This is partly because of the huge fiscal costs of these transfer payments – amounting to an estimated $ billion this financial year, or some 11 per cent of estimated GDP (both figures include the fiscal cost of New Zealand Superannuation). This cost substantially constrains the government from devoting more resources to education, law and order, research and development, and tax reduction.
More importantly, however, it underlines the need for other or new institutions to step in and relieve the ECB from some of its responsibility. Actually, this is the central message of the Five Presidents’ Report.