gdplive.net