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“In the wake of the economic consequences of the COVID-19 outbreak, the Labor government must not only seek to help those most affected by the recent shutdown, but also introduce the framework for radical new policies; policies that address systemic weaknesses that have undermined our economy and society for so long and that they threaten our future. “
He presents what he calls an “unpleasant truth”, arguing that New Zealand lags behind OECD countries with “institutional inefficiencies, poor policymaking, and the almost voluntary refusal of successive governments to admit (let alone confront) the growing economic problems “The country towards a” deep and lasting economic recession “.
The authors present key areas where they say New Zealand is lagging behind: the “three pillars of social welfare” (education, health and social welfare), housing, taxes, productivity and debt. Without bold action, the report says we are on the “path to poverty.”
Education, health, social welfare.
The three pillars of social welfare: education, health and social welfare, have seen an increase in spending in real terms by each successive government, according to the report, bringing annual spending in these sectors from $ 4,500 per person in 1972 to more $ 12,000 today.
But despite this, the authors say the results have not improved significantly. They point to a series of reports and statistics that show decreasing results.
For example, in education, they refer to the 2017 Progress Study in International Reading Literacy which found that reading ability had declined, with New Zealand ranked below many OECD countries. However, the 2018 OECD Program for International Student Assessment report found that students in New Zealand scored higher than the OECD average in reading, math, and science. Although that also confirmed a steady downward trend in those three areas since at least 2000.
Regarding health, Douglas and his co-authors say that we spend approximately twice as much in real terms on health as in 2001, but the number of consultations made in New Zealand per person was decreasing, something confirmed in a 2017 OECD report. Aotearoa was near the end of the pack in this area.
“When we add our aging population to the mix, and the enormous additional burden that will be imposed on our health system in the coming decades, it is difficult to disagree with the Ministry of Health’s own finding, in its 2016, that current government-provided services are unsustainable in the long term and that “it is essential that we find new and sustainable ways of delivering services.”
Finally, with social welfare, which New Zealand spent $ 34 billion last year, almost more than health and education combined, the report finds the sector to be broken, citing the Well-being Expert Advisory Group report of the year past and recent child poverty data showing that 13.4 percent of children live in households reporting material hardship. He said that rising benefits and retirement costs made current models unsustainable.
The current government has attempted to support families and reduce child poverty through its Family Income Package, which included the introduction of the Winter Energy Payment, increases to the Working for Families tax credits, and changes to housing supplements . Many of these initiatives were recently promoted by the Government in response to the COVID-19 pandemic.
Taxes and debts
The report suggests that successive governments have responded to crises by raising taxes, something it says is no longer an option. He notes that the “economic devastation” caused by COVID-19 means that people simply will not be able to pay higher taxes and that New Zealand has a higher overall tax burden than most other countries.
“History tells us that when governments create a high-tax environment, they unintentionally provide an incentive for those who can afford to hire smart accountants to find innovative ways to lower their taxes. In other words, high taxes will often prove in a reduction of tax revenue. “
The authors say taxes are simply being “misused.”
On debt, the report says New Zealand has a real problem due to the economic downturn that COVID-19 has caused, along with the “additional debt burden” related to the aging of New Zealand’s population and the pressure will have about retirement and the health system. .
“Taking New Zealand’s healthcare and retirement costs together, in 2019 we had a cumulative undiscounted liability of more than $ 1.2 billion,” the report says.
“Unfortunately for New Zealanders, we cannot see the true costs of our current policies because the Government believes that such responsibility does not” accumulate “until it requests such a right.
“The fact that you can pretend that it is not a liability for accounting purposes does not alter reality. The current New Zealand scheme is accumulating significant unfunded liabilities without thinking about how they will be met in the future.”
The authors say that this shows the expensive path we are on. It calls on politicians to recognize the issue of future accumulated obligations.
“The government needs to find the courage to face this crisis (which begins by admitting that it exists), instead of falling into the empty politics that comes with pretending that everything is fine, leaving future governments and our younger generations to deal with it. disorder. “
Finance Minister Grant Robertson said last week that, following COVID-19, the government would run a deficit for an extended period with debt levels set to hit record levels. Robertson previously said that New Zealand has a good platform to rebuild due to low unemployment, rising wages, and surpluses.
accommodation
Over the past 20 years, the authors say, Kiwis’ ability to buy a home has become increasingly difficult, with low housing standards, higher prices, a complex political environment, land banking, and the “intransigence of privileged owners. ”
To summarize the difficulties for kiwis to own a home, the report points to a survey by Demographia International that finds a “median multiple” that measures house prices divided by median household income. If the median multiple is less than 3, house prices are considered affordable, while those over 5.1 cannot be paid. New Zealand scored 8.6, just below China at 20.8. Of the countries surveyed, the United States was the lowest with 3.9.
“When house prices rise, it has a disproportionate impact on low-income New Zealanders, not only because they have no hope of buying their own home, but because rent prices also rise,” the report says.
“If we want to find a reason why 13 percent of our children live in poverty or close to poverty, then rent and mortgage costs are a good place to start.”
The housing shortage is “artificial” due to limits imposed by the councils and the government. The Government is currently seeking to reform the Resource Management Act and has already placed limits on foreigners who do not intend to live in Aotearoa by purchasing existing houses in New Zealand.
Productivity
Finally, to raise Kiwis’ general standard of living, we need to raise productivity, the report argues. He cites the findings of economist Michael Reddell who ranks New Zealand fourth in terms of labor productivity growth and last in terms of multi-factor productivity growth.
“Furthermore, for the last measured 5-year period, New Zealand averages about 65 percent of the median country GDP for the OECD’s data per hour worked,” the report says. “Given that hourly GDP is a fairly reliable indicator of a country’s long-term prospects, we are clearly a long way from our competitors and we are rapidly losing ground.”
“While there are several reasons for this, including the high costs of capital goods in New Zealand, the small size of our domestic market, and our low investment in knowledge-based capital, productivity within government sectors is also has the blame “.
Once again, the authors say that we need to leave the issue of productivity “uncovered” and promise possible ideas for reforms that will be presented in a future document.
