1. © The Treasury Opportunities and challenges for New Zealand's economic performance: a perspective from the Treasury Presentation to GEN November 2014

2. © The Treasury We’ve been thinking... 2004 Growth State of Play 2008-2010 Series of productivity papers 2011 Briefing to the Incoming Govt (BIM) -Engage externally (e.g. today). -Build our capability to provide better advice (e.g. BIM). -Help focus our resources (e.g. medium-term investment priorities). Economic narrative refresh 2013 BIM, including Holding On and Letting Go 2014 Dec 2010 Micro- Macro Narrative

3. © The Treasury...and we’ve been listening... Our work has been made much richer by the extensive dialogue we have had with a variety of New Zealanders around the country: Collaborative workshops Cross- government panel Ongoing engagement Seminars on alternative perspectives Treasury Guest Lectures Regional visits

4. © The Treasury...and this is what we’ve heard. We used what we heard to support us in broadening our strategic economic story to have a wider focus on a prosperous and inclusive New Zealand that is well prepared for the future. National vision Improved education NZ is not your average country Living standards framework Child poverty NZ is part of the global economy

5. © The Treasury Global trends create challenges and opportunities for New Zealand… Projected changes in the world economy over time Percent share of world economy

6. © The Treasury...in lifting our economic performance and living standards. INCLUSIVENESS Social infrastructure Increasing equity SUSTAINABILITY Sustainability for the future Managing risks PROSPERITY Economic growth Sustainability for the future Managing risks Social infrastructure Increasing equity 6

7. © The Treasury Inclusiveness is about helping all New Zealanders play their part... Expected years children will spend in benefit-dependent households Percent of total number of children aged between 0 and 14 years

8. © The Treasury...and investment in quality public services has an important role to play.

9. © The Treasury Sustainability is about good management of all our capital stocks... 9 Breaking down tradable and non-tradable activity

10. © The Treasury...to shift from a rock star to a rock solid economy.

11. © The Treasury Making New Zealand more prosperous means overcoming the challenges of size and distance... New Zealand’s geographic challenge Selected countries distance from world markets and population

12. © The Treasury...to boost our international connections.

13. © The Treasury Summary of our advice on policy priorities Inclusion: lifting outcomes for disadvantaged New Zealanders Short-termMedium-termLong-term Reducing child poverty and supporting inclusion: expanding smart social sector investment and helping those on the lowest incomes. A continued shift towards investment in effective social sector interventions that improve long-term outcomes, reduce long-term economic, social and fiscal costs and focus on those most in need. Sustaining economic performance Managing pressure on interest and exchange rates in the upswing through fiscal restraint. Microeconomic and state sector reform Increasing the responsiveness of housing supply, improving natural resource management and lifting state sector effectiveness. Internationally- competitive business environment Continued strengthening of international connections and ‘behind the border’ policy settings. Long-term productivity Tertiary education and infrastructure are two key priorities for long- term productivity performance. Environmental and fiscal challenges Managing the risks and costs to New Zealand of climate change and demographic fiscal pressures. Sustainability: moving to export and investment- led growth Prosperity: boosting productivity and international connections

14. The economic cycle is managed so that pressures in interest rates and the exchange rate are moderated The Crown Balance Sheet is Managed Efficiently and Effectively The State sector delivers results for New Zealanders Internationally connected & competitive business environment People have the skills & support to participate in the economy Applying the international lens to other areas of domestic policy INTERMEDIATE OUTCOMES Improved outcomes for Maori Applying an Internationalisation Perspective Water allocation and quality Improving Resource Management Identify key issues in tertiary education system (especially low public & private returns) and medium term policy responses Improving returns from tertiary education and skills Understanding aggregate, industry and firm productivity performance Productivity and Competitiveness Child Poverty & Inequality A focus on education, economic development, housing and water Improving Outcomes for Maori Develop the 2013 State Sector narrative story to the BIM Treasury (State Sector) Narrative Supporting effectiveness in social sector purchasing through coordination and advice; Develop a contestable Social Housing market Improving State Sector through a system-wide focus Crown Balance Sheet Options for reducing pressures on tradable sectors Managing the Cycle Address barriers to supply in Auckland Housing Understand how capital markets can support firms’ funding of investment Focus on the supply, demand and intermediation of financial capital. Capital Markets Fiscal Policy Asset performance metrics & aggregate risk modelling Understand the impact of fiscal policy on the economy & vice-versa Developing appropriate tools Understanding vulnerable populations and how they interact with the system Medium-term investment priorities