From a commercial background which propelled him into the international sphere, Alastair Scott MP for Wairarapa, is unusual among today’s parliamentarians in that only in later life did he set out to become one. At a youthful 52 Mr Scott (pictured) keeps his business hand in while involved in several agribusinesses in the Wairarapa, notably his Matahiwi wine enterprise. As the National Party MP settles into his second term MSC Newswire posed Five Questions…….
1. We note your previous role as chairman of the old Crown Health Financing Agency and your current one as Associate Finance spokesman for the National Party. Are you satisfied that the economy will be sufficiently productive to accommodate the wave of baby boomers in retirement?
New Zealand is facing a significant change in the demographics of our population in the next two decades. The large number of baby boomers reaching retirement age, collecting superannuation and living longer than their parents, will cost the taxpayer more per capita than their parents did. This is not speculation, but is a fact that we must face and prepare for.
As the baby boomers live longer, they will also weigh heavily on the public health sector. Private health insurance has been steadily declining in New Zealand and is now below the OECD average. New Zealand has only 17% of health funding coming from private sources compared to OECD average of 28%. Participation in Private Health Insurance is greatly reduced for those over 65yrs as the cost of premiums increase considerably. Encouraging or incentivising retirees to stay in the private sector would help reduce some of the burden on the taxpayer. Currently, there is an expectation that the current level of public health services can continue indefinitely.
As we live longer, we are also able to work for many more years than our parents did. Many 70 year olds choose to work for reasons such as financial, social, and to have a greater sense of contribution to their communities and families. Therefore it makes sense to gradually raise the age of superannuation entitlement over the next two decades. Mechanisms such as KiwiSaver and a greater awareness of the cost of aging all contribute to the acceptance of a higher retirement age. This would start reducing the longer term costs of an ageing population for future generations.
In the meantime, the Government must work tirelessly to ensure our economy is strong enough to withstand the added pressure of the ageing population for the next twenty years. Already, the uncertainty of the Coalition Government is impacting peoples’ quality of life and ultimately the economy. Unfortunately, the situation will only get worse when Labour’s proposed employment law reforms are implemented. Following the Global Financial Crisis and Canterbury Earthquakes, National worked hard to get the books back to surplus and then get on top of the debt those events had created. We didn’t do it by slashing spending, but by carefully making sure any new spend was high value. In spite of taxing more, borrowing more and spending more the Coalition Government is still breaking promises and axing genuinely important programmes like cochlear implants, mental health funding and universal cheap GP visits.
The Coalition Government inherited a strong economy, with annual GDP growth averaging around 4 per cent, accompanied with high levels of business confidence and around 10,000 new jobs being created each month. Under Labour, the GDP per capita growth has fallen to just 0.1 per cent in the previous quarter. These early signs of economic slowdown reflect a combination of low business confidence and uncertainty in the Coalition Government’s policy agenda. Without a strong and prosperous economy, New Zealand will struggle to support our ageing population in years to come.
2. As Associate finance spokesman and as a former international banker are you worried about the outflow of New Zealand funds to foreign financial services owners, notably via the trading banks?
The short answer is no, I am not worried about outflows of profits going to the owners of the larger banks, just as I am not concerned with funds going offshore to the owners of international airlines that fly us in and out of our cities. Nor am I worried about the funds that flow back to Japan when we buy our imported cars from them. The banks are providing a service that we are willing to pay for, that make a fair return to their shareholders, and that we are able to own directly simply by picking up the phone and calling an investment advisor. We already own a portion of those banks indirectly through our KiwiSaver schemes or at least through the NZ Superfund investments made into the banking sector.
Some people are concerned about the power the Australian banks have in our market and that they extract abnormal gains. However the sector is highly regulated by the Australian Reserve Bank and our own Reserve Bank of New Zealand. Strong balance sheets are stipulated by the regulators so that the economy could manage another credit crunch as it did during the GFC 10 years ago.
There is plenty of competition for the Australian banks. There is KiwiBank, the Building and Cooperative Societies and Credit Unions. There have been other banks that have come and gone, or reduced their presence in New Zealand because the market here is too competitive; notably Barclays, CitiBank, Deutsche Bank, Credit Suisse, ABN, the list goes on.
Inflows and outflows of funds occur as we buy and sell goods and services across our border. While we might use an Australian bank for banking services, the Australian consumer pays New Zealand businesses when they use or consume a New Zealand product or service. Kiwi fruit, wine, or accounting services that we sell offshore bring foreign funds into our economy. Fonterra exports most of their product globally. If China banned Fonterra from the Chinese market, the consumer in China would have to buy the product elsewhere. It would be a more expensive and/or inferior product. Similarly, banning Australian banks would result in a more expensive and inferior product being offered to the NZ public. Trade wars increase the cost of production and decrease productivity, making citizens worse off economically.
