"It's more akin to an annual report of a company," says Finance Minister Grant Robertson of New Zealand's first wellbeing Budget, coming up on May 30.

"When a company does an annual report, the back third is the accounts and the front two-thirds is the why and what of the business."

The corporate analogy is one of the ways Robertson makes the case for what he promises will be a big shift in the way the Crown accounts are delivered.

Social and cultural happiness, environmental protection and the future of work are all topics that won't just get a cursory mention in this Budget – they'll be baked in by legislation passed by the Coalition last year.

Advertisement

Selling the concept is crucial for this Government.

Under fire from its own support base for not being "transformational" about issues like tax and welfare reform, Labour in particular has a lot staked on this.

Economy Hub: Budget Preview - Grant Robertson Interview

But a wellbeing Budget isn't easy to talk about in ways that aren't easily dismissed as abstract, soft and meaningless.

Business NZ chief executive Kirk Hope says he hopes the Budget will offer some more explanation of the Government's "broader economic strategy" and "how the wellbeing Budget approach might assist business growth".

Robertson says: "it's up to me and the Government to explain that and show people how we're doing that.

"The numbers matter and they'll be there. We also want to tell a story about where we are going. The wellbeing approach gives us a framework for analysing that, using Treasury's living standards framework as the core – but also using other evidence to say: what should we invest in?"

So how are the accounts? Is there money to invest?

Sticking with that corporate analogy, New Zealand's economy is facing some headwinds. And while there are areas of new business that require investment, that's going to require some cost cutting elsewhere.

At a pre-Budget speech this week, Roberston announced that the Government would look to reallocate $1 billion in "low priority spending".

That includes $200 million of funding to make the first year of tertiary study fees-free, which hadn't been spent because fewer students than expected had taken up the scheme.

Robertson also said he had directed all ministers to cut 1 per cent of their spending in areas that were deemed the lowest priority.

"Out of this, we have identified just over $1 billion worth of spending over the forecast period that is no longer a priority or where the funding allocated is no longer needed," he said in his speech.

"Overall, the Government accounts are standing up well," Robertson says reassuringly, when talking to the Herald .

That's true but the near-term outlook - with both domestic and global growth slowing - is ominous.

Treasury's latest Crown financial statements - for the nine months to March 31 - show the surplus running at $2.5b, about $300m ahead of forecasts.

But that's largely due to the changing valuation of assets and liabilities on the Crown balance sheet.

Crown expenses and tax revenue are still roughly in line - but that's because both are below forecast by 0.9 per cent.

In other words, a lower tax take from a flatter domestic economy has been offset by the Government's failure to fully spend money it has already allocated.

Independent economist Cameron Bagrie says it is hard to see the fiscal numbers being "rosy" given the weaker economy.

"They'll still present solid numbers to champion fiscal responsibility, but we'll start to see some cracks and I suspect they'll look at more ways of raising debt via crown entities as opposed to under core government debt - to make sure the 20 per cent debt target is achieved," he says.

"Bottom line is that a lot of spending was front-loaded last year, pressures are headed one way. The economy has decelerated, not accelerated."

Independent economist Cameron Bagrie. Photograph / Paul Taylor
Independent economist Cameron Bagrie. Photograph / Paul Taylor

Robertson concedes that conditions have become tougher.

"Quite clearly we are in a more complicated global environment. We have seen slowdowns in global growth and forecasts for further slowdowns, so we have to keep that in mind as we put the Budget together."

He shrugs off suggestions that a slowing domestic economy might benefit from the stimulus of some extra spending.

Robertson remains deeply wedded to his pre-election promise of fiscal responsibility.

"We're keeping an eye on that and calibrating that but the principle of fiscal responsibility will remain important."

Robertson notes that International Monetary Fund projections for New Zealand are that our economy will grow by about 2.5 per cent in 2019 and 2.9 per cent in 2020.

Some local economists believe GDP growth will actually bottom out at 2 per cent later this year.

"Two, 2.5 per cent [GDP] growth is above trend, certainly above where other OECD nations are but it wasn't where we were," he says.

"The fundamentals of the New Zealand economy are in a good place. We have low unemployment, relatively low levels of public debt, a forecast surplus in the government accounts.

"We always have to balance where we are in the economic cycle. People will see on Budget day where we have landed."

That's reassuring for the likes of Businesss NZ's Hope, who puts ongoing fiscal responsibility at the top of his wish list for the Budget.

But it doesn't sound as though there is much scope for spending surprises on Budget day - whether that's the wage increases teachers are striking for, or things business would like to see, such as more transport infrastructure.

"Surprise is in the eye of the beholder," Robertson says. " We've been very clear about what our priorities are for the Budget so they shouldn't be surprises.

"This is the first wellbeing Budget, we've used an evidence based approach. We're looking at issues like mental health, child wellbeing, reducing disparities for Māori and Pasifika."

Bagrie says he likes the wellbeing focus in certain areas, "especially mental health, but the missing part of the wellbeing part is how we are going to lift incomes".

