Dec 15, 2017 - The 11th Ministerial Conference (MC11) of the World Trade Organisation (WTO) concluded today in Buenos Aires, Argentina. “Going into this meeting we were apprehensive about what the membership could deliver. There’s a lot of concern in the world about where some of the big countries are heading on trade and whether the framework of rules we have for international trade is fit for purpose, now and for the future” said Minister for Trade and Export Growth David Parker.
“We’re pretty disappointed that on agriculture, the Conference wasn’t ready to agree to cap the subsidies that major countries give their agriculture sectors, which distort world markets and disadvantage not just our farmers but subsistence farmers in developing countries.
“Nor was there a willingness to implement rules to make the regulation of services more transparent, predictable and accessible. But I’m heartened that on both issues, members are keen to keep working, so the huge effort made to advance these negotiations since the last conference hasn’t been wasted. “
Minister Parker considered that some progress has been made on two environmental issues. “I believe that trade policy can contribute to global environmental solutions and sustainable development. New Zealand has a leadership role here. So I’m really pleased that yesterday, we started a dialogue to encourage the WTO to address the global harm being caused by fossil fuel subsidies.
Mr Parker led the effort to deliver a Ministerial statement to the WTO on Fossil Fuel Subsidy Reform (FFSR). Endorsed by twelve other WTO Members, the statement confirms the benefits for development, trade and the environment of fossil fuel subsidy reform. It includes a commitment by New Zealand and its supporters to bring the issue into the WTO.
“We were also able to take a step toward prohibiting harmful fisheries subsidies in time to meet the 2020 deadline set by Leaders’ in the United Nations Sustainable Development Goal (SDG) 14.6. “Fisheries subsidies are a major driver of the crisis in global fisheries. Two thirds of global stocks are overfished or fully fished. Harmful subsidies have increased and fish stocks have deteriorated.
“While this week we fell short of locking down what is needed to implement SDG 14.6, members agreed that they will conclude negotiations to prohibit these kinds of subsidies before 2020. To achieve this we will need to continue negotiations toward an agreement in 2018.
Interested Members including New Zealand also agreed to continue their discussions on e-commerce and how to make trade rules deliver more for micro and small exporters.
“You never get everything you want in trade negotiations” said Mr Parker. “But overall, I’m optimistic about where we’ve ended up. At a time of considerable global uncertainty, the WTO’s members have re-confirmed how important the organisation and its rules are for their economies and their citizens.”
| A Release from the Beehive || December 14, 2017 |||
Dec 14, 2017 - The New Zealand Productivity Commission today released its draft report - Measuring and improving state sector productivity. “The state sector spends more than $40 billion every year on public services. Measuring productivity is essential for knowing if the money is being well spent.” Says Chair of the Productivity Commission, Mr. Murray Sherwin.
“Constantly improving productivity across an economy is the essential source of improved incomes and wellbeing. While most businesses have a pretty good idea of their productivity performance, the public sector is much less likely to focus on its productivity. In part, that is because it can be harder in the public sector to measure what is being produced.”
“The Commission has worked with government agencies to develop a number of case studies. These illustrate the methodological issues encountered when measuring the productivity of public services. We found that much of the data required to measure productivity already exists. It can be dispersed and not readily accessible but those matters can and should be fixed.”
“Measuring productivity is not an end in itself. Rather it’s a starting point for discussing better ways of doing things. Stimulating innovation in the state sector is key to improving productivity. There are many examples of local innovation but they don’t tend to spread very far or fast. This needs to change if we want a more efficient and effective state sector.”
The inquiry terms of reference asked the Commission to provide guidance on how to measure productivity in “core” public services (health, education, justice, social support) and provide advice on developing the systems, culture and capability to measure and improve state sector productivity.
Submissions on the draft report are due 1 March 2018.
| A Productivity Commission release || December 14, 2017 |||
Dec 11, 2017 - Speech: Finance Minister Grant Robertson to the Auckland Chamber of Commerce
Thank you to the Chamber for inviting me to speak here today.
This morning I’d like to talk to you about the Government’s key priorities and policies for the economy and businesses, give an update on the Budget 2018 process, and more specifically discuss our approach to supporting this city and region.
We have an ambitious plan for transitioning New Zealand to fairer and more sustainable economic growth, while responsibly managing the Government’s books.
In forming a Government, Labour, New Zealand First, and the Greens have committed to a shared purpose – that of working towards a fairer and better New Zealand.
In both the Coalition Agreement between Labour and New Zealand First, and the Confidence and Supply Agreement between Labour and the Greens, there is a common mission statement that reads:
“Together, we will work to provide New Zealand with a transformational Government, committed to resolving the greatest long-term challenges for the country, including sustainable economic development, increased exports and decent jobs paying higher wages, a healthy environment, a fair society and good Government. We will reduce inequality and poverty and improve the wellbeing of all New Zealanders and the environment we live in.”
I am very conscious that we as a Government set a positive tone for the future of the New Zealand economy and its people. And there is every reason to be optimistic.
We have a strong economic base: Our wonderful environment that is the backbone of our primary industries and tourism; innovative and creative people who work hard – harder, in fact, than in almost any other country in the world; and we have global and progressive outlook on the world.
But it is important that as the Government moves forward, we are open and transparent about where the country is at.
Internationally competitive rates of GDP growth are a good start – but in New Zealand our GDP numbers are masked by an over-reliance on population growth and an overheated housing market as predominant drivers for headline economic activity.
Per person GDP has been under one percent and compares far less favourably with our OECD counterparts. We have had almost zero labour productivity growth for five years. Put simply, more people are working longer hours, but our output is not improving in proportion to that extra work.
By far the biggest issue is that too many people have missed out on a share in prosperity. This was the message I got in boardrooms and smoko rooms around the country during the election campaign. No one wanted to stop economic progress, but almost everyone was uncomfortable with a New Zealand where our rates of homelessness and inequality were growing, while our rates of home ownership and social mobility were declining.
