Connecting with Universities and Government Agencies

© The Treasury

Improving the Living Standards of New

Zealanders - Working Together for Better Policy

Advice

Policy Relevant Research & Analysis: Knowledge

Hubs - Sharing, Connecting and

Discussing

Girol KaracaogluChief Economist

The Treasury

CONNECTING WITH UNIVERSITIES AND GOVERNMENT AGENCIES

Girol.Karacaoglu@treasury.govt.nz

Joey AuCommittee Member

Government Economics Network (GEN)

Joey.Au@treasury.govt.nz

© The Treasury

WHAT ARE WE TRYING TO ACHIEVE?

1. Building a database of Economics research capability, as well as ongoing research, across the public sector, universities, and research institutions in New Zealand.

2. Creating a network across all people and institutions undertaking policy relevant research with a view to enhancing the transparency and quality of policy-supporting

3. Promoting Treasury’s Living Standards Framework as a possible vehicle for collaborative work on policy design and advice.

© The Treasury

ABOUT GEN

WEBSITE: www.gen.org.nz EMAIL: info@gen.org.nz

© The Treasury

ABOUT GEN

The Network has three aims:

support economics training and professional development;

develop linkages between economists; and

strengthen economic advice to government.

© The Treasury

ABOUT GEN

© The Treasury

Joey Au

Policy Relevant Research & Analysis: Knowledge Hubs -

Sharing, Connecting and Discussing

Committee Member – GEN &

Advisor – The Treasury

© The Treasury

Researchers

Universities

Policy Analysts

Government Agencies

Influence policy Produce quality policy advice

Higher Living Standards

for NZers

WORKING TOGETHER FOR BETTER POLICY ADVICE & RAISE LIVING STANDARDS

KEY ATTRIBUTES OF THE CENTRE OUTCOMES SOUGHT

A ‘STRAW-MAN’ – ENHANCING RESEARCH CAPABILITY

Public Sector

TSY

MoBIE

MSD

MOE MoH

Etc.

Private Sector NZIER

BERLEtc.

Motu

Universities

Otago

Waikato VUW

Auck.Etc.

Overseas

Universities

IMF

OECD

Public & Private sector

Etc.

• Well connected, strong networks.• Ability to coach & mentor junior researchers.• Intellectually brilliant, policy focused researchers.

CENTRE OF EXCELLENCE

This is not about more funding, it is about using existing funding

and capabilities to greater effect.

Improve Co-ordination & Coherence...

Coherent programmes of long term research need to be

developed.

Increase Consistency & Standards...

Clear and consistent research standards need to be applied

and adhered to.

Lift Capability...

Stronger capability to undertake research,

commission research and interpret research.

Clearer pathways required for researchers in the public

sector.

© The Treasury

ONE SMALL STEP FORWARD:PRODUCTIVITY (HUB)

Combine

Collaborate

Prioritise

© The Treasury

ONE STEP SIDEWAYS NO VEHICLE FOR PEOPLE TO SHARE, CONNECT AND DISCUSS

© The Treasury

SOME PRINCIPLES

1. Share

2. Connect

3. DiscussUniversities

Government Agencies

Policy Analysts

Researchers

© The Treasury

KNOWLEDGE HUBS (WEBSITE): PRODUCTIVITY HUB

1. Share

2. Connect

3. Discuss

© The Treasury

Improving the Living Standards of New Zealanders - Working Together for Better Policy Advice

Girol Karacaoglu Chief Economist

The Treasury

© The Treasury

Treasury’s Vision

To be a world class Treasury

working for higher living standards for New Zealanders.

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© The Treasury

The OECD

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© The Treasury

Distributionwithin thepopulation

and over time

Subjective Wellbeing

The Living Standards Framework

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© The Treasury

Fundamentals – WHAT is it all about?

What is “improving standards of living” all about?

It is about increasing the freedoms of individuals to enjoy the kinds of lives they wish to live. [Amartya Sen’s concept of justice and human rights. ]

Need to focus on achieving this across society and across generations – that is what equity and sustainability are all about.

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© The Treasury

Using LSF to Guide Policy Advice

Practical

Focused

Measureable

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© The Treasury

Increasing Equity

Social Infrastructure

Sustainability for the Future

Economic Growth

Managing Risk

FINANCIAL & PHYSICAL

Financial WealthHousing

Infrastructure

NATURAL

ClimateBiodiversity

Water

SOCIAL

InstitutionsTrust

HUMAN

SkillsHealth

Living Standards

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A Proxy Social Welfare Function for NZ

© The Treasury

Key Policy Question

Instead of thinking of trade-offs between the five corners of the living standards cobweb, can we come up with policies that make these corners mutually reinforcing – so that we can create an expanding dynamic cobweb?

