Connecting with Universities and Government Agencies

1. Connecting with Universities and Government Agencies Improving the Living Standards of New Zealanders - Working Together for Better Policy Advice Policy Relevant Research & Analysis: Knowledge Hubs - Sharing, Connecting and Discussing Girol Karacaoglu Chief Economist The Treasury Joey Au Committee Member Government Economics Network (GEN) Girol.Karacaoglu@treasury.govt.nz Joey.Au@treasury.govt.nz

2. What are we trying to achieve? Building a database of Economics research capability, as well as ongoing research, across the public sector, universities, and research institutions in New Zealand. • Creating a network across all people and institutions undertaking policy relevant research with a view to enhancing the transparency and quality of policy-supporting Promoting Treasury’s Living Standards Framework as a possible vehicle for collaborative work on policy design and advice.

3. About GEN WEBSITE: www.gen.org.nz EMAIL: info@gen.org.nz

4. About GEN The Network has three aims: support economics training and professional development; develop linkages between economists; and strengthen economic advice to government.

5. About GEN

6. Policy Relevant Research & Analysis: Knowledge Hubs - Sharing, Connecting and Discussing Joey Au Committee Member – GEN & Advisor – The Treasury

7. Working Together for Better Policy Advice & raise Living Standards Higher Living Standards for NZers Influence policy Produce quality policy advice Universities Government Agencies Policy Analysts Researchers

8. A ‘Straw-Man’ – Enhancing Research Capability Outcomes Sought Centre of Excellence Key Attributes of the Centre Improve Co-ordination & Coherence... Coherent programmes of long term research need to be developed. • Well connected, strong networks. • Ability to coach & mentor junior researchers. • Intellectually brilliant, policy focused researchers. MOE MoH Public Sector Increase Consistency & Standards... Clear and consistent research standards need to be applied and adhered to. Etc. TSY MSD MoBIE Lift Capability... Stronger capability to undertake research, commission research and interpret research. Clearer pathways required for researchers in the public sector. Universities OECD Overseas Etc. IMF Public & Private sector Otago Motu BERL This is not about more funding, it is about using existing funding and capabilities to greater effect. Etc. Auck. Etc. VUW Private Sector Waikato Universities NZIER

9. One small step forward:Productivity (Hub) Combine Collaborate Prioritise

10. One step sideways No Vehicle for People to share, connect and discuss

11. Some Principles Government Agencies 1. Share Policy Analysts 2. Connect Researchers 3. Discuss Universities

12. Knowledge Hubs (Website): Productivity Hub 1. Share 2. Connect 3. Discuss

13. Improving the Living Standards of New Zealanders - Working Together for Better Policy Advice Girol Karacaoglu Chief Economist The Treasury

14. Treasury’s Vision To be a world class Treasury working for higher living standards for New Zealanders.

15. The OECD

16. Distribution within the population and over time Subjective Wellbeing The Living Standards Framework 16

17. 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.

18. Using LSF to Guide Policy Advice • Practical • Focused • Measureable 18

19. Economic Growth A Proxy Social Welfare Function for NZ Living Standards Managing Risk Sustainability for the Future FINANCIAL & PHYSICAL Financial Wealth Housing Infrastructure NATURAL Climate Biodiversity Water SOCIAL Institutions Trust HUMAN Skills Health Increasing Equity Social Infrastructure 19

20. 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? 20

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

22. Opportunities Capabilities Higher Living Standards Incentives Obstacles WHAT should be the focus of government-policy interventions (in support of market processes) – Government Roles? • All of the above are about maintaining and building: • physical/financial capital • human capital • social capital • natural capital • Providing opportunities • Building capabilities • Improving incentives • Removing obstacles

23. Opportunities Capabilities Higher Living Standards Incentives Obstacles Current Policy Levers: BIM • growth-supporting infrastructure • support business-led R&D • work-based training • youth agenda • 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 • welfare reform • labour market reform • tax reform • All of the above are about maintaining and building: • physical/financial capital • human capital • social capital • natural capital • Providing opportunities • Building capabilities • Improving incentives • Removing obstacles

24. Policy Tools • Fiscal Tools • Government Expenditure • Taxes • Public Debt and Public Loans • Regulatory Tools • Regulations • Authorisations • Other Tools • Ownership • Contingent Liabilities • Nudging or Cajoling 24

25. How might we measure progress for New Zealand? Economic Growth • NNI / capita Living Standards Managing Risk Sustainability for the Future FINANCIAL & PHYSICAL Financial Wealth Housing Infrastructure NATURAL Climate Biodiversity Water SOCIAL Institutions Trust HUMAN Skills Health • gross capital formation • GHG emissions tonnes/capita • % aged between 35-34 with tertiary qualifications • NII position of NZ • Reducing crime rate • Reduction in social welfare dependency Increasing Equity Social Infrastructure • % of population below 50% of median income • Difference in the PISA score between the top and bottom 10% of students • World Bank government effectiveness indicator • World Values Survey: social trust indicator 25

26. The Living Standards HUB Going live 2nd April 2013 – Register in advance, email: Joey.Au@treasury.govt.nz

27. Example:Effect of a PAYGO-funded expansion of New Zealand Superannuation Reduces investment risk Increases wage growth risk Reduces intergenerational equity Increases within generation equity

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

29. Economic Growth Reducing Risks Sustainability for the future Social Infrastructure Increasing Equity

30. Example:Living Standards Assessment: Risk Management Method: Increasing the freedoms of individuals to enjoy desired lifestyles Elements: Physical Human Social Natural Capital CapitalCapitalCapital Risks Earthquakes Crime Welfare dependency Climate Change e.g. Floods Ill health Economic crises Biodiversity risks Eruptions Skill Deficiency Education failure Erosion Infrastructure disrepair Civic society failure White elephants MitigationsInsurance Education Policy Welfare Reform Emissions Trading 30

31. 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. 31