Treasury to advise on living standards

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Treasury's policy advice will include greater consideration of living standards after the central government agency devised a formal 'Living Standards Framework' to use when formulating advice to Ministers.

The framework, released on the same day as the OECD released its Better Life Index, will highlight how human, social, natural and financial capital flows will be affected by a given policy, and how the flows related to each other, Treasury says.

Treasury had in the past focussed on how improved economic performance could enhance living standards, it says in a paper written by Ben Gleisner, Mary Llewellyn-Fowler and Fiona McAlister.

"However, while economic performance certainly contributes to raising material living standards and will continue to be a core focus, Treasury's role as a central agency with oversight of issues across the entire state sector requires recognition that there are a broad range of factors that contribute to people's standards of living.

Thus, in its broadest interpretation, 'higher living standards' encompasses all the objectives of the state sector," it says in the paper.

Over the last 18 months Treasury said it undertook research to improve its understanding of living standards, to help it better determine the effects a given policy decision could have on the wellbeing of various groups in society and their standards of living.

"The Framework includes a range of different stocks within financial/physical, human, social and natural capital.

It recognises that these stocks create flows of goods and services that contribute to the living standards of New Zealanders, and that when people 'use' certain capital stocks and flows, this can affect other forms of capital (and their associated flows)," it says in the paper.

"The distribution of these effects may differ across the population and through time. For example, increased investment in skills could increase future flows of employment and income across the population.

However, this investment could reduce the financial wealth of government or require a reduction in other government-provided services, all of which would also have effects across the population," it says.

"Ultimately, decisions about acceptable levels of factors within the Framework, distributional choices, and trade-offs between competing goods are ethical and political in nature and are therefore not amenable to definitive policy solutions.

However, highlighting these choices and trade-offs will help ensure Treasury's advice is robust and that governments' decisions are well-informed," it says in the paper.

- INTEREST.CO.NZ