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Measuring wellbeing – not just GDP - why and how?


One of New Zealand’s most established economic research agencies, BERL, will explore the Government’s intention for a Wellbeing Budget next year at its inaugural annual wānanga in Wellington on August 23.

The 2019 Budget has been heralded by the Minister of Finance as The Wellbeing Budget.

BERL chief economist Dr Ganesh Nana sees the wānanga as an opportunity to examine what a wellbeing Budget might mean in practical terms, especially when a budget is more normally understood to be all about dollars and cents.

“We are looking forward to hearing from the Ministers of Finance, Māori Development and local government on their perspectives on wellbeing and to address related questions,” Dr Nana says.

“The government says it is committed to putting people's wellbeing and the environment at the heart of its policies, including reporting against a wider set of wellbeing indicators in future Budgets.

“In terms of why the change, a shift away from GDP seems well warranted. Nevertheless, there are many economists who hold onto GDP like a security blanket, reluctant to venture outside their comfort zone and into the unknown.

“And, importantly, GDP remains internationally comparable. With the primacy of GDP and so of dollars and cents, policy decisions can be simply boiled down to calculating cost-benefit ratios; or, crudely, choose policies that give the biggest bang for each buck.

“Equally, many economists will concede that the GDP measure is a poor proxy for prosperity. GDP tells us little about how prosperity is distributed across groups in the population; and not much about environment degradation that may have occurred as collateral damage in achieving the stated GDP.

“Nor does it tell us about non-market, non-monetary activities such as voluntary work and stay-at-home parents. With these omissions and discrepancies, are policy decisions based on maximum contribution to GDP justified?

“Sticking to narrow GDP measures means spending on environment remediation don’t stand a chance, and investment in te reo revitalisation remains an incredibly difficult sell, while unpaid family or whānau caring for disabled or elderly are effectively invisible.

“But, there appears no obvious replacement to GDP. Going down the wellbeing route could suggest an assessment of the value of these broader perspectives on prosperity. However, this route is by no means clear cut.

“There are numerous questions that immediately arise. What does wellbeing entail? And whose wellbeing (or prosperity) are we measuring – yours, mine, family, whānau, hapū, community, nation? And, is it indeed measurable?

“And what of the wellbeing frameworks already in place in agencies and institutions around the country? Of course, there will be some who will not want a bar of this. There will be cynics that see talk of Wellbeing driving Budget decisions as being the road to expenditure that yields poor value for taxpayers’ money.”

Dr Nana hopes the wānanga will be a good opportunity for the Ministers to hear from a range of stakeholders and, equally, for attendees to assess whether this is part of the promised transformational government, or is it merely a window-dressing exercise to make this administration look different?

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