Reflections from the 2024 NZ Economics Forum

The 2024 New Zealand Economics Forum, held at the University of Waikato on 15-16 February was positioned as a briefing to the incoming government, with topics spanning health, demographics, tax, social investment, trade, monetary policy, technology, infrastructure, and climate change. Through the wide-ranging discussions, a clear theme emerged – the need for focused leadership and discipline to invest our nation’s limited resources in areas with the strongest evidence of delivering improved wellbeing and long-term productivity growth.

Tough trade-off decisions will need to be made with long-term value in mind, and the outcomes of these decisions measured. In the Waikato region, we’re clear that these decisions must be made with regional economic objectives and enabling social outcomes at the core, and we’ll continue to advocate for these to be accounted for. Read on for some reflections from the Te Waka team members who attended this year’s New Zealand Economics Forum, and how their observations could apply to their work in the Waikato.

We cannot ignore the reality of having to make tough trade-off decisions

We are not (yet) wealthy enough as a nation to be able to afford to invest in everything that we might want to, and we lack the scale and capacity to do everything at once. Several speakers at the conference highlighted our challenges as a small, relatively unproductive nation with limited resources, competing in a complex global environment.

This necessitates strong leadership and policy rigour to make better decisions about how we prioritise our limited resources, to achieve a step change in economic and social prosperity for Aotearoa New Zealand.

Here in the Waikato, we see a need for a robust decision-making framework that is evidence-based and accounts for the regions’ economic priorities and key growth enablers. This framework should provide tools and processes to make the difficult trade-off decisions that will be required going forward.

On the other hand, common behaviours that underpin poor decision-making were highlighted at the conference, including:

• Short-term thinking and lack of long-term vision – optimising for short election cycles and immediate benefits that can be detrimental long-term
• Siloed decision-making – failing to account for inter-dependencies or leverage collaborative opportunities
• Prioritisation of ‘new’ projects over maintenance – building on top of poor foundations, resulting in fragile and inefficient systems
• Poorly informed decision-making – lacking clear data or evidence to identify areas of greatest need or options most likely to deliver greatest benefit
• Status quo bias – a lack of creativity and willingness to make fundamental system changes despite clear evidence of the need for change.

Trade-off decisions need to be made based on long-term value

A clear area of consensus at the conference was the need for greater weight to be placed on long-term vision, goals, and outcomes. While views naturally differ on what that long-term view should be, the value of intergenerational thinking in enabling decisions that generate long-term prosperity was highlighted by many at the conference.

From a local perspective, we see a longer-term vision and pipeline of goals and outcomes as having the added benefit of creating more certainty for potential public, private and philanthropic investors in the foundations that enable prosperity, such as our infrastructure.

From an economic theory perspective, long-term economic growth and wellbeing is achieved through productivity improvements, which are enabled in part by growth in capital, many forms of which were discussed in detail at the conference:

• Natural capital – our environment and natural resources
• Human capital – the capabilities and capacity of our people
• Physical capital – our built environment including housing and infrastructure
• Technological capital – the level of innovation, unlocking new opportunities and solutions.

The discussions on natural capital focused on the impact of climate change and the need to build our nation’s resilience to increasingly extreme and unpredictable weather events. Conference speakers called for clearer leadership, more coordination and collaboration, and the implementation of a funding model that prioritises preparation for the long term rather than just recovery from immediate events.

Serious concerns about human capital were raised at the conference across multiple sessions. In the area of health, panel speakers highlighted systemic issues that have resulted in a system that is focused on disease and injury management rather than on health and wellbeing. The call for a systemic shift to prioritise and enable primary and community health (which build long-term wellbeing) over hospitals (which manage more immediate ill health) was clear.

On education, strong concerns were expressed about high levels of truancy, poor literacy and numeracy outcomes, high rates of young people not being engaged in education, employment or training (NEETs), long-term welfare dependency and ongoing skill shortages in key industries. These concerns are particularly relevant to the Waikato region where truancy, NEET and unemployment rates are well above national averages. Conference speakers highlighted the need for stronger investment in creative solutions in education, including financial incentives for people to train in high-priority industries/roles.

Related to the conversation on education was the topic of demographic change, with a conference panel session dedicated to this topic. The major demographic shifts occurring in Aotearoa New Zealand and globally have significant societal and economic implications. An ageing population puts significant pressure on a relatively small (and under-educated) workforce to fund the health needs of a growing base of retirees. Our young population is increasingly Māori and Pasifika – many education and health trends for those communities are particularly concerning, and if left unaddressed have serious implications for community wellbeing and the capability and capacity of our future workforce.

The demographic conversation naturally spurred discussion on immigration policy, with the panel speakers highlighting the global trends of lower fertility and ageing populations in many developed nations, which will drive international competition for working-age talent. This creates a risk for Aotearoa New Zealand which has often relied on immigration to fill skill gaps and support economic growth. We may increasingly struggle to attract migrants to our shores when we are competing against nations that are wealthier, more productive, and may have stronger imperatives to attract young migrants.

