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Commissioned report

Genuine Savings as a Test of New Zealand Weak Sustainability

Issue date: 
Tuesday, 25 September 2018
Status: 
Current
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Abstract

The key aims of this paper are to:

  1. to extend the World Bank’s (WB) measure of Genuine Savings (GS) for New Zealand by using a longer time-series of data, 1950 – 2015
  2. improve GS estimates for New Zealand by adding additional dimensions to GS ie, forestry
  3. investigate the relationship between several GS measures and the discounted values of GDP per capita and consumption per capita, used to proxy well-being
  4. test a series of hypotheses which relate GS to the change in future well-being using the framework proposed by (Ferreira, Hamilton, & Vincent, 2008), and
  5. investigate the effects of a growing population on the availability of future capital stocks by considering the consequences of ‘wealth-dilution’ as defined by Ferreira, Hamilton, & Vincent (2008).

The paper makes a contribution to the literature on GS, particularly in the context of New Zealand, by considering patterns of GS and well-being over a longer time span of data than has been previously used and adds to a relatively small, but growing literature on tests of GS using long- or relatively long- time series data (see eg, Greasley et al. (2014); Greasley et al (2017), Hanley et al. (2016). We conclude, based on the data used here, that New Zealand’s GS has been positive (ie, weakly sustainable), since the start of our data series, even without allowing for the contribution of technological advancement. However, we also conclude that the effects of a growing population and a savings-gap, have lead to a ‘wealth-dilution’ effect needed to maintain real wealth per capita, as we estimate that there was an average savings gap (GS as a percentage of Gross National Savings) over the period 1955-2015 of 0.5% per annum.

Acknowledgements

The New Zealand Marsden Fund supported this research, for which we are appreciative. We wish to thank David Greasley, Matthias Blum and Nick Hanley for allowing us to use methods from our previously, published joint research and Tony Burton, Tim Ng (New Zealand Treasury), Adam Tipper (Statistics New Zealand) and Brett Longley (NZ Ministry of the Environment) for feedback, suggestions and support.

Last updated: 
Tuesday, 25 September 2018