"Raising the minimum wage etc is tinkering around the edges. If we are serious about boosting incomes, we need a transformational strategy in regard to lifting productivity. I don't see it."

Robertson isn't giving anything away yet, but he is happy to mention productivity and the future of work in the list of issues he sees as "wellbeing Budget" targets.

"Take an issue like wage growth, and there is a real dilemma, where's that gone? Nobody has come up with a full answer," he says. "We're doing a lot of work about how we support people through that changing nature of work and it is one of the priorities in the Budget."

But that doesn't necessarily mean a radical approach.

"My view is there is a balance to be struck here and we'll continue to calibrate. But it's important for the New Zealand economy that dramatic shifts in fiscal management need to be avoided."

Again, that's the kind of balance that will strike a chord with business leaders.

Business NZ chief executive Kirk Hope. Photo/File.
Business NZ chief executive Kirk Hope. Photo/File.

A number of industry training initiatives feature on the Business NZ Budget wishlist.

"[We'd like to see] greater funding for industry training to provide more opportunities and training support for small businesses," says Hope. "Additional places for Trade Academies and Youth Guarantee to get more young people into trades."

Hope says business also wants more resources for immigration compliance and immigration services, to reduce visa waiting times and address acute skills shortages.

He's also looking for more R&D spending "to help make the lower emissions transition".

That one does get a mention from Robertson when he talks about the "big picture priorities" and a focus on intergenerational wellbeing.

"Obviously there'll be announcements on the day – that's the essence of the Budget," he says.

But the reference to company reports is really about the way the story is told, he says.

"We tell a story for people about where we are heading. We may not be able to do it all in one year but people will be able to see the direction of travel, that's what businesses do."

The Wellbeing framework

Through all of Robertson's arguments for the wellbeing approach comes a strong sense that this is the start of something bigger – but something that will take time.

His belief in that kind of evolutionary approach probably underpins some the Government's more pragmatic decision making. Winning a second and third term seems part of the grand plan.

Globally though, New Zealand is now at the front end of what is a growing trend.

New Zealand's Treasury first produced a Living Standards Framework in 2011 which adopted the UK's "four capitals" model.

It's on this that the wellbeing approach is based.

Those four include: natural capital (environmental considerations); human capital (which goes to the skills and knowledge of the population); and social capital (which looks at factors like social cohesion and is likely to include cultural wellbeing). Traditional financial measures, dubbed physical capital, are also firmly in the mix.

The UK put together a similar wellbeing index after the global financial crisis.

But unlike the UK, in New Zealand we now have a centre-left Government that has told Treasury to put the framework at the core of its thinking.

Luckily for Robertson, he has had a keen supporter for the new approach in Treasury Secretary Gabriel Makhlouf.

"We're probably the first country in the world saying all this conceptual stuff is great but let's take it and apply it to policy and decision making," Makhlouf told the Herald last year.

Gabriel Makhlouf is the Secretary to the Treasury and leads the Treasury's work on the Wellbeing Budget. Photo / File
Gabriel Makhlouf is the Secretary to the Treasury and leads the Treasury's work on the Wellbeing Budget. Photo / File

"This is a bit of a leap of thinking," he said. "In the sense of taking that strand of economics and saying let's start applying it rigorously to decision making, to government policy making, to Budget making. That is different. That hasn't been done before."

This month Makhlouf was picked to be Ireland's next central bank governor, surprising many pundits.

It was, perhaps, a validation of his work and vision for a wellbeing approach to economics and fiscal management.

Robertson makes a similar point, saying international interest has resulted in him being invited to the meetings of both the World Bank and International Monetary Fund, to talk about our change.

"Our ideas are interesting to many countries as they seek ways of building truly sustainable economies that deliver prosperity and fairness, and that build trust," he said in his pre-Budget speech this week.

But for New Zealanders there are expectations that remain to be met.

The challenge will be for the Government to turn all this feel-good language into something real.

The Wellbeing Budget priorities:
•Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy
•Supporting a thriving nation in the digital age through innovation, social and
economic opportunities
•Reducing child poverty and improving child wellbeing, including addressing family
violence
•Supporting mental wellbeing for all New Zealanders, with a special focus on under
24-year-olds
•Lifting Māori and Pacific incomes, skills and opportunities

What business wants:
(Business NZ CEO Kirk Hope's wishlist)
•Fiscal responsibility
•More funding for tourism infrastructure
•Investment in transport infrastructure
•R&D funding to help business innovate to make the low-emissions transition
•More funding for industry training to provide more training opportunities and training support for small businesses
•Additional places for Trade Academies to get more young people into trades
•Extra funding for micro-credentials for upskilling in the workplace
•More professional development for teachers to connect to industry and keep up with new technologies
•Additional investment in immigration services to cut work visa processing times
•Investment to reduce immigration compliance

Want to see more from Liam Dann? Sign up here for the Business News newsletter to get the best premium stories sent to your inbox daily.