Shifting from human to physical capital, the conference discussions focused on the alarming infrastructure gap and the need for systemic behavioural changes to address it. Conference speakers spoke to the need for much greater efficiency in both planning for and investment in infrastructure – the importance of being smarter with how we invest in infrastructure, not simply throwing more money at it. The need to invest in the ‘boring’ stuff was also highlighted – the importance of maintaining the assets we already have, to ensure we maximise utilisation and reduce long-term costs. Financing and funding of infrastructure was also discussed, including the need for broader financing options to be adopted (including private capital) and the need for more funding tools to be able to pay for infrastructure investment over time. The important role of infrastructure regulation was also highlighted, as a tool for ensuring appropriate levels of investment and fair pricing.

On technology, there were conference sessions dedicated to the future of the agriculture sector in the face of disruptive technology and the opportunities for fintech to transform the financial services sector. Speakers highlighted both disruption risks and opportunities from technology change, including the impact of Artificial Intelligence, precision fermentation, environmental technologies, and open banking. The opportunities for Aotearoa New Zealand to improve its productivity through adoption and development of technology was raised throughout the conference, with particular focus on opportunities in health, infrastructure, and financial services.

Data, evidence and outcome monitoring will be critical

Perhaps the strongest recurring theme at the conference was the call for evidence-based decision-making and monitoring – the need for hard evidence on what works and (just as importantly) what doesn’t, coupled with a systematic approach to investment decisions and measurement of outcomes.

Multiple speakers called for a ‘value’-centred approach that is tightly focused on desired outcomes, coupled with monitoring and accountability frameworks which provide appropriate levels of freedom on how those outcomes are achieved. This requires:

• Strong clarity on desired outcomes. Strategic work founded on data and evidence must be done up front to define desired outcomes, informed by a clear understanding of needs. Ideally there is bipartisan support for these outcomes – several speakers highlighted the need to take people on the journey, provide a clear vision, and be open about the decision-making process and trade-offs being made.
• Appropriate devolution and the courage to empower those best placed to deliver outcomes to determine how they go about delivering those outcomes. Several speakers called for leaders to challenge their thinking on who is best placed to deliver outcomes and to be open to alternative approaches based on evidence.
• Strict monitoring and accountability frameworks. With the freedom to determine how you deliver outcomes must come tight accountability for delivering those outcomes and consequences for non-delivery. This requires sophisticated monitoring frameworks so that poor performance is identified and rectified early, and that strong performance is amplified for maximum impact.
• Clear transparency on the data, models and assumptions used in assessing outcomes. This is critical for building trust and avoiding biased approaches to measurement.

An outcomes-focused approach has the potential to break down barriers and silos, and enable more holistic ways of addressing an issue. An example given at the conference was on mental health, noting that clear objectives on mental health outcomes might be best achieved through investment in housing or education rather than the health service – a health outcome doesn’t necessarily need to be achieved through investment in the health budget line.

This model is perhaps best articulated in the social investment approach, which was a key topic at the conference. Maria English, CEO of Impact Lab, described the social investment approach as having a strong customer focus, an investment-based framework for decision-making that focusses on value, and feedback loops to ensure continuous improvement. There was clear consensus at the conference about the value of investing in the potential of our people.

Finance Minister Hon. Nicola Willis provided the keynote address on day one of the conference and set the tone for this conversation. “For me, social investment is about using data, evidence and modern analytics to invest in earlier and better intervention that can effectively break cycles of disadvantage, dependence and despair. It’s about moving beyond good intentions towards hard evidence about what works. Improving these peoples’ lives is not only a sign of a decent country, it’s a recipe for safer communities and a stronger economy."

Measurement of these holistic interventions may require collection of a broader range of data. As a team we’re investigating the potential of fit for purpose environmental, economic and social wellbeing performance measures that can capture genuine progress along with costs of delay, disruption, and low productivity.

The rhetoric needs to turn to action

The scene has been set and we now await a series of decisions from elected leaders at central and local government levels as they set budgets, make long term plans, and decide how they will allocate their resources for the benefit of the community. The 2024 New Zealand Economics Forum called upon our political leaders to focus on developing long-term prosperity, make difficult trade-off decisions, overcome status quo bias to make system change, and apply high levels of rigour to monitor and ensure accountability for delivery.

From a Waikato region perspective, Te Waka will be monitoring policy announcements in the upcoming budget, looking for opportunities to support long-term regional economic development and prosperity. At a local government level, we continue to engage with the Future Proof urban growth partnership, encouraging the integration and alignment of spatial and economic development planning to grow the productive capacity of the Waikato region.

A collective effort is required to achieve a step change in Aotearoa New Zealand’s economic and social prosperity. Focused leadership is required across central and local government, business, and community organisations to embrace a long-term intergenerational approach with high accountability for delivering outcomes for our people. There is opportunity to partner and secure investment for the Waikato region that will strengthen economic resilience, social outcomes, and prosperity for the region and Aotearoa New Zealand.