Jacinda and Grant's 'Wellbeing Budget' for 2019; Labour jumps in poll; Bill has the numbers to stay

Wednesday was a big day for both Ardern and English. Photos by Lynn Grieveson

In today's email we looked at how the new Batman and Robin of Labour plan to engineer a major change in the way the engine room of Government works.

1. Next year's Wellbeing Budget

Under John Key, the Government's focus was the Business Growth Agenda and GDP growth. Under Bill English, it was Social Investment and the Better Public Service targets. Bureaucrats and public sector CEOs scurried around from 2011 to 2017 to print out the 'BGA' targets and 'BPS' targets and put them on their walls and key performance indicator criteria.

Now the new Government is discarding the BGA and BPS and adopting its own nomenclature and system for measuring success and yesterday we got a much clearer look at what Prime Minister Jacinda Ardern and Finance Minister Grant Robertson will judge performance by over at least the next three years. They key phrases in the new Government are 'Wellbeing' and the tool to measure it is Treasury's Living Standards frameworks. If they aren't already, bureaucrats and CEOs should be studying how these frameworks were created and what they mean for policy advice.

It's also clear from yesterday's events that Ardern and Robertson really are the 'Batman and Robin' of the Government in the same way Helen Clark and Michael Cullen worked together to set the agenda and run the cabinet from 1999 to 2008, and then John Key and Bill English did the same from 2008 to the end of 2017.

Robertson and Ardern strode down Willis Street from his Wellington electorate office to St Peter's Church with a smile last evening, knowing they were about to signal a major change in the way the engine room of Government works.

Hooted and cheered by passing motorists -- 'Congratulations on your baby Jacinda' -- they walked into the old wooden church with a speech they hoped would set the direction for the Government for the rest of their first term after a hectic 100 days.

Initially, Ardern announced her formal targets for child poverty reduction over the next decade, including roughly halving the rate of child poverty to five percent and lifting 100,000 children out of households with less than 50 percent of the median income over the next decade. That in itself didn't appear massively ambitious, given the Government estimated in December that its first families package would lift 88,000 out of poverty and then-Prime Minister Bill English promised in the election campaign to lift 100,000 out of poverty within three years.

Ardern assured journalists later that the five percent target would make New Zealand one of the world's best performers on poverty and that international experts had said moving below five percent was very difficult.

But the centrepiece of her agenda setting speech was yet to come.

"We want to go a step further than child poverty measures. We want to introduce, by 2019, a tool and framework that will make the wellbeing of our people a measure of our economic success," Ardern said.

"We want New Zealand to be the first place in the world where our Budget is not presented simply under the umbrella of pure economic measures, and often inadequate ones at that, but one that demonstrates the overall wellbeing of our country and its people," she said.

"Till now, the country’s economic progress has been measured solely by tracking GDP. But organisations like the OECD and the IMF have, for a while now, urged countries to take a different view of what constitutes a successful economy beyond a strong balance sheet and a strong economy – as important as that may be."

Robertson said he had asked Treasury to accelerate its recent initial work on building a Living Standards Framework. Treasury has been working on it for several years, but it was not used by the previous Government.

"By Budget 2019 Grant and I want New Zealand to be the first country to assess bids for budget spending against new measures that determine, not just how our spending will impact on GDP, but also on our natural, social, human, and possibly cultural capital too," Ardern said.

"It will no longer be good enough to say a policy is successful because it increases GDP if, at the same time, it also degrades the physical environment, or drives down wages or fractures a community."

The drive for a 'Wellbeing' Budget lines up with a drive among economists overseas to look beyond GDP per capita as the core measure of economic success, given the current issues around climate change, poverty and environmental degradation.

Beefed up Living Standards Framework

Earlier in the day, Robertson previewed the shift to a 'Wellbeing' Budget framework when announcing the date of Budget 2018 on May 17.

He told the Finance and Expenditure Select Committee the Government remained committed to its Budget Responsibility Rules around reducing core debt to GDP to 20 percent of GDP within five years, and running a surplus.

But he said the living standards tool was still being developed and would not be ready for this year's Budget. By next year it would be able to create the ability for the Government to assess the wider effects of policies, beyond what it meant for economic growth and the Government's finances.

"This is a new and better way of discussing the Budget than just the financial forecasts," he said.

After the committee hearing, Opposition Leader Steven Joyce said he would prefer Treasury stuck to its core job of assessing the Government's finances.

2. Robertson vs Joyce at FEC

The other big set-piece of the day for economy and budget watchers was the Finance Minister's first appearance before the Finance and Expenditure Select Committee (FEC) for the year.

It's traditionally the appearance where the Finance Minister announces the date for that year's Budget -- it will be May 17 this year -- and sets the economic and fiscal expectations for the coming budget round.

This year's first appearance had some extra spice with Grant Robertson facing off for an hour of questioning from the Opposition's lead committee member and former Finance Minister Steven Joyce.

