AFR endorses NZ approach

Jennifer Hewitt writes in the AFR:

The combination of John Key as Prime Minister and Bill English as Finance Minister has achieved an increasingly rare feat in any advanced economy.

That includes returning a budget to surplus while managing better growth along with substantive social, economic and, yes, taxation reform.

All within a political framework of relative popularity, especially a track record good enough to be re-elected with stronger voter endorsement for its program.

Better outcomes in health and education, fewer people on welfare and a return to surplus – not bad.

Bill English attended this weekend’s Consilium, the annual conference organised by the Centre for Independent Studies. So did a few Australian politicians, including Porter.

Presumably he was listening hard to what English had to say about the need to constantly stress the idea of better government rather than getting stuck in arguments over bigger or smaller government.

But while finding the right language may be a necessary precondition for change, it is not sufficient to achieve it without detailed policy work to back it up.

Porter told The Australian Financial Review last week that he was attracted to New Zealand’s radical version of welfare reform, aimed at reducing dependency and improving results in a way that “changes lives”.

That’s any government’s stated goal, of course, just one almost never achieved. But New Zealand’s model uses what is specifically called an “” rather than relying on the usual talk of cuts.

The key is using newly available big data to both figure out the eventual cost of continued welfare dependency of various people over decades, while also targeting and tailoring assistance for those individuals most at risk of following that otherwise extremely expensive pattern.

That can necessarily include spending more rather than less money on some individuals initially – in order to avoid the much greater costs longer term.

This is clearly awkward to sell given immediate budget pressures and short-term political cycles, meaning that general welfare spending that is not effective must also be redirected into such “investment”. That’s where the constant talk of providing better services rather than budget cuts becomes so politically valuable. 

It also requires being data and results driven only – and in a much simplified system with far fewer overlapping programs.

When it comes to considering any new programs or continuing to fund existing ones, the judgement is made on how effective they are in terms of specific and measurable results.

Some of the preliminary big data has already been provided by PricewaterhouseCoopers.

 It will enable what Porter calls the equivalent of “keyhole surgery” – drilling down into groups of a few hundred people in various locations and categories to assess what works best.

The New Zealand government claims considerable success with this more personalised approach.

It is particularly effective in assisting single parents getting part-time work and in focussing on diverting young children and young adults from what their personal background statistics suggest would become long lasting problems for them as well as costs for governments.     

Is it too much to ask of a Turnbull government?   

Big data, the investment approach and flexible targeted investment – that is the way ahead.

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