Discussion paper

Embedding wellbeing in the Public Finance Act 1989: discussion document

12 Sep 2018

A wellbeing approach to decision-making

This Government believes that economic growth, as important as it is, will not alone guarantee improvements to people’s lives, particularly for the most vulnerable, or the ongoing health of the natural resources that sustain us.

A wider framing is needed to measure New Zealand’s progress, to develop and assess fiscal policy and support decision-making. This means looking beyond well-established measures like gross domestic product (GDP) – which remains an important marker of economic activity, but does not capture important facets of wellbeing for the environment, people, and communities.

To achieve the Government’s vision, New Zealand needs a public sector that is more strongly focused on improving current and future wellbeing. This Government has committed to delivering a Wellbeing Budget in 2019, as an important first step towards showing how the wellbeing approach can be used to inform our investment priorities and funding decisions, and to measure our success.

Changes to the Budget will include using the Living Standards Framework to inform the development of Budget priorities, and taking a more collaborative approach to setting those priorities. It also means reporting New Zealand’s progress in Budget documents against a wider range of wellbeing indicators, alongside macroeconomic and fiscal indicators.

Proposal to embed wellbeing in the Public Finance Act

As well as taking a wellbeing approach through Budget 2019, we also need to look at how we can make this focus on wellbeing enduring.

This document sets out a proposal to amend the Public Finance Act 1989 to embed wellbeing (in the Act). This proposal is part of a wider package of State Sector Reforms, including proposed changes to the State Sector Act 1988 and the Public Finance Act.

The proposal would create new requirements for:

  • the Government to set out how its wellbeing objectives, along with its fiscal objectives, will guide its Budget decisions, and
  • the Treasury to report on wellbeing indicators, alongside macroeconomic and fiscal indicators.

Under this proposal, it would be up to the Government to select the specific priorities (wellbeing objectives) which will inform its fiscal policy, spending, and other decisions. At the same time, the Treasury would report annually on wellbeing indicators, which would track aggregate, national-level movement, and long-term trends in wellbeing, and which could be used by the Government to identify areas which may need attention.

These changes would require the Government to describe how its wellbeing objectives have shaped its Budget and fiscal strategy in its Budget Policy Statement (generally published in December) and its Fiscal Strategy Report (presented on Budget Day). The Treasury would report annually on wellbeing indicators, for example, as part of the Budget Economic and Fiscal Update.

The effect of requiring reporting on wellbeing indicators and objectives would be to augment the discussion of macroeconomic and fiscal indicators, and broaden the framework that the Government uses to develop and assess its Budget and fiscal policy.

This proposal seeks to build on New Zealand’s existing fiscal framework, focusing on macroand national-level reporting on wellbeing (under Part 2 of the Act). Implementing this proposal would have a positive impact on both transparency (through expanding public reporting) and accountability, by requiring every Government to draw a connection between its wellbeing objectives and its fiscal policy, and requiring the Treasury to report on wellbeing indicators.

It is also proposed to require the Statement on the Long-term Fiscal Position and the Investment Statement (which are produced by the Treasury every four years) to include a wellbeing focus.


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