Last week, the advice from officials to the incoming Government was released, and I think it is timely to mention a couple of things that were highlighted, which will help explain this Government’s priorities over the next few years.
In housing the message was clear. The failing housing market is leading to inequality between the old and young, and the rich and the poor. It is harming our productivity. And this is affecting the overall economy. Housing officials have told us we are 45,000 houses short in Auckland alone, and nearer to 70,000 around the country.
That is why we have put such a premium on fixing the housing crisis.
We have already begun work on addressing demand side pressures with the introduction of the ban on overseas speculators buying residential property, and we will shortly move to extend the bright line test to five years and crack down on the use of negative gearing.
On the supply side we will be building more state houses and tackling homelessness. If the previous Government had built extra state houses each year instead of selling the stock down by 5,000, we simply wouldn’t have the homelessness problem we do now.
And, we are establishing our KiwiBuild programme to build 100,000 affordable homes exclusively for first home buyers over the next ten years. To do this, we will be slowing down our overall debt reduction programme a little to give us the capital to get on with this work which New Zealand desperately needs.
The Acting Reserve Bank Governor recently acknowledged that our programme of work had in part already given him the confidence to start relaxing Loan-to-Value Ratio restrictions.
It is a sad thing to say – but the previous Government had effectively outsourced its responsibility to create the conditions for a stable and affordable housing market to the Reserve Bank. We understand our responsibilities. We need to do this work to fix the housing crisis.
I will give one other example of what we are facing in Government – an example of the need to invest in public services. That is in the health sector. The briefing to the incoming Health Minister said that the health system urgently needs to find new ways to meet demand and reduce inequalities.
Officials are concerned that many of the most vulnerable New Zealanders are missing out on the primary healthcare they need. Nearly half a million Kiwis did not go to the doctor last year because of the cost. Not only is this bad for these people but it actually adds to the bill for taxpayers because more Kiwis will end up needing more expensive, hospital-based treatment as a result.
Fixing this is not just about putting in more money. It is also about a more effective and efficient healthcare system. After nine years of not being funded properly to keep up with the changing nature of our population or even inflation, New Zealand’s health system can no longer cope.
This is a basic breakdown in one of the building blocks of a decent society – that there is a health system that will look after you if you get sick and will help you stay healthy. The Government cannot just be an ambulance at the bottom of the cliff trying to deal with an ever-bigger bill. This is why we are redirecting money that had been promised by the previous Government in across-the-board tax cuts to more targeted spending – on health, education, and for families with children.
We can make these investments while not having to increase taxes. We do this by having different priorities to the previous Government – reversing the proposed tax cuts and giving ourselves two extra years to meet the Government’s debt reduction target.
We are also pursuing the multinationals and tax evaders who do not pay their fair share. This week, a bill to implement changes to rules around base erosion and profit shifting will have its first reading in Parliament.
My colleague Stuart Nash is also working with IRD on further steps to push multinationals to pay their fair share, and is building on the previous Government’s work on the taxation of on-line purchases to ensure a level playing field when it comes to GST.
We can provide the public services that New Zealanders want and deserve, and build a strong economy. This will mean doing some things differently and investing more now to get the payoff for New Zealand over the long term.
We can pay for the plans we have made and the policies in the agreements we have signed. But there are still other cost pressures to meet and programmes to deliver. I have asked my Ministerial colleagues to re-assess current programmes to ensure they match this Government’s priorities and are value for money. Any such re-prioritisations will be reinvested to meet the cost pressures we face.
This twin approach of investing to deliver social justice while being responsible with our finances very much mirrors who I am and my background. I grew up in the cloak of a Presbyterian family in Dunedin. Today I still try to live by the values that my mother taught me – we are our brother’s and sister’s keepers; treat others as you wish to be treated; and that if you work hard you will achieve your goals.
I have also taken the extra precaution of having two Associate Finance Ministers steeped in the background of parsimonious southern Presbyterianism in David Parker and David Clark. The latter being an ordained Minister for good measure.
I also worked in the Fifth Labour Government as an advisor to Helen Clark. I saw first-hand how she and Michael Cullen were able to lead a Government that was fiscally disciplined, ran surpluses, paid down debt, and had the lowest unemployment rates in the OECD, while also delivering progressive social programmes like Working for Families, 20 hours free early childhood education, interest free student loans, Kiwisaver and more.
We have done this before – and we will do it again.
Economic Strategy This time around we also know we need to transition our economy to the 21st Century. This does mean doing things differently. The aim of our economic strategy is to improve the living standards of New Zealanders through sustainable and inclusive growth.
Success cannot be measured by GDP alone, although this remains an important measure of headline economic activity. Rather, we must take a different view of what constitutes a successful economy, along with broader measures of what success looks like.
We have committed to working on new sustainable development indicators. In addition to this work I have instructed the Treasury to accelerate its work on the Living Standards Framework. This Framework focuses on measuring our success in developing four capitals – financial, natural, human, and social capital. By assessing our performance across a wider range of measures we will see a much clearer picture of the effectiveness of our policies and how they benefit New Zealanders’ wellbeing.
In Opposition I led a major project for the Labour Party on the Future of Work. I am very grateful that Michael Barnett helped us as we developed that work. The core conclusion was that, while we cannot predict exactly what the future holds, we can prepare ourselves.
We are seeking a resilient, adaptable and inclusive approach to transition to a world where technology and changing patterns of work offer both huge challenges and opportunities. This has informed our policy in areas such as education, research and innovation, the labour market and social policy.
We are also going to put a fresh set of eyes on core aspects of our economy, including through a review of the Reserve Bank Act. You can be assured that this will maintain a focus on price stability. But we will widen the Bank’s objectives so that it gives due consideration to maximising employment when it makes monetary policy decisions.
We are also setting up a Tax Working Group under the leadership of Sir Michael Cullen to develop recommendations to get a better balance across our tax system to support the productive sector rather than speculation.
