This presentation was made by Fiona Ross, New-Zealand, at the 36th Annual Meeting of OECD Senior Budget Officials held in Rome on 11-12 June 2015.

1. © The Treasury
OECD Senior Budget Official
2015
Inclusive Growth – a New Zealand Perspective

3. The outlook for real GDP growth remains
solid with real GDP growth forecasts around
2.8% on average over 2015-2019
Key factors supporting the growth outlook are
low interest rates, robust investment activity,
strong population growth and historically high
terms of trade
Nominal GDP (the dollar value of output)
forecasts have been reduced reflecting
weaker-than-previously inflation
Tax revenue forecasts have been revised
as a result of lower nominal GDP and lower
interest rates
There are a number of risks to the
forecasts, including:
• upside risks to net migration
• downside risks to global economic
developments and the risk that dairy prices
and CPI inflation (and hence nominal GDP
growth) do not rebound as expected
ECONOMIC CONTEXT
-3
-2
-1
0
1
2
3
4
2009 2011 2013 2015 2017 2019
% change
Budget 2015
Forecast
Economic growth (real GDP)
0
1
2
3
4
5
6
2009 2011 2013 2015 2017 2019
%
Budget 2014 Half Year Update 2014 Budget 2015
Forecast
CPI inflation

4. FISCAL STRATEGY
Fiscal strategy objectives:
• Returning to and maintaining OBEGAL
surpluses
• Returning net core Crown debt to 20%
by 2020 and repaying nominal debt by
2017/18
• Lowering ACC levies and beginning to
reduce income taxes from 2017
• Using any additional fiscal headroom to
lower debt
Why this fiscal strategy?
Returning debt to prudent levels (set by this
Government at 20% of GDP by 2020 and
then 10-20% over the economic cycle):
• Tighter fiscal policy (larger operating
balances) takes pressure off interest
rates and the exchange rate. This
promotes macro stability and creates
the confidence to enable businesses to
invest and a platform for the BGA to
deliver.
• Provides a buffer for future shocks,
important for NZ as shown since 2008
given we are vulnerable to shocks and
have high levels of private debt.
• Also helps prepare for the impact of an
ageing population.
• Expenditure restraint tests spending for
value and results, including baselines.
0
5
10
15
20
25
30
2006 2008 2010 2012 2014 2016 2018 2020
Net core Crown debt% of GDP

5. 5
We are shifting New Zealand’s public
sector
From now ... to the future
Agency-centric Citizen-centric; working for and with New Zealanders
Outputs Results and outcomes; working together to make a difference for
New Zealanders, flexibility to deliver and target interventions
One or two strong agency leaders Leadership; empowering our people and motivating one another
Focus on the short term Stewardship; looking after
New Zealand for present and future generations
High integrity and trusted state sector High integrity, trusted state sector with incentives and accountability
mechanisms in place that drive performance and innovation
Limited use of data Information driven; using data to determine where and when to
invest, better evidence of what is working and what is not

6. Understanding Performance
Building up a detailed understanding of performance across agencies and sectors:
Tier 1: Controls and monitoring Tier 2: Cost drivers and sustainability
Tier 3: Efficiency Tier 4: Effectiveness
0
2
4
6
8
10
12
14
2007/08 2013/14
Changes in Departmental Expenses
Other operating
Rent
Depreciation
Capital charge
Consultants
Total personnel costs
$ billion
+$352m
+$25m
+$248m
+$424m
+$130m
+$978m
14.5
19.0
10.6
13.9
8.1
10.0
4.7
5.4
2.8
3.3
6.9
6.3
-
10
20
30
40
50
60
70
2007/08 2013/14
Composition of Non-departmental Expenses
(grouped by administering Department)
Other
MBIE
IRD
Education
Health
MSD
$ billion
Analysing demand, price and policy change as key drivers across the public sector,
especially for the non-departmental expenses.

