Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Treasury think-piece breaks sacred cows aplenty

Treasury think-piece breaks sacred cows aplenty

By Pattrick Smellie

Oct. 29 (BusinessWire) – Shorter prison terms for non-violent offenders, larger school class sizes, reduced public services, a higher age of pension eligibility, and a higher rate of GST are among the many unpalatable choices the Treasury says New Zealand must face or watch public debt levels blow out unsustainably.

Among other sacred cows examined for slaughter are the notion that NCEA is working just fine, and that too much of the public debate about government spending focuses on the wrong things.

"We need to focus on what works and what doesn't and it's for the public to think about it wants overall," said the Treasury Secretary Whitehead at a presentation for media and economists. "For example, (talking) about having healthier people rather than numbers of doctors' visits, instead of measuring a government's commitment to policy by spending levels".

The government's lead economic policy adviser has used the publication of its second Long Term Fiscal Statement to stir public debate on what it calls the "challenges and choices" facing the country economically, and warns that even much higher rates of economic growth would not fix the looming debt problem.

As much a public relations document as a Treasury report, the 2009 40 year outlook is in stark contrast with the first such statement, published in 2006 to minimal fanfare by the then Finance Minister Michael Cullen.

The document is clearly intended to assist the Government's expectation-setting ahead of the 2010 Budget, and to give real examples of what Finance Minister Bill English's $1.1 billion a year new spending cap could mean in practice for public services.

The underlying message is that if historical productivity growth of 1.5% a year does not improve, and Budget deficits projected over the medium term are not controlled, public debt to GDP could blow out from 106% today to $223% by 2050.

If productivity growth were to improve by 2% a year, labour force participation was 3 percentage points higher than it is today, and new migrants added 15,000 to national population annually instead of the 10,000 forecast, net debt would rise to 146% of GDP by 2050. "This is still an unsustainable fiscal position," the report says.

It looks at several core areas of government spending, and notes the huge drive to increased spending that the national superannuation scheme represents, because its payout rate is linked to wage movements and people over 65 will be approaching half the total populatioin by 2050, on current projections.

It notes that the New Zealand tax system, lauded in the late 1980s, is now incapable of raising sufficient funds and relies too heavily on company and personal income taxes, while the 12.5% rate of GST is low by global standards, and New Zealand has no property or capital gains taxes.

Looking through the low productivity performance of public sector spending, the paper makes a number of radical suggestions as to the kinds of actions that a government seeking to control spending over the long term might pursue.

These include:

• Linking the age of pension eligibility to national average lifespans, as Denmark has done, with changes not kicking in until the late 2020's.

• For a quarter of all pensioners, Government Superannuation is less than 20% of their income, while for the other 75%, it is more than 80%. Halving or axing eligibility for pension payments to this upper quarter would yield significant savings. A trade-off could be to spend more on health services to meet the growing costs of an ageing society.

• Adopting health system practices which, in other countries, have halved the length of average hospital stays.

• New Zealand's prison population is forecast to rise from 150 prisoners per 100,000 citizens in 1999 to 225 per 100,000 by 2017, and justice system costs have doubled in the last 15 years despite a stable crime rate. "Given that New Zealand's imprisonment rate is already one of the highest in the OECD, and recent increases have had little impact on recorded crime rates, it is unlikely that further increases in our imprisonment rate will be the most cost-effective way to achieve lower crime rates," the Treasury said.

• Education funding assistance is indiscriminate and risks not being captured by groups in society who need it most. The report suggests more targeted assistance, especially in early childhood education funding. Likewise, basic indicators should be reassessed. "Research shows that smaller class sizes are a relatively expensive and ineffective option", except for some disadvantaged children if the small classes can be sustained over several years.

(BusinessWire)

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

RNZ: Porirua Most Expensive Region To Rent, According To Trade Me

A rental website shows this town is now New Zealand's most expensive region to rent a house, ahead of Wellington and Auckland cities. More>>

ALSO:


Stats NZ: Nearly 1,000 More Big Businesses Now Than Two Decades Ago – Media Release

There are now 2,690 big businesses in New Zealand employing more than 100 staff – nearly 1,000 or 58 percent more than 20 years ago, Stats NZ said today. Over the 20 years to February 2020, the total number of enterprises in New Zealand increased ... More>>

ALSO:

RNZ: Housing Boom Could Get Worse, Economist Warns

Economists are calling on the Reserve Bank to reinstate lending restrictions, warning the housing market is spiralling out of control. More>>

ALSO:

Westpac: Sets Out Plan To Go Cheque-Free

Westpac NZ has announced details of its plan to phase out cheques, after signalling in May that it would be supporting a move to other forms of payment. Cheques will cease to be available as a means of payment after 25 June 2021. Westpac NZ General ... More>>

ALSO:

NZTA: Major New Zealand Upgrade Programme Projects Go To Tender

Two major New Zealand Upgrade Programme projects are beginning tenders for construction. The New Zealand Upgrade Programme is a $6.8 billion investment to get our cities moving, to save lives and boost productivity in growth areas. The first Auckland ... More>>

Reserve Bank: RBNZ Seeks To Preserve Benefits Of Cash

The Reserve Bank – Te Pūtea Matua is taking on a new role of steward of the cash system “to preserve the benefits of cash for all who need them”, Assistant Governor Christian Hawkesby told the Royal Numismatics Society of New Zealand annual conference ... More>>

ALSO:


CERT NZ: Malicious Computer Virus Targeting New Zealanders

CERT NZ, the government agency which supports organisations and individuals affected by cyber security incidents, says a recent surge of increasingly sophisticated malware attacks is affecting everyday New Zealanders as well as large organisations. The ... More>>

ALSO:

Economy: NZ Small Business Recovery Continues In September

Xero, the global small business platform, today released its Small Business Insights (XSBI) for September revealing an uptick in small business jobs and year-on-year revenue growth in New Zealand. Nationwide, the average number of jobs in the small ... More>>

ALSO:


Courts: Businessman Eric Watson Sentenced To A Four-Month Jail Term

New Zealand businessman Eric Watson has been sentenced to a four-month jail term in the UK for contempt of court, TVNZ reports. More>>

OECD: Area Employment Rate Falls By 4.0 Percentage Points, To 64.6% In Second Quarter Of 2020

The OECD area employment rate – the share of the working-age population with jobs – fell by 4.0 percentage points, to 64.6%, in the second quarter of 2020, its lowest level since the fourth quarter of 2010. Across the OECD area, 560 million persons ... More>>

Spark: Turns On 5G In Auckland And Offers A Glimpse Into The Future Of Smart Cities

Spark turned on 5G in downtown Auckland today and has partnered with Auckland Transport (AT) to showcase some of the latest in IoT (Internet of Things) technology and demonstrate what the future could look like for Auckland’s CBD with the power of 5G. 5G is ... More>>

Stats NZ: Monthly Migration Remains Low

Since the border closed in late-March 2020, net migration has averaged about 300 a month, Stats NZ said today. In the five months from April to August 2020, overall net migration was provisionally estimated at 1,700. This was made up of a net gain ... More>>