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How does New Zealand’s Wellbeing Budget actually work?

4 June 2019

News and media


New Zealand landscape

By Professor Michael Mintrom 

New Zealand’s first ‘Wellbeing Budget’ was delivered last week by the Minister of Finance, Hon Grant Robertson. It is the second budget of Prime Minister Jacinda Ardern’s Labour-led Coalition government and signals important changes to policy formulation. Crucially, it treats public policies as investments, a practice previously championed by Bill English, former Prime Minister and Minister of Finance, who had a distinguished career in the New Zealand National Party, which governed from 2008-2017.  

There is no doubt that the Wellbeing Budget is a major policy innovation. Even before it was delivered, the New York Times proclaimed it “the next big move by a New Zealand government seen by progressives around the world as a beacon in increasingly populist times”.

So, what is the excitement about and why does it matter?

The Wellbeing Budget is founded on the idea that financial prosperity alone is not a sufficient measure of the quality of life. Echoing a comment by Robert Kennedy in the 1960s, Mr Robertson noted the importance of looking beyond Gross Domestic Product (GDP) as a measure of our wellbeing. In his budget speech Robertson said we must seek to “value and to measure all that makes life worthwhile in New Zealand”. 

The Wellbeing Budget was developed with reference to more than 60 indicators highlighted within the New Zealand Treasury’s Living Standards Framework.  The Finance Minister said no previous New Zealand government had used that level of evidence and statistical analysis as the foundation for a budget. Indeed, while the Organisation for Economic Cooperation and Development (OECD) has long advocated such an approach, New Zealand is the first country in the world to have explicitly adopted a wellbeing budget. 

How does the Wellbeing Budget work in practice? 

To see how a focus on wellbeing will change the way government operates, consider a couple of examples.

First, past budgets in New Zealand have funded mental health and addiction services only for those with the highest needs. People with emerging issues or mild to moderate mental health or addiction needs have largely been left to their own resources or have faced lengthy waits before receiving help. Yet it’s estimated that the economic cost to New Zealand of serious mental illness amounts to approximately five per cent of GDP each year. There is no easy way to measure the human misery caused to sufferers and those who care for them.

In response, the Wellbeing Budget has made a significant investment to create new frontline services for mental health. The longer-term goal is for health services to be available so that when people reach out for help there is a trained mental health worker immediately available. This is a classic but rarely seen example of promoting primary preventative.

Second, currently Māori are significantly overrepresented in New Zealand’s criminal justice system, and rates of recidivism are above 70 per cent. To address this, the Wellbeing Budget has allocated funds to a new culturally sensitive, co-designed approach to enable people to experience a Māori and family-centred approach throughout their time in the system. Mr Robertson said: ‘We are acknowledging that our system does not work for the majority of Māori. This is a system change and a cultural change for our prisons’. 

Promoting early intervention to address mental health issues and promoting culturally sensitive criminal justice are both examples of treating public policies as investments. Spending on these new approaches is anticipated to improve the quality of people’s lives and save large amounts of public money in the long run. People who prosper and live on the right side of the law also pay taxes and make fewer calls on government support.   

New Zealand’s wellbeing approach required that any new spending in this budget must advance one of five government priorities: 

improving mental health
reducing child poverty,
addressing the inequalities faced by Māori and Pacific island people
thriving in a digital age
transitioning to a low-emission, sustainable economy.

This requirement forced ministers to collaborate on funding proposals with their colleagues and fit their proposals to the new criteria. However, this time around, core spending on things like schools, hospitals, and roads was allocated in the usual way. That might change in future budgets. 

On behalf of the Labour-led Coalition government, Mr Robertson was careful to state “this Budget is just one step in a longer process of reforms”. He added: “we do not claim perfection on this first attempt, but we do believe that this Budget represents a significant step forward”.

Politicians, media pundits, public intellectuals and policy analysts around the world will be watching the implementation of this policy innovation with interest. If these reforms can soon deliver better outcomes for those in greatest need, we can be certain other countries will emulate New Zealand’s budgetary change.

Michael Mintrom is the Academic Director of the Executive Master of Public Administration degree at the Australia and New Zealand School of Government (ANZSOG) and Professor of Public Sector Management at Monash University. He is author of Public Policy: Investing for a Better World (Oxford University Press, 2019). 

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