Budget Responsibility Rules For us to keep being able to afford the policies necessary to achieve higher living standards we must remain fiscally responsible. It goes without saying that a Government that presides over high deficits, increasing debt, or a shrinking economy could not provide the quality public services that New Zealanders want and deserve. That is why we have developed and committed to our Budget Responsibility Rules.
Firstly, we will deliver a sustainable operating surplus across an economic cycle. We will not generate artificial surpluses by underfunding key areas such as health, education, and infrastructure. Our surpluses will exist after we have funded our policy objectives – this is what we mean by a ‘sustainable surplus’.
Secondly, we will reduce the level of net core Crown debt to 20 percent of GDP within five years of taking office. While New Zealand already has low levels of Government debt relative to many of our overseas peers, we remain vulnerable to shocks such as earthquakes and other natural disasters. We have made our commitment to debt reduction to ensure that future generations of New Zealanders are in a position to be able to respond effectively to any such shock.
Thirdly, this Government will prioritise investments to address the long-term financial and sustainability challenges facing New Zealand, such as restarting contributions to the New Zealand Superannuation Fund, which will happen in our first 100 days. We will also invest in the infrastructure required to support our growing population and reduce the risks posed by climate change.
Fourthly, we will maintain Government expenditure within the recent historical range of spending to GDP, which has averaged around 30 percent over the last 20 years. While the quantity of publicspending is important, it is the quality of that spending that is a major determinant in whether our policies achieve their outcomes.
We have accounted for all of our policy programme. As you will see in this week’s Budget Policy Statement and the Treasury’s Half Year Economic and Fiscal Update, this Government will meet its 100 Day Plan commitments by reversing the previous Government’s tax cuts. And, through our operating and capital allowances we can deliver the remainder of our programme while meeting the Budget Responsibility Rules.
However, we will continue to look closely at all Government expenditure to make sure that it is being directed effectively – towards improving all New Zealanders’ wellbeing.
Lastly on the Budget Responsibility Rules, we will ensure a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy. As noted, Sir Michael’s group will be making their recommendations to us about this by early 2019. This review isn’t a revenue-grab – one option is that the recommendations are fiscally neutral. It is a responsible review of New Zealand’s tax system to ensure it is appropriate for the 21st Century.
100 Day Plan/HYEFU and Budget Policy Statement The new Government was sworn in on the 26th of October, less than two months ago. Since then, the main focus has been the implementation of our 100 Day Plan. We are making excellent progress.
We have seen:
– The passing of the Paid Parental Leave Bill to extend this to 26 weeks
– The passing of the Healthy Homes Guarantee Bill to improve the minimum standards for rental housing
– Confirming the details of our fees free post-secondary school education and training policy commencing on 1 January 2018, along with an increase of $50 per week for student allowances and living cost component of student loans.
And much more besides. The next big step is the introduction of our Families Package. This will be one of the major initiatives of this Government.
We are committed to lifting children out of poverty at a faster rate than the previous Government, and supporting low- and middle-income families, particularly in the critical early years of their children’s lives.
We will boost Working for Families, introduce the Best Start payment for children in the first three years of life, put in place a Winter Energy Payment for superannuitants and those receiving a main benefit, restore the Independent Earner Tax Credit the previous Government cancelled and commit to boosting the Accommodation Supplement.
More details will be provided in the near future, but this is a substantial initiative paid for, as I said earlier, by reversing the across-the-board tax cuts, which were promised by the previous Government but have not yet begun.
The 100 Day Plan, along with Labour’s remaining policies in the pre-election Fiscal Plan; the Coalition Agreement between Labour and the New Zealand First Party; and the Confidence and Supply Agreement between Labour and the Green Party of Aotearoa New Zealand, lay out the agenda of the new Government.
This means a different approach to the way we will shape Budget 2018. There will not be a slew of new initiatives released in the weeks heading into that Budget. The plan is already out there.
The first steps towards Budget 2018 will come this Thursday.
This is when Treasury announces its regular Half Year Economic and Fiscal Update, or the HYEFU, where it details its latest forecasts for the economy and the Government’s fiscal track. Alongside this, we are announcing a Budget Policy Statement, setting out our economic strategy and kicking off the Budget 2018 process.
I’ll just give an overview of how this will all play out.
The Government was formed early enough during the Treasury’s forecasting and HYEFU cycle – just – that we were able include officials’ work on our 100 Day Plan costs into the Half Year Update.
So the likes of our Families Package, Fees-Free Post-Secondary Education and Training, Paid Parental Leave, the $2 billion capital injection for KiwiBuild, and our plan to restart contributions to the New Zealand Super Fund, are all included in the ‘base’ projections we’re starting from.
These policies have been costed using Treasury’s normal process ahead of Budget announcements. Because of where the election fell, and the ambition of our 100 Day Plan, we were able to incorporate them into the accounts and the Budget process in December, rather than waiting for May to roll around.
That’s not to say we’ll have nothing to talk about at Budget 2018, or 2019. A second document on Thursday will be our Budget Policy Statement. This will set out the operating and capital allowances we have set for the next few Budgets.
These allowances provide the room for the rest of this Government’s policy agenda beyond the 100 Day Plan. Detailed work has already begun on these policies as we head towards Budget 2018. They are now being put through the Budget process to get final costings and design as officials work towards May.
I will leave the detailed announcements for Thursday but, suffice to say, I am confident we can meet our Budget Responsibility Rules while advancing our comprehensive programme.
Auckland Infrastructure I want to spend some time now talking about infrastructure, particularly as it relates to Auckland.
It is stating the obvious that Auckland faces significant infrastructure challenges. The gridlock on Auckland’s roads is costing $1.3 billion a year. The housing crisis is dragging down productivity and speculation has also sucked vast amounts of the country’s wealth into buying and selling houses instead of investing in productive firms that generate jobs and exports.
We will not shy away from these challenges. Our Government recognises the failure to manage urban growth is a huge drag on the economy.