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© The Treasury

0

5

10

Status quo

Policy change

Example: Educa-tion Reforms

Managing Risk

Increasing Equity

Social Infrastructure

Sustainability for the Future

Economic Growth

21Note: This is intended to demonstrate how the diagram could be used, rather than a Treasury view of the recommendations

© The Treasury

WHAT should be the focus of government-policy interventions (in support of market processes) – Government Roles?

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• Providing opportunities• Building capabilities• Improving incentives• Removing obstacles

Higher Living

Standards

Capabilities

Obstacles

Opportunities

Incentives

All of the above are about maintaining and building: • physical/financial capital• human capital• social capital• natural capital

© The Treasury

Current Policy Levers: BIM

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• Providing opportunities• Building capabilities• Improving incentives• Removing obstacles

Higher Living

Standards

Capabilities

Obstacles

Opportunities

Incentives

• growth-supporting infrastructure • support business-led R&D• work-based training• youth agenda

• welfare reform• labour market reform• tax reform

• education reform• wide access to health care• international linkages programme

• removing international trade and investment obstacles • improving economic stability• improving public-sector productivity• work on long-term fiscal strategy

All of the above are about maintaining and building: • physical/financial capital• human capital• social capital• natural capital

© The Treasury

Policy Tools

Fiscal Tools Government Expenditure Taxes Public Debt and Public Loans

Regulatory Tools Regulations Authorisations

Other Tools Ownership Contingent Liabilities Nudging or Cajoling

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© The Treasury

Increasing Equity

Social Infrastructure

Sustainability for the Future

Economic Growth

Managing Risk

FINANCIAL & PHYSICAL

Financial WealthHousing

Infrastructure

NATURAL

ClimateBiodiversity

Water

SOCIAL

InstitutionsTrust

HUMAN

SkillsHealth

Living Standards

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How might we measure progress for New Zealand?

• NNI / capita

• NII position of NZ• Reducing crime rate• Reduction in social welfare dependency

• % of population below 50% of median income• Difference in the PISA score between the top and bottom 10% of students

• gross capital formation• GHG emissions tonnes/capita• % aged between 35-34 with tertiary qualifications

• World Bank government effectiveness indicator • World Values Survey: social trust indicator

© The Treasury

THE LIVING STANDARDS HUBGoing live 2nd April 2013 – Register in advance, email: Joey.Au@treasury.govt.nz

© The Treasury27

Reduces intergenerational equityIncreases within generation equity

Example: Effect of a PAYGO-funded expansion of New Zealand Superannuation

Reduces investment risk Increases wage growth risk

© The Treasury

Example: Effect of a SAYGO-funded expansion of New Zealand Superannuation

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© The Treasury

0

1.6

Example: NZ's performance compared to the OECD

OECD av-erageNZ 2000NZ 2010

Note: This is only intended to indicate how the diagram may be used. The data involved and the methodology for con-structing the indices needs significant further work. It does not therefore represent Treasury's view of what has hap-pened over the ten years concerned.

Economic Growth

Sustainability for the future

Increasing Equity

Social Infrastructure

Reducing Risks

© The Treasury

Example: Living Standards Assessment: Risk Management

Method: Increasing the freedoms of individuals to enjoy desired lifestyles

Elements: Physical Human Social Natural Capital Capital Capital Capital

Risks Earthquakes Crime Welfare dependency Climate Changee.g. Floods Ill health Economic crises Biodiversity

risksEruptions Skill Deficiency Education failure ErosionInfrastructure disrepair Civic society failureWhite elephants

Mitigations Insurance Education Policy Welfare Reform Emissions Trading

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© The Treasury

Next Steps

USE IT Encouraging various teams within Treasury to trial the framework and share

what they learn with other teams. Encouraging teams within Treasury to work with people from across the

public sector in developing and using the framework, and associated measures.

PROMOTE IT

Ongoing presentations to various audiences (universities, public sector agencies, ...) to explain the work and seek feedback.

DEVELOP IT Ongoing work to set up teams, within Treasury and across the public sector,

to progress research and measurement within each “corner” of the cobweb. Sharing what we learn by trying with all so that we can improve ways in

which we can enhance the framework for better policy guidance.

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