Restricting or banning a group of businesses from conducting business in New Zealand will result in higher costs, less productivity, and less value received.
3. You have been involved with the energy sector. How do you calculate the longer term effects of the recent government ban on oil exploration?
Finance Minister Grant Robertson has admitted that no Treasury analysis had been completed on the economic impact of the Government’s decision to ban oil and gas exploration. It is staggering that on such an important issue, the Government commissioned no economic or long term analysis. The Government made the decision the ban oil and gas exploration without any advice on how this would impact forecast economic growth and tax revenue, including factors like electricity generation capacity and security of local supply.
As I mentioned above, banning or restricting a product or service results in buyers being forced to purchase an alternative at a higher cost. Banning gas and oil exploration means that alternative energy forms will take its place. Given the long term nature of the exploration business and the long lead times for exploration and production, it makes no sense for a business to focus on New Zealand opportunities. Jobs and resources will be diverted to countries that allow gas and oil exploration.
Having natural gas as a backup in our system works perfectly well. Gas is the lowest emission fossil fuel, keeps security of supply strong and prices affordable for New Zealanders. I’m all for renewable power generation, and I’m proud the previous National government increased renewable generation from 65 per cent to 85 per cent. The key is getting the incentives right to drive long-term change rather than short-term shocks and to consider the wider impacts on the economy, jobs and incomes.
4. You are the National Party’s spokesman on forestry. What is your opinion on the NZ First-Green scheme to plant a billion trees, and by implication also reverse forest-to-dairy conversions?
Planting more trees will help us meet our carbon emission targets. Not only do trees absorb carbon, they contribute to water and soil quality, reducing erosion, phosphate and sediment issues.
We all want healthy forests, a comprehensive biodiversity profile, strong logging and local wood processing industries. These things don’t happen by chance. It takes responsible policy mechanisms to support sustainable growth. Regulations working towards continuous improvement, progressive harvesting techniques and rethinking mechanisms within the Emissions Trading Scheme will support the sector to plan for the future.
The problems currently facing the Billion Trees Project are the shortage of seedlings, the lack of available land, and the shortage of labour to plant the trees. The One Billion Trees Project is woefully behind target even though a quarter of the billion dollar Provincial Growth Fund is being spent on it. Broken election promises, disorganisation and policy incompetence will be the challenge for the Billion tree Project.
Trees take a long time to grow and harvest. Constantly changing regulations and rules in the forestry industry will discourage new investment. The Emission Trading Scheme will be an important part of the framework, and will need to encourage the market to invest in planting more trees.
We need to prepare for more frequent extreme weather events, paying stronger attention to adaptation measures within our infrastructure, industry practices and environmental systems. New Zealand’s future land resilience and climate change mitigation goals will not be realised if the Billion Tree Project is poorly implemented.
Ultimately markets and consumers will dictate the how land in New Zealand is best utilised. Appropriate land use, whether forests, dairy farms or residential blocks is about striking the balance between environmental, community and financial outcomes.
5. As deputy chairman of the National Party’s infrastructure and transport committee, you seem to have taken this assignment in the broadest context with your introduction of your private members bill permitting the police to random test drivers for any intoxicant at all…
The Bill I have introduced will allow for random roadside drug testing and will provide the Police with the power to test any driver, any rider or any supervising licence holder, at any time. The purpose of the Bill is to ensure that motorists who take drugs and drive can be easily detected at the roadside and penalised accordingly. The law stipulates that it is a driver’s duty to be mentally and physically fit when they drive a motor vehicle on public roads - this includes not being impaired by alcohol or drugs.
The Bill is about saving lives. Saving family and friends from the grief of losing a loved one. Preventing serious injuries. Preventing destroyed lives. And to form part of the solution in how our society tackles the complacency of some of those who use drugs and then drive. The Random drug testing of drivers will be similar to our already existing random breath testing for alcohol.
The incidence of drug driving in NZ is startling. The recent study by the Automobile Association in June 2018 found 79 drivers who were involved in fatal crashes last year later tested positive for drugs, compared to 70 who were above the legal alcohol limit or refused to be tested. This is the first time that drugs have overtaken alcohol in this statistic.
Ironically we test employees in the workforce for drugs, to ensure people are safe in the workplace, but we do not take the operation of a car on the road as seriously. We understand that using heavy machinery while under the influence of drugs is unacceptable, and test for it in the workplace. It is a simple step to conclude that we should be doing the same on our roads, to improve road safety outcomes.
This Bill is about road safety, education and compelling those that use drugs to stay off the road. Just like we have greatly reduced the incidence of drink driving in New Zealand, we need to reduce the incidence of drug affected drivers. Safety on our roads is so important and I am certain that the Drugged Driving Bill I propose will make a difference to the number of lives lost or injured on our roads.