We have a comprehensive reform agenda. I have already mentioned the specific housing policies that will address the housing crisis. But more systemic change is needed.
We are going to establish a Housing Commission, an urban development authority to cut through the red tape and lead large urban development projects – building whole communities at scale and at pace.
All of this is underpinned by our Urban Growth Agenda – a set of reforms designed to get the market more responsive to demand. We need competitive urban land markets to bring down the very high cost of urban land that is at the heart of our problems. It’s a five point plan:
1. Turning on the tap of infrastructure finance, for example, infrastructure bonds serviced by a targeted rate, building on the work done with Crown Infrastructure Partners;
2. Designing a more pro-growth planning system that allows the city to make room for growth instead of choking it off;
3. More robust spatial planning by central and local government;
4. Investigating a GPS-based network or transport pricing system. This will allow us to fully internalise transport costs so that roads and motorways aren’t a disguised subsidy for sprawl; and
5. Possible legislative reform to support this new approach.
The Government is looking at alternatives for the East-West link. We will be making an investment in that corridor, but not the $2 billion option proposed by the previous Government. While we obviously see the need for making large investments into Auckland’s transport system, we do not believe paying $327 million per kilometre is good value for money. I am not interested in setting the record for building the most expensive road in the world.
One of our major priorities is to roll out a 21st Century rapid transport system for Auckland.
We are committed to implementing a $15 billion, 10-year programme to build this rapid transit system – including light rail from the CBD to the airport and out to West Auckland. We are also investigating third-tracking the main trunk rail line and electrifying the rail line to Pukekohe.
We have allowed the Auckland Council to charge an additional fuel tax to help with some of this funding. We are also investigating funding options such as infrastructure bonds, and we will be opening up use of the Land Transport Fund beyond just roading projects.
We cannot carry out an ambitious programme like this, or for other infrastructure, alone. We want to ensure that the Crown and Maori work together effectively as we move towards the end of the Treaty settlement process. We are committed to working with Iwi to achieve our infrastructure goals.
We also want to work with those in the private sector who are willing to be partners in building and modernising our infrastructure.
Yes, this can include Public-Private-Partnerships (PPPs). We don’t believe PPPs have a place in schools and hospitals, but there is a potential for partnerships which can be used to drive productive and sustainable growth where they are appropriate.
Beyond Auckland It is, of course, important to invest outside of Auckland too. While Auckland has been growing (at times beyond its means), many parts of regional New Zealand have been left behind.
The Provincial Growth Fund, developed in conjunction with New Zealand First, will help ensure inclusive growth across all of New Zealand. We will invest $1 billion per year to provide infrastructure and investment to help our regions recognise their economic potential.
We will fund projects including the expansion of regional rail, the planting of 1 billion trees over the next 10 years, and other important capital projects. We also intend to commission a study into the future of the Upper North Island ports.
There isn’t enough time today to go into the remainder of our programme, but I want to mention in closing two issues I know are important to the business community.
I want to re-affirm today our commitment to negotiating and signing quality trade agreements. Under this Government, New Zealand will remain open to the global economy through progressive trade policy.
We will pursue Free Trade Agreements that are beneficial to New Zealanders and our interests. We renegotiated the Comprehensive and Progressive Trans Pacific Partnership so that it is now in line with Kiwis’ interests, and we will continue to look at similar high quality agreements.
However, we know that Kiwis do not want to be tenants in their own country. While we remain open to the world and welcome overseas investment that adds jobs, improves productivity, and adds to our housing stock, we are not open to overseas speculators who simply drive up our cost of living.
And so we will change the Overseas Investment Act to ban foreign overseas speculators from the existing housing market.
Likewise, in remaining open to the world we need to have immigration policies that support our goals. New Zealand will always need migrants who provide essential skills. We want to facilitate that, and I want to assure you that where you have a genuine skills gap that the settings will not change.
But, at the same time we cannot allow immigration settings to drive low quality international education that actually exploits the students who come here. Nor do we think that the huge rise in temporary work visas should continue in areas where there are and should be New Zealanders able to take up the work.
Conclusion The Government has already made great progress on its 100 Day Plan. We are off to a running start. We have highlighted our priorities, and we will continue to implement the policies we campaigned on and agreed to with New Zealand First and the Green Party, looking towards Budget 2018 and beyond.
We will be there beside New Zealand businesses in building an economy that is fair and inclusive. We want to ensure that all Kiwis prosper from the benefits of economic growth. We want to partner with you to tackle the long-term challenges facing this country. It is in all of our interests to work toward creating shared prosperity in New Zealand.
Dec 8, 2017 - Higher sales volumes for chemicals and plastics producers helped lift manufacturing in the September 2017 quarter, Stats NZ said today.
The total volume of manufacturing sales rose 0.3 percent in the September 2017 quarter compared with the June 2017 quarter, when adjusted for seasonal effects. This follows a 1.0 percent increase in the June 2017 quarter.
Six of the 13 manufacturing industries saw sales rise in the September 2017 quarter. The largest movements were chemical, polymer, and rubber product manufacturing, up 3.7 percent, and transport equipment, machinery and equipment manufacturing, up 2.8 percent.
“The September quarter’s rise in chemical, polymer, and rubber product manufacturing sales followed a sizeable 8.5 percent fall in the June 2017 quarter,” manufacturing manager Sue Chapman said. “This industry includes the manufacturing of fertiliser, plastics, and rubber products.”
Meat and dairy product manufacturing sales seasonally fall in the September quarter, with sales volumes down 0.5 percent. This followed an 8.0 percent rise in the June 2017 quarter.
The actual volume of total manufacturing sales was unchanged from the previous September quarter. When price changes are included, the value of manufacturing sales was $25.3 billion in the September 2017 quarter, up $2.0 billion from the September 2016 quarter.
