OECD Economic Surveys: Iceland 2019

Description

Well-being in New Zealand is generally high, although there is room for improvement in incomes, housing affordability, distribution, water quality and GHG emissions. Economic growth is projected to remain around 21/2 per cent. The main risks to the outlook are rising trade restrictions and a housing market correction. Labour market reforms have been initiated to increase wages for the low paid but will need to be implemented cautiously to minimise potential adverse effects. Substantial planned increases in bank capital requirements should reduce the expected costs of financial crises but might reduce economic activity. To improve the well-being of New Zealanders, the government is amending legislation to embed well-being objective setting and reporting, developing well-being frameworks and indicator sets and using well-being evidence to inform budget priority setting and decision-making. Immigration increases well-being of both immigrants and most of the NZ-born, although associated increases in housing costs, congestion and pollution have had negative effects. A raft of measures is underway to make housing supply more responsive to demand. However, strict regulatory containment policies, which impede densification, need to be replaced by rules that are better aligned with desired outcomes and alternative sources of finance found to relieve local government infrastructure funding pressures. SPECIAL FEATURES: WELL-BEING; MIGRATION; HOUSING Basic statistics of Iceland, 2018 Executive summary Key policy insights Growth is slowing The monetary policy framework is well established Further reforms to the monetary policy framework are underway Monetary policy has eased but vigilance is needed Safeguarding a resilient financial sector Fiscal policy for inclusive growth The fiscal framework can be strengthened further Improving the quality of spending Rebalancing taxation Establishing a sovereign wealth fund Structural reform to improve competitiveness is needed Lowering the regulatory burden Productivity differs more than wages Fostering strong and relevant skills Institutions and governance could be strengthened further Green growth References Thematic chapters Chapter 1. Fostering strong and relevant skills Building solid core skills Iceland spends significantly on education but outcomes have deteriorated Meeting the reading skills target Improving teaching quality Helping students to succeed Reducing inequalities in education quality There is scope for better skills matching and a more rigorous analysis of skills needs Evidence suggests the presence of skills gaps Developing tools to assess and anticipate skills needs Addressing skills imbalances Strengthening the vocational pillar Harnessing skills for a knowledge- and innovation-driven economy Ensuring lifelong learning for all Making better use of existing skills Active labour market policies Improving financial incentives to work Making better use of immigrant skills References Chapter 2. Improving public spending to maintain inclusive growth The quality of public spending has deteriorated Performance budgeting should be strengthened Decentralisation should be modernised Education spending needs better impact From childhood to PISA Tertiary education Private funding of universities should be strengthened Health care could be made more cost-effective Health care works well but is expensive Health reforms should help contain unnecessary spending Private cost participation could help reduce overconsumption Public infrastructure should be planned more rigorously Social protection The system is well-targeted but discourages low- and medium income earners Disability benefits are rising Subsidies should become less damaging References