7. IMAP – Investment Management and
Asset Performance

8. Four Year Plans – better assurance and
planning
Ministers determine what they
want to achieve and priorities
(strategy)
Ministers decide what mix of
goods and services they wish
to provide and performance
expectations (agencies advise
on this)
Chief Executives manage their
resources to achieve these
(planning and achieving)
Agencies report to the Minister
and Parliament on how they are
delivering
(monitoring and reporting)
Strategic Intentions –
sets out the strategic
objectives the agency
intends to achieve
Estimates – sets out
what is intended to be
achieved with the
appropriated
expenditure and how
performance will be
assessed
Annual Report
Statutory documents
(tabled in Parliament)
Documentation
and reporting
Four Year Plans –
sets out strategic
objectives, strategic
delivery, risks,
finances and
workforce
Output Plan or similar
(optional) – sets out
services to be provide
in a year
Agency in-year
progress reporting

9. 9
The Results Approach
The Results approach is changing how the State sector works...
Agencies are organised around the results that
matter to the Government and New
Zealanders. Results require agencies to find
new ways of combining capabilities and
resources to address difficult issues that are
important to New Zealanders.
Focus on the vital few. Trying to do
too much has hampered previous
efforts to improve outcomes
because it has been unclear how to
prioritise scarce resources and
capability.
Data and performance information
is used to drive action. Those
responsible for result achievement
are required to demonstrate
progress against key indicators and
targets.
Leaders are accountable for
achieving cross-agency results. Each
result area has a named Minister
and chief executive tasked with
leading across agencies and
accountable for achievement of
results targets.
Open Government. Progress
towards achieving the results is
announced every six months.
Publication is an important driver of
action.
Tangible outcomes. Results are
achieving tangible, measurable
outcomes for New Zealanders.
Government actions can be tracked
and measured.

10. Budget 2015: $790m child hardship
package
Family Category
Change to entitlement
(per week)
Number of families
impacted
Beneficiary families
$25 increase to
benefit
110,000 families
Working families
(less than $27,000)
$24.50 increase to
WFF
4,000 families
Working families
($27,000 - $36,350)
$12.50 increase to
WFF
50,000 families

11. Smart social sector investment is about lifting long-term outcomes through
the application of five principles to social spending:
• Clarity on the key measurable outcomes (in welfare the focus has been on
the benefit liability)
• Better use of evidence, data and population information to target those
who most need help or where benefits are greatest
• Clear institutional incentives and accountability mechanisms to drive
performance and innovation
• Financial and delivery flexibility to target interventions coupled with
evaluation and evidence based feedback loops to test, learn and adapt
11
Building from results - Smart social
investment

12. A focus on social investment
1 per cent of five year olds:
• are known to CYFS, and
• have been supported by benefits for
more than 40 months, and
• have a parent who has had contact
with Corrections
This 1 per cent is around 600 children
per year, but over 20 years creates a
pipeline of 12,000 at high risk

13. A focus on social investment
If we look at an average group of ten of these five year olds

14. A focus on social investment
On average, each child in this group will cost taxpayers $320,000 by age 35 – some over $1m
At age five… By twenty one…
…four will have
been on a benefit
long-term (40%)
At thirty five…
…a quarter will
have been in
prison (24%)
After high school…
…seven would not
have NCEA2 (74.6%)
… a group of ten of
these high-risk children

15. Social Development learning more
about their clients and future costs

16. 16
SOCIAL INVESTMENT – UNDERSTANDING CUSTOMERS
WITHIN AND ACROSS AGENCIES
Source: Treasury analysis of MSD’s Integrated Child Dataset
Estimates costs from birth to age 35 by
number agencies interacted with by age
5, 1990 birth cohort
Overlap of agency contacts before age 5
CYF
W&I
Dept. of
Corrections
577
6511
3226
489
435
142
49,860
1178
Number of children in the 1990 birth cohort
who had contact with CYF, Work and Income
or had a parent with a corrections history.
0 100000 200000 300000 400000
Three
Two
One
None Average
CYF & YJ
cost
Average
benefit cost
as child
Average
benefit costs
to 35
Average
Corrections
costs to 35

17. Changing the Budget process
CBA-X
• CBA-X is a tool that helps agencies identify the long term economic and fiscal
impacts of their planned interventions.
• The first stage of the model develops a marginal annual value for the
intervention at a per-person level.
• The second stage of the model aggregates the per-person annual value
to a cohort level annual value, which drives the cost-benefit analysis of
the intervention.
Adjusted value of
unit cost
$Unit Cost
Marginal impact of
intervention
# Confidence scaling
factor
% Annual value, per
person
$pp/year
Annual value, per
person
$pp/year
Duration of impact Target cohort
Annual value for full
cohort
$year
Share of impact by
vote
%
Annual value by vote
$vote

18. 18
UNDERSTANDING AND EMPATHY