Local Government Commission Instead Should be encouraging Collaboration
Dec 7, 2017 - The Lions service organisation called on management consultant Derek Williams, a specialist in mergers, to become a platform participant in its community forum programme designed to achieve a wider understanding among voters of the pending referendum on the amalgamation of local bodies in the Wairarapa.
Mr Williams drew upon his long experience in such public rationalisations, especially in IT blending, to warn the assembled on what he sees as the contemporary outcome of these mergers. He further refined his views in answering our Five Questions….
1. In your argument against local government amalgamation in the Wairarapa you were particularly cautious, downright sceptical in fact, of the stated costs in the IT component of the scheme?
From a review of the papers behind the IT numbers it appeared that:
First a top tier firm was asked to supply an estimate of the costs involved in bringing the IT systems of the three Councils together and the resulting estimate was between $20 and 30m.
Unnamed “experts” at the Local Government Commission then “adjusted” the number to around $10m and we know not the basis for this bold “decision”.
A further consultancy was then engaged to refine the costs further and according to their report after a few phone calls to vendors they were able to get the number down to $2.3m with some caveats including to perform a deeper dive on the requirements and numbers before proceeding.
That is why I don’t believe that the numbers for the amalgamation of the IT systems are within a bulls roar of reality. The facts are that the work hasn’t been done to a “rough order of cost” level that you’d see in an initial high level business case in the commercial sector. The initial $20-30m was probably in the right ball park when it was done and the real cost now, with the passage of time, is likely to be substantially higher.
2. You stressed that the benefits of the amalgamation could be achieved and at no additional cost if the territorial local authorities involved, the ones in Masterton, Carterton, and Martinborough, focussed more on collaboration with each other?
The local Councils have already proved that they are capable of having fits of cooperation with each other and so far as I can tell there is no legislative barrier to them having more. Specifically:
It appears that most back office services across the region could be run as shared services in support of local and mobile service delivery teams across planning, infrastructure and regulatory services. Gaining efficiencies from shared services typically involves standardisation, simplification, automation and a degree of centralisation under effective governance and project management which remains engaged with key stakeholders. In such a scenario we would end up with mobile and decentralised field forces that are equipped with modern technology supported by a set of back office processes that work and which are responsive and efficient.
There are policy and strategy matters that require the Councils to start acting as adults: * The determination of what region wide facilities and access to them will be governed and managed as portfolios including for example halls, community centres swimming pools, parks and reserves, museums and art galleries etc. * Creating a district voice to deal with central and regional government on local environmental and infrastructure issues transport, water etc and revenue sharing.
In parallel the business and productive sectors need to work together with limited Council and Government involvement to act on the opportunities for appropriate economic growth across the region.
Whether the proposal to amalgamate goes ahead or not local leaders in all sectors will have not have have the excuse of possible amalgamations or restructurings to sit on their hands waiting for new “wisdom from Wellington”. There will be no longer any legislative or potential structural barriers to further fits of cooperation between the Councils play their part in getting to the Wairarapa moving forward
3. The amalgamation of the Hawkes Bay territorial local authorities was rejected. Do you see any pointers here to the pending Wairarapa referendum result?
I hope that the Hawkes Bay rejection and the publicity surrounding the Auckland super city implementation will be encouraging voters in the Wairarapa to understand the risks and costs of the Council amalgamation proposal and to reject it by voting no.
4. You are cautious about the underpinning argument in favour of these amalgamations in regard to their leading to economies of scale?
I remain cautious. There are many efficiencies and improvements that can be made through shared services from capturing the benefits of scale. However, these to not require the restructuring and amalgamation of Councils.
The threats to local representation and the effective operation of democracy from amalgamation and restructuring are high as are the threats to the character and identity of towns. I read an account recently of the amalgamation and subsequent de-amalgamation of councils in Queensland, where it was reported that the people of Noosa, one of the Councils in question woke up to find that their “identity had been stolen” through the amalgamation.
I don’t think it matters where Council services come from so long as they work and are delivered at the lowest sustainable cost. What is far more important is that the identity of towns be protected and enhanced by local people. The governance and management arrangements for local government should be dominated by local people who are engaged with local communities and make decisions on local matters locally.
The Go Swiss study by the New Zealand initiative strongly suggests that local control over local matters is a significant factor in creating a sustainably strong economy. As a backdrop to our arrangements for government it highlights the lack of any meaningful local control and sharing of tax revenue.
This leads me to think that forcing more amalgamations of local Councils is stepping in the wrong direction and we need to look more broadly for solutions to the problems facing local government and its relationship to central government.
Our long run economic, social and environmental performance compared to the rest of the world suggests that continuing to rely on big central government and the wisdom of Wellington may not provide the best future for us all.
5. As a management consultant you have had hands-on involvement with public projects at many levels. In your experience what are the real causes of the cost overruns that increasingly characterise them? In engineering construction works the most common problems I see are:
Lack of validated design assumptions and requirements leading to deliverables that don’t work as promised and/or expensive remedial actions.
Absence of or the failure of basic project controls to detect and remedy variations from plan promptly. These are generally exacerbated by poor governance – lack of subject matter expertise and role confusion – many of the people I see in project governance have role confusion in which they act as a stakeholder for the project outcomes rather than as a member of the group that need to hold management accountable for the application of resources and capability to deliver a planned result in full on time and within budget.
Many supply side problems are exacerbated by contracts that have been formed by lawyers dealing with lawyers that are not understood or practical to apply by either the project manager or the supplier.
In the world of IT projects I see the same issues as I see in the engineering space and observe that:
The realisation of benefits from IT projects generally requires that the new system can talk with existing systems and share data. People and existing systems also need to be able to access the new system in a controlled way. These points of integration and user management often become stumbling blocks to the implementation of new systems because they were overlooked in the planning and estimating stages of the project.
All too often I’ve found that the path to production for new systems has both technical and people obstacles that were underestimated in the initial planning. With hindsight, most projects that have run into difficulty would have benefited from significantly better due diligence and planning up front. The cost of better due diligence and planning would have been much less than the costs of subsequent remediation.
