www.berl.co.nz Will wellbeing be gazumped? As sombre economic - PowerPoint PPT Presentation

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Will wellbeing be gazumped? As sombre economic outlook hovers Haratua 2019 Amanda Reid, Senior Researcher Nick Robertson, Senior Economist Dr Ganesh Nana, Chief Economist @BERLeconomics BERL BERL pre-Budget Briefing – Haratua 2019 – slide 2

Wellbeing Living Standards Framework Government priorities Amanda Reid Senior Researcher BERL pre-Budget Briefing – Haratua 2019 – slide 3

The Living Standards Framework BERL pre-Budget Briefing – Haratua 2019 – slide 4

Current wellbeing domains BERL pre-Budget Briefing – Haratua 2019 – slide 5

“Our people” graphs BERL pre-Budget Briefing – Haratua 2019 – slide 6

The four capitals BERL pre-Budget Briefing – Haratua 2019 – slide 7

Government priorities • mental health • reducing child poverty • l ifting incomes for Māori & Pasifika • digital innovation • transitioning to a low-emissions economy BERL pre-Budget Briefing – Haratua 2019 – slide 8

The economic situation Nick Robertson Senior Economist BERL pre-Budget Briefing – Haratua 2019 – slide 9

OCR and inflation BERL pre-Budget Briefing – Haratua 2019 – slide 10

GDP and growth BERL pre-Budget Briefing – Haratua 2019 – slide 11

Employment and investment BERL pre-Budget Briefing – Haratua 2019 – slide 12

Risks coming from offshore BERL pre-Budget Briefing – Haratua 2019 – slide 13

USA yield curve Yield curve on US Treasuries yield on 10yr bonds minus that on 1yr bonds 4 % 3 2 1 0 -1 Aug 03 Nov 05 Feb 08 May 10 Aug 12 Nov 14 Feb 17 May 19 Federal Reserve BERL pre-Budget Briefing – Haratua 2019 – slide 14

USA vs China (and Iran and North Korea) BERL pre-Budget Briefing – Haratua 2019 – slide 15

Australia, the UK and EU all face change BERL pre-Budget Briefing – Haratua 2019 – slide 16

Budget 2019 The Wellbeing Budget Dr Ganesh Nana Chief Economist BERL pre-Budget Briefing – Haratua 2019 – slide 17

The political imperative BERL pre-Budget Briefing – Haratua 2019 – slide 18

Economic noise Yield curve on US Treasuries yield on 10yr bonds minus that on 1yr bonds 4 % 3 2 A weakening 1 0 global -1 expansion. Aug 03 Nov 05 Feb 08 May 10 Aug 12 Nov 14 Feb 17 May 19 Federal Reserve The main shared policy priority is for countries to resolve cooperatively and quickly their trade And, of course, there is BREXIT disagreements and the resulting policy uncertainty BERL pre-Budget Briefing – Haratua 2019 – slide 19

Fiscal policy now critical (and makes sense) 10-year Government bond rate %pa monthly average 8 6 4 2 0 Apr 09 Apr 11 Apr 13 Apr 15 Apr 17 Apr 19 RBNZ BERL pre-Budget Briefing – Haratua 2019 – slide 20

Wellbeing Budget: can we afford it? The rainy day surplus HYEFU $m OBEGAL 9,000 • includes new spending of $2.4bn per year 6,000 • hits debt target a year earlier 3,000 • if push debt target to 2021/22 as originally promised then another 0 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 $500m per year available BERL pre-Budget Briefing – Haratua 2019 – slide 21

The rainy day surplus • this scenario is best $m OBEGAL with extra $500m pa spend 9,000 part of $3bn per year new spend 6,000 • still meets debt ‘rule’ and still substantive 3,000 surplus • if want to push 0 envelope further … 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 BERL pre-Budget Briefing – Haratua 2019 – slide 22

The rainy day surplus defer debt ‘target’ to $m OBEGAL with extra $1bn pa spend 9,000 2022/23, then • another $1bn 6,000 available per year • i.e. $3.5bn new spend 3,000 per year • surplus still visible 0 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 BERL pre-Budget Briefing – Haratua 2019 – slide 23

Huge elbow room around debt • debt still well under Net core Crown debt % of GDP % 23 control 22 • not forgetting this 21 measure excludes 20 assets of NZSF 19 2018 HYEFU/FSM 18 • including NZSF then Scenario A 17 Scenario B net debt close to 0 16 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 BERL pre-Budget Briefing – Haratua 2019 – slide 24

Budgeted Govt capital spend Net Government Capital Expenditure (excl NZSF contrib) 10 actual HYEFU17 HYEFU18 $bn 8 6 4 2 0 2005 2008 2011 2014 2017 2020 2023 NZ Treasury BERL pre-Budget Briefing – Haratua 2019 – slide 25

The business case for transformation Economics in state of denial? measures of climate demographic progress change upheaval (GDP et al) social structures insular world and cohesion inequality minimum wage living wage gig economy technology robotics NAIRU and free trade synthetic foods still drive economic models crypto currency BERL pre-Budget Briefing – Haratua 2019 – slide 26

The productivity puzzle productivity profitability pay BERL pre-Budget Briefing – Haratua 2019 – slide 27

More sophistication? productivity profitability succession training knowledge experience skills pay BERL pre-Budget Briefing – Haratua 2019 – slide 28

Papatūānuku

Elephant in room Distribution of household income and wealth 100 % of net household income and wealth 80 wealth (2018) 60 income (2017) 40 20 0 0 20 40 60 80 100 % of households BERL calcs BERL pre-Budget Briefing – Haratua 2019 – slide 30