Joyce started off by objecting to the decision by Robertson and the Treasury not to allocate the $1 billion Regional Development Fund into the formal Operating Expenditure and Capital Expenditure allowances. The fund's spending was included as a contingency in the outook, but had been 'unallocated' to the formal outlooks for both types of spending.

Robertson and Treasury officials said decisions had yet to be taken on the split between 'Opex' and 'Capex' for the fund. Joyce also challenged Treasury and Robertson about the likely 'probity' of the fund to ensure it did not become a type of slush fund for ministers and MPs in their favoured electorates.

Robertson said the criteria were being set to ensure the best decisions for 'NZ Inc' would be taken, although later at the St Peter's event he said the bulk of the funding was likely to go to those areas with the most need, including Northland, the East Coast of the North Island, Manawatu Wanganui and the West Coast of the South Island.

3. A distracting 'bit of gossip'

Yesterday's National leadership speculation faded through the day as a deeper temperature check confirmed our view that a full coup attempt any time soon was very unlikely, although Paula Bennett's future as deputy remains clouded.

Newsroom's Sam Sachdeva had a close look yesterday at the chatter and how it affected Bill English's attempt to grab the political spotlight to challenge Labour.

English’s State of the Nation speech was a chance for the National leader to outline the strong economy he believes the Labour-led coalition has inherited, touting rises in average wages and job growth numbers while expressing the fear it could all be put at risk.

Yet instead of debating the Government’s decision to scrap Better Public Services targets, most people were focused on a BPS measure of a different kind - Bill’s Political Survival.

That was thanks to what can only have been a deliberately-timed leak to media hours before his speech, suggesting English’s potential successors were beginning to do the numbers ahead of a caucus retreat in Tauranga.

While there was no suggestion of an imminent threat to his leadership, the rumours were nonetheless destabilising, as was a claim that his deputy Paula Bennett was in the firing line after an uninspiring campaign performance.

Yet English did his best to appear unaffected, dismissing the talk as “a bit of gossip” and saying he was in the black where it mattered.

"In the end it’s about numbers and we’ve got some pretty good numbers - 44 percent of the public voted for us in the election, we’ve got 56 seats in the Parliament, we remain larger than Labour and New Zealand First put together and we have every intention of maintaining those numbers."

Those numbers make a compelling case, and explain why the talk of a spill was holding no water with many senior National MPs.

Here's Sam's full commentary piece, as first published yesterday on Newsroom Pro.

4. A BPS lament and a new campaign

Sam went to English's speech at the Wellington Chamber of Commerce to cover the Opposition Leader's first set-piece of the year.

English was unhappy about Ardern's decision to scrap the BPS targets and signalled the Opposition would focus its attacks on Labour's industrial relations plans.

National would seek to hold the Government to account by regularly requesting official data to track its progress against the scrapped BPS targets, publishing the results online every six months for the public to view.

English also highlighted concerns with proposed changes to industrial relations rules, saying the Government’s plans to remove 90-day trials and the “starting out wage” would make it harder for young, unskilled and vulnerable workers to find jobs.

He hit out at plans to reintroduce centralised wage bargaining, claiming the reforms were “about supporting union officials, not New Zealand workers”.

English revealed National was launching a Protect New Zealand Jobs campaign to explain the proposals and fight the changes, urging those gathered to speak out.

“If you can get your voice heard then the Government can be influenced, and these industrial relations changes can be significantly moderated."

See Sam's full story published first on Newsroom Pro yesterday.

5. Briefly in the global political economy...

What inflation? - Reinforcing again the strangely dormant inflation outlook, Australia reported weaker than expected inflation figures yesterday that economists said meant a rate hike there was now likely towards the end of 2018, rather than the middle. (Reuters)

32 million extra tourists - China's China Outbound Tourism Research Institute estimated yesterday that China’s overseas tourist numbers would grow from over 122 million in 2016 to hit 154 million this year in 2018. (Juwai).

On hold - The US Federal Reserve held its official interest rates unchanged this morning, but said it saw inflation rising, reinforcing expectations it would raise interest rates again in March under new Chairman Jerome Powell. (Reuters)

State of dis-Union - Donald Trump read a teleprompted State of the Union speech yesterday that called for unity. The New York Times fact-checked the speech, which is the best way to read it.

Oops - Australia's ABC reported yesterday it had obtained hundreds of top-secret and highly classified cabinet documents after someone in the Australian Government sold a locked filing cabinet to a second-hand store with the documents still inside.

6. Coming up...

The Government is set to announce the details of an inquiry into abuse in state care at 11 am today.

Migration and building consent figures for December are due tomorrow morning.

Jacinda Ardern travels to Waitangi tomorrow for five days of talks and celebrations.

7. One fun thing...

There's a bad 'blue blood' moon rising for Paula Bennett, according to Al Nisbet in this cartoon in the Press.

8. This morning's political links

These are available in the morning subscriber email.