Dec 7, 2017 - Health Minister Dr David Clark says he is taking action following the release of the Stage 2 findings from the Government Inquiry into Havelock North Drinking Water. “All New Zealanders should expect to have access to clean drinking water and, following this report, some will ask whether their water is safe. This report highlights that little has been done in this space for nine years,” Dr Clark says.
“The inquiry found that 80 per cent of residents have access to water which meets current standards. The inquiry raised concerns about the other 20 per cent.
“My priority, in reviewing the recommendations, remains the health of every New Zealander.
“Overall, this report raises serious concerns about oversight and infrastructure. We will be pursuing solutions to address any problems identified.
“I’ll be briefing Cabinet before Christmas on the next steps – both short and long term.”
Dr Clark acknowledged the scope of the report.
“Much of what we’re reading about today reflects yet another problem inherited from the previous Government and their nine years of neglect.
“I am expecting the Ministry of Health to take the report’s findings very seriously.
“The inquiry indicates that while drinking water standards instituted in 2007 represented international best practice at the time, since then New Zealand’s standards have not kept up with the world. This is a failure of the previous Government, and one we will take control of and address,” Dr Clark said.
Dec 5, 2017 - The Government has today made good on its 100-day promise of delivering the first year of fees-free post school training and education and industry training from 1 January next year, says Education Minister Chris Hipkins. “This Government has taken the first major steps to break down financial barriers to post-school training and education. Next year, around 80,000 people will be eligible for fees free post-school training and education.
“It comes on top of our recent announcement of $50 increases in student allowance and student loans weekly living costs limits, which will make more than 130,000 students $50 a week better off.
“The policy is a major investment in New Zealanders and the New Zealand economy.
“It’s great news for young people who are finishing school and adults who have in the past been put off because of the cost, and it provides a genuine incentive to keep learning. This government is passionate about life-long learning.
“Employers have also been calling for bold forward thinking to build a future workforce with new skills to meet changing demands. That’s what this policy will deliver.
“We expect the policy to halt, and over time reverse the current trend of fewer people going into post-school training and education. We have budgeted for a 3% increase in equivalent full-time students in 2018, equating to about 2000 extra students.
“The Government has budgeted for up to $380 million in the current financial year across the fees-free policy and the $50 increases to student loans and allowances.
“Of the about 80,000 eligible students, estimates are that about 50,000 will train or study at a polytechnic, as industry trainees, at a wānanga or a PTE. The remainder will study at university.
Eligibility and implementation
Mr Hipkins said the policy details released today confirm the eligibility for fees-free in provider-based education and industry training.
“If you're a New Zealander who finished school in 2017, or if you will finish school during 2018, you qualify for a year of free provider based tertiary education or industry training in 2018. If you're not a recent school leaver, and you've done less than half a fulltime year of education or training, you also qualify,” Mr Hipkins said.
The Tertiary Education Commission (TEC) will be responsible for implementing the fees-free policy, Mr Hipkins said.
“The TEC is working with Tertiary Education Organisations (TEOs) to ensure effective implementation of the fees-free policy, minimising any extra work TEOs may have to do. The TEC has set up a fees-free website to help prospective students and trainees confirm their eligibility for free fees. The TEC is being supported by other agencies, including the Ministry of Social Development, Ministry of Education and Inland Revenue.
“I appreciate that enrolled and prospective learners have had to wait some time before seeing the final details of the fees-free policy and I thank them for their patience; however, I’m sure learners will be happy with the result,” Mr Hipkins said.
More information for prospective students and trainees is at the fees-free website www.feesfree.govt.nz.
Further information for tertiary education providers and industry training organisations is available on the TEC’s website – www.tec.govt.nz.
Dec 5, 2017 - New Zealand will develop a close relationship with China, Foreign Minister Winston Peters said on Tuesday, putting to rest fears that his protectionist campaign rhetoric would fuel tension with a key trading partner. The 40-year political veteran played a decisive role in bringing the centre-left Labour Party to power in October after an inconclusive election left his nationalist New Zealand First party holding the balance of power.
But many in China see New Zealand as a model for the Asian giant's relationship with Western countries, with President Xi Jinping last year calling the depth of the bond "unprecedented".
"Our record of trade and economic firsts is dramatic," Peters, who is also deputy prime minister, told academics and diplomats in Wellington, setting out his stance on China for the first time since taking office.
"New Zealand will continue to seek closer cooperation with China as both countries focus on sustainable economic development and the wellbeing of our peoples," Peters said, giving a complimentary account of 45 years of diplomatic ties.
Dec 4, 2017 - Minister for the Environment David Parker and Associate Minister for the Environment Eugenie Sage, have today welcomed Cabinet approval of the regulations banning microbeads. “Plastic microbeads are found in personal care products such as facial cleansers, bath scrubs and toothpaste,” says Mr Parker.
“They get washed down the drain but are too small to be fully captured by our waste water treatment systems. These minute plastic particles enter the marine environment where they accumulate, do not biodegrade, and are mistaken for food. This causes long-term damage to New Zealand’s marine life.”
“This ban was initiated by the previous Government and I’d like to acknowledge the work of Hon Nick Smith. We supported the regulations while in opposition and we’re happy to be bringing these regulations into force,” says Mr Parker.
“This ban contributes to global efforts to reduce the amount of plastic ending up in our oceans,” says Ms Sage
The changes align with similar initiatives in the United States, United Kingdom, Canada, France and Australia. Public consultation on the proposed Regulations took place in January 2017 and drew wide public support.
Many submitters urged the Government to broaden the scope of the proposed ban to include other products containing microbeads. In response the Regulation has been widened to include all “wash-off” microbead-containing products for exfoliating, cleansing or abrasive cleaning purposes. This includes household, car or other cleaning products as well as personal care products.
“The market for these additional products is minimal, but we want to prevent a future market developing,” says Ms Sage.
