A Snapshot of New Zealand in 2014

New Zealand Centre for Political Research

The New Zealand Centre for Political Research is a web-based think tank that takes a research-based approach to public policy matters and encourages the free and open debate of political issues. www.nzcpr.com

2014 has been a turbulent year – with the rise of ISIS, the outbreak of Ebola, the shooting down of a fully laden passenger jet … and closer to home, a general election that was hijacked by dirty politics and scandalmongers. While opposition parties have tried to revive the pre-election scandal and rouse public concern, New Zealanders believe there are far more pressing issues to worry about.

Meanwhile, the machinery of government rolls on. After each general election, briefing papers are prepared by public agencies for the incoming government. They provide us with a snapshot of New Zealand in 2014.

According to the State Services Commission, the government agency charged with overseeing the performance of the state sector, New Zealand’s government is bigger than ever before – and more expensive. With total Crown expenditure set at $73.1 billion for this financial year, the per capita cost of running the New Zealand government exceeds $16,000.

Some 229,631 people are employed in the wider state sector – an increase of almost 10,000 since National took office in 2008. Of those, 44,500 work in the core public service. The Ministry of Social Development employs the most staff with 9,931, followed by Corrections with 7,555, and Inland Revenue with 5,641. The agency with the fewest staff is the Ministry of Women’s Affairs with 23.

The state sector is made up of literally hundreds of government agencies. In their briefing to the incoming government, the Commission highlights that poor performance is a key challenge. They point out that while the functions of state sector agencies have been placed at arms length from Ministers, “Improving Board performance is the major way that Ministers have of driving for results in the wider State sector. Board performance has a range of determinants, a major one being the quality of Board appointees.”

Yet outside of the school sector, “There is no overall system to manage the candidate pipeline for the Crown and no standard appointment process. Some agencies interview potential candidates and some don’t; some advertise, some do background checks, but there is no consistent approach.”

Since Ministers are responsible for appointing between 2,000 and 3,000 members to more than 520 boards – at a cost in excess of $43 million in annual board fees – this is a serious issue of concern. 850 board appointments will be made in 2014 alone.

The briefing by the Ministry of Education to the incoming government reports that while education is a major public investment, accounting for one dollar in every five of total government spending, failing students and falling standards remain major concerns.

They explain that the education sector is divided into three distinct areas. The early childhood sector receives $1.6 billion in government funding, to provide services to over 200,000 children, delivered by 22,000 teachers, in over 5,000 centres – including kindergartens, kohanga reo, playcentres, and day care establishments. The primary and secondary sector receives $5.8 billion for over 750,000 students and 52,000 teachers, in over 2,500 state, integrated, independent and partnership schools. And the tertiary sector receives $4.2 billion in government funding for over 565,000 students and 600 providers – including universities, polytechs, industry and private training organisations, and community providers.

The Ministry of Education – which employs 2,610 staff – explains that, “International studies show that results for nine and ten year olds are declining in maths and science and that fifteen year olds are not doing as well as they have previously in reading, maths and science. In these studies and in these learning areas, New Zealand is not keeping pace with other high-performing countries.”

They outline key areas of failure – “In 2012, for example, 79% of Year 8 students were below the expected curriculum level in science” – and of successes: “The ECE [Early Childhood Education] sector has increased participation, so that now approximately 96% of children starting school have attended ECE. The persistent gap in take-up of ECE between children from European and higher socio-economic status backgrounds, and other children is reducing, but not quickly enough.”

The briefing by the Ministry of Health explains that current health expenditure of $15.1 billion, accounts for more than a fifth of all government spending: “Real spending has increased from $583 per person in 1950 to $2987 per person in 2011.”

The country’s 20 District Health Boards play a pivotal role in New Zealand’s health care system. Along with the Ministry of Health and the Accident Compensation Corporation (ACC), the DHBs are the main purchasers of public health services, with PHARMAC working on their behalf to prioritise and procure pharmaceuticals.

The DHBs provide hospital care and purchase primary and community health services for their local populations. While general practice and aged care services are funded by DHBs, they are provided by non-government organisations and private businesses. The Ministry of Health also purchases health services directly, including some disability support services. And as part of its no-fault injury insurance cover, ACC provides medical treatment and rehabilitation services through bulk funding arrangements with DHBs. Services that are not subsidised include optometry, orthodontics and most adult dental care.

The Ministry of Health’s three key goals are ensuring, “New Zealanders are healthier and more independent; high-quality health services are delivered in a timely and accessible manner; the health and disability system is sustainable.”

The New Zealand Police briefing explains that, in addition to the 12,000 staff located in 12 Districts around New Zealand, there is a small international Police presence in China, Singapore, London, Washington, Fiji, Australia, Indonesia, Solomon Islands, Papua New Guinea, Timor-Leste, Tonga, and Pitcairn Island. The broad range of activities they are involved in includes keeping the peace, law enforcement, crime prevention, maintaining public safety, national security, and emergency management.

With crime at a 35-year low, and last year’s road toll the lowest ever recorded, the main challenges faced by the Police relate to changes in criminal activity. This includes gang-related activities, the increase in violent crime (especially family violence, child protection and adult sexual assault), and the over-representation of Maori offending and victimisation. In addition, there is growing concern over the rapid growth in non-crime demand – including mental health – that requires more complex and intensive multi-agency responses: “In 2013 alone, the Police Communications Centre fielded 32,000 attempted suicide and mental health related calls for service, 22,000 of which Police employees subsequently attended. The standard two Police officers per event response cost the Police an estimated $10 million.”

Of the Police’s $1.5 billion budget, 72 percent funds personnel, 19 percent is used for operating costs including fuel and forensic expenses, and 9 percent for asset operating and ownership costs. Around $300 million – 21 percent of the budget – is used for road policing.

As the government’s lead economic and fiscal advisor, the Treasury has provided a number of briefing papers – including on health, ACC and climate change. Their report to the Minister of Finance focuses on lifting New Zealand’s economic performance and living standards: “New Zealand needs to reduce its foreign debt levels and shift the balance of economic activity towards the investment and export growth needed to support higher living standards over the long-term”.

They discuss a range of matters including the vexed issue of how to improve the country’s poor productivity performance: “While there is a wide range of potential explanations, three main themes emerge from the debate. One set of arguments emphasises a weakening in the pace of economic policy reform over time and the role of the state sector in restraining economic performance. Another set focuses on the links between New Zealand’s lower productivity, high real interest rates and exchange rate, low level of saving and consequential lower level of investment and exports. And a third line of argument focuses on the constraints to New Zealand’s economic performance from our small population and distance from international markets.”

Their analysis identifies three key strategic challenges – improving our international markets, moving towards export-led growth, and “enabling all New Zealanders to participate in the economy and society”. On this point they note, that while New Zealand’s overall employment rates are high, some groups are under-represented, including those with no or low qualifications, Maori, the disabled, and solo parents: “New Zealand is particularly unusual in terms of the high proportion of our children in sole parent households and our low employment rates for solo mothers. In many OECD countries solo mothers have similar or higher employment rates than partnered mothers. However, solo mothers have significantly lower employment rates than partnered mothers in New Zealand.”

They state that since welfare is the main source of income for two out of three children living in low income households, paid work is an important route out of poverty. While such families often face multiple barriers to work, overcoming them “can bring wider personal and social benefits to the parents, their children and the community. These include the long-term economic, social and fiscal costs from the related impacts of joblessness, like crime or anti-social behaviour, and poor housing, health, and educational achievement.”

Treasury supports the welfare system’s new focus on investing in those who are most likely to remain on benefits in the long-term: “Policies that assist beneficiaries to move out of long-term welfare dependency and participate in the labour market are not only likely to improve outcomes for the most disadvantaged families, including children, but will also enhance economic growth.”

The Reserve Bank plays a central role in New Zealand’s financial system. Its briefing to the incoming government, explains that it “manages monetary policy to maintain price stability, promotes the maintenance of a sound and efficient financial system, and supplies New Zealand banknotes and coins”.

As part of its monitoring role, the Reserve Bank issues comprehensive reports on a regular basis. This week’s NZCPR Guest, economic commentator Frank Newman, has examined the Reserve Bank’s half yearly Financial Stability Report and shares his analysis – including his concerns about the Governor’s proposed new restrictions on property investors:

“Reserve Bank Governor Graeme Wheeler commented on the possibility of regulations to curb buying by larger property investors (those owning more than five rentals). The Reserve Bank’s proposal would require banks to treat loans to residential property investors owning more than five properties as commercial lending.

“SME [small and medium sized enterprise] bank lending is considered to be higher risk lending and is charged a higher interest rate. To target larger residential property investors is a truly absurd notion given the diversification of a large residential property portfolio actually lowers risk – larger investors should pay lower interest rates than the single property owner.

“The true purpose of the regulation is obviously to put the brakes on house prices by targeting existing property investors, just as they targeted first home buyers when they changed the loan to value ratios last year. At this stage the Reserve Bank is still considering the proposal.”

In this newsletter, we have provided just a taste of the extensive information available in the briefing papers from over 60 government agencies on the Beehive website. We encourage those with an interest in any of the organisations listed below* to follow this link to their briefings.

*ACC, Callaghan Innovation, Canterbury Earthquake Recovery Authority, Careers New Zealand, Civil Aviation Authority, Creative New Zealand, Crown Law Office, Department of Conservation, Department of Corrections, Department of Internal Affairs, Earthquake Commission, Education New Zealand, Education Review Office, Electricity Authority, Energy Efficiency and Conservation Authority, Environmental Protection Authority, Fair Way Resolution Limited, Families Commission, Housing New Zealand Corporation, Inland Revenue, Land Information New Zealand, Maori Television, Maritime New Zealand, Ministry for Culture and Heritage, Ministry for Primary Industries, Ministry for the Environment, Ministry of Business, Innovation and Employment, Ministry of Civil Defence & Emergency Management, Ministry of Defence, Ministry of Education,  Ministry of Foreign Affairs and Trade, Ministry of Health, Ministry of Justice, Ministry of Pacific Island Affairs, Ministry of Social Development, Ministry of Transport, Ministry of Women’s Affairs, Natural Resources Sector, New Zealand Artificial Limb Service, New Zealand Customs Service, New Zealand Defence Force, New Zealand Police, New Zealand Productivity Commission, New Zealand Qualifications Authority, New Zealand Teachers Council, New Zealand Trade and Enterprise, NZ on Air, NZ Transport Agency, Office of the Children’s Commissioner, Parliamentary Counsel Office, Reserve Bank of New Zealand, Serious Fraud Office, Social Workers Registration Board, Sport New Zealand, State Services Commission, Statistics New Zealand, Te Mangai Paho, Te Papa, Te Puni Kokiri, Tertiary Education Commission, Transport Accident Investigation Commission, Treasury, Veterans’ Affairs New Zealand, Work Safe New Zealand.


What is your view on the size of New Zealand’s government – is too big, about right, or not big enough?


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