Dec 1, 2017 - Thank you to ANZ for the opportunity to speak today. This morning I want to outline the goals and some of the key policy initiatives in the government’s economic strategy; update you on the steps we will take before Christmas including the release of the Half Year Economic and Fiscal Update and Budget Policy Statement, and the implementation of our 100 Day Plan.
It is only just over a month ago that the government was formed, built on a coalition agreement between Labour and New Zealand First, and with the support of our confidence and supply partners, the Green Party. While these are three parties with different traditions and histories, they are bound together by a shared desire to deliver a fairer and better New Zealand.
In both these agreements, there is a common mission statement that reads “Together, we will work to provide New Zealand with a transformational government, committed to resolving the greatest long-term challenges for the country, including sustainable economic development, increased exports and decent jobs paying higher wages, a healthy environment, a fair society and good government. We will reduce inequality and poverty and improve the well-being of all New Zealanders and the environment we live in.”
The parties that make up this government have a shared belief that the status quo and the tired out former government were failing too many New Zealanders.
While the fundamentals of our economy were, and are, strong, the purpose of it had become lost. While some enjoyed the fruits of growth, many did not.
This government will change that and build an economy with the purpose of delivering shared prosperity. We are committed to removing the social and infrastructure deficits that have emerged, and to shifting the focus to improving the wellbeing of all our people.
This will be an economy fit for purpose for the 21st Century. Resilient, Adaptable, Productive and Inclusive.
One of the things that struck me over the last few years as I have moved around the country was that the message I received from workers in smoko rooms was the same one I received from Executives in board rooms – the gaps in our country have grown too large. In this year’s Mood of the Boardroom survey 70% of the CEOs said they were concerned about the widening gap between the rich and the poor. Concerns about child poverty, homelessness, and inequality dominated the election.
It’s not the New Zealand way to see our fellow citizens left out and left behind. The clear message from voters was that we had to do better, to fulfil our country’s egalitarian mission.
And to do better, we have to do things differently. In crafting our plans and agreements we have had this at the forefront of our minds.
On a personal level I have had in my mind a man who last year sent me a copy of a letter he had sent to the then Prime Minister. He and his wife both worked, 60 hours a week in total, but they were not making ends meet. He was struggling to pay the bills and he said his children did not play sport because he could not afford the fees. He ended his letter saying “I am lucky. I have a house to live in and my wife and I both work. But we are poor.”
It is a not a successful economy where people in work feel poor or lucky, simply because they have a roof over their heads. A successful economy must be one where all our people can live a life of dignity, security and hope.
The goal of our economic strategy is to improve the well-being and living standards of New Zealanders through sustainable and inclusive growth. This means moving beyond narrow economic indicators and measures of success, and instead puts the well-being of our people and the environment at the centre.
Budget Responsibility Rules
Underpinning our strategy are our Budget Responsibility Rules.
We set these out earlier this year to ensure that everyone understood our commitment to responsible fiscal and economic management. In government we will abide by these rules.
To recap, this means that we will deliver a sustainable operating surplus each year unless there is a significant disaster or major economic shock or crisis. We will ensure that government spending as a proportion of the economy won’t rise above the recent historical average of 30% of GDP. We will reduce net core Crown debt to 20% of GDP within five years of taking office.
In order to meet these rules, it will require discipline. We have an ambitious programme and a plan to deliver on. We will grow the economy by making it more productive and we will have greater revenue from rejecting National’s tax cuts and cracking down on multinational tax evasion and speculators in the housing market.
But that will not be enough in itself. We also need to reprioritise and seek out programmes that are good value for money.
I have directed all Ministers to assess their Budgets against the new government’s priorities. If programmes are found that do not match these priorities then Ministers should consider whether this funding can be re-invested in new, higher priority areas which match our strategy. This work is already underway and will contribute to Budget 2018 planning.
The last Labour-led government showed that it is possible to be fiscally disciplined and deliver progressive policies. We will do the same.
I want to mention two other pieces of work that underpin our strategy. We have already begun the work to modernise our monetary policy. While in general our Reserve Bank Act has served New Zealanders well, after 28 years the legislation needs to be updated.
We will continue to ensure that inflation is carefully managed within the target band. But we will expand the objectives of the Reserve Bank Act to provide monetary policy support to our goal of improving the wellbeing of New Zealanders, including focusing on maximising employment. As announced within our first two weeks in office we will review the work of the Bank in two phases, looking at the objectives and decision making first, and then other issues including the macroprudential framework in the second. The independence of the Bank remains paramount.
We have also established the terms of reference for a Tax Working Group to investigate possible changes which would make our tax system fairer and more balanced. At the moment, our system supports the speculative economy over the productive one.
The group, led by Sir Michael Cullen, has a mandate to propose changes that will make our tax system fit for a 21st Century economic plan, including the changing nature of work and commerce, and the enhancement of our environment.
Living Standards Framework
One of the things we will be doing differently is how we decide our priorities and how we measure the success of our economic strategy.
It is true to say that our GDP growth in New Zealand has been relatively impressive on a global scale. But that tells us only a fraction of the story. Firstly, it is a measure of activity, not the quality of that activity. And secondly, on a per capita basis, our performance has been significantly less impressive than many of our OECD counterparts.
Our supply and confidence agreement with the Green Party commits us to working on new sustainable development indicators. Alongside this work I have asked the Treasury to further develop and accelerate the world-leading work they have been doing on the Living Standards Framework. This focuses on measuring our success in developing four capitals – financial, physical, human and social. These give a rounded measure of success and of how government policy is improving our well-being.
This is a far better framework for judging our success. It is easy to say a policy is successful if it grows GDP, but what if that is at the expense of the physical environment? How can we be successful if the skill level of our workforce is not improving at the same time? If we do not have strong communities, any individual success can easily be undermined.
Success for us will mean more than just a strong balance sheet - as important as that is. It will be marked by how we improve the well-being of all our citizens.
This framework is still being developed, but I see this approach of focusing on well-being and lifting living standards as a core element of how we will create our future Budgets and measure the success of our work.
It is too late in the process to make significant changes in this regard for the 2018 Budget, but I will have more to say when I deliver that Budget about how this approach will drive our future work.
We will, however, take the first steps in this direction as part of our 100 Day Plan. We will introduce legislation to set measures of child poverty and a requirement to set reduction targets against them. This will include amending the Public Finance Act to ensure this work is part of our Budget process.
I want to say something about the way we must work if we are to achieve the goal of our economic strategy. This will only be possible when central government partners with local government, businesses, iwi, unions and communities. There are some big challenges in front of us, which I will now turn to, but I want to be clear that we will be coming to you to solve them together.
Delivering the Economic Strategy
To deliver this strategy we will have a number of areas of focus. We will develop detailed plans over the coming months but today I want to highlight several key issues.
Lifting Productivity and Wages
Fundamental to creating a more inclusive and prosperous economy is increasing productivity, so that New Zealanders achieve more with every hour they work and our businesses become more internationally competitive. For the last five years we have had almost no labour productivity growth. Low productivity has been a cloud over the New Zealand economy for decades and previous governments have failed to tackle this issue – this government will not.
Lifting the skills of our people is critical to solving the productivity challenge. We believe that learning for life is core to the further well-being of our people and to promoting our economy. The Future of Work Commission undertaken by the Labour Party in the last two years identified this as one of the most important transitional factors in the changing world of work.
Just as the first Labour Government moved to make a full secondary education the norm for people we need to update that vision for the 21st Century. We are sending a clear signal that post-school education and training will be for all.
Let me be absolutely clear – our first-year fees-free policy will come into force from the 1st of January 2018. This is for all quality post-school training. Only about one-third of school leavers go to University. They will benefit from this policy, but so will the other two thirds - those who will go to Polytechnics, other training programmes, apprenticeships and industry training. This policy is also for those who have not studied or trained before but are in work now.
Also critical for lifting productivity is increased investment in Research, Development and Innovation. The first step in this is the introduction of an R and D Tax Credit. Beyond that we will move to work smarter, adding value to change the mix of our exports and using and creating new technologies.
We also want to see wages rise. The government can and will take action to help this happen, including through lifting the minimum wage, paying core public sector staff the living wage and improving fairness in the workplace. But it is through improving productivity and developing new technologies and approaches to work that we will see long term sustainable improvements.
Just Transition to a Low Carbon Economy
Climate change is the greatest challenge facing the world and has the potential to undermine our primary industries. But our response to it is also an opportunity to develop new high wage jobs. The government’s commitment is to sustainable development that makes the transition to a low carbon economy. Work is already underway, under James Shaw’s leadership as Minister for Climate Change Issues, to develop a Zero Carbon Act and an Independent Climate Commission. Through our $100 million Green Investment Fund we aim to stimulate $1 billion of new investment in low carbon industries by 2020. This will contribute both to New Zealand’s climate targets and to the sustainability of our economy going forward.
Supporting Regions To Thrive
It is essential that the regions of New Zealand thrive again, for the sake of the people who live there and to take the pressure off Auckland. Long-term under-investment and inter-generational poverty are undermining areas of the country that have enormous economic potential.
The cornerstone of this government’s response to this is the $1 billion Regional Development (Provincial Growth) Fund agreed with New Zealand First as part of the coalition agreement.
This fund will (among other things) invest in regional rail, supporting the planting of a billion trees over the next ten years, an investigation of the future of the upper North Island Ports, and investment in other large-scale capital projects.
The criteria for the fund are currently being finalised. But I can say that successful bids will have to have robust business cases that show long-term development potential.
There is also a strong commitment to forestry with the development of a NZ Forest Service to be located in regional New Zealand and the regionalisation of some other government services.
Infrastructure To Support Sustainable Growth
One of the biggest challenges facing the incoming government is the need to update and build the infrastructure for sustainable and inclusive growth.
We will make the necessary investments in our health and education assets to ensure that we do not have hospitals that make people sick, or schools where students cannot learn. This is the core role of any responsible government.
Beyond that, we know that at a local government level, a significant amount of infrastructure is inadequate, aging and vulnerable. Many of our local authorities are either at the limits of what they can borrow, or do not have the revenue to service more debt.
At a central government level, we have an urgent and pressing need to fund the infrastructure that will support the unlocking of growth opportunities.
The fiscal plan that we have used as the starting point for our Budget has room for significantly more capital investment than the previous government. This is as a result of a slightly slower debt repayment track that will allow us to make investments such as the capital injection to kick off KiwiBuild.
But to create the 21st Century infrastructure, New Zealand needs to be innovative. We need to unlock capital and capture the value of investments through the work of urban development agencies and innovative instruments such as infrastructure bonds.
We want to work with those who can be partners in taking forward developments that build and modernise our infrastructure. Ministers have come together to identify and co-ordinate this work.
Growing exports through a Progressive Trade and Investment Agenda
New Zealand will and must remain open to business and the global economy. We welcome foreign investment that adds value to our economy, improves productivity and grows jobs.
This does not mean, however, that anything goes. Where we have drawn the line, is to say that we will not accept that there is value in having offshore speculators buying existing residential property and keeping first home buyers out of the property market. We continue to welcome offshore investment that adds to our housing stock.
We have heard the concerns of New Zealanders that they do not want to be tenants in their own land. To this end, we have already issued a new directive to the Overseas Investment Office and legislative changes will follow, to be introduced as part of the 100 Day Plan. We recognise the importance of an efficient and effective overseas investment regime and will be working to improve the operations of the Office.
When it comes to immigration, we must have people with the right balance of skills coming to New Zealand, with a particular emphasis on closing regional skills gaps. We must ensure that those who come to study are in quality courses and are not exploited or are simply here to gain residence.
Where there are genuine skill gaps that need to be filled to drive sustainable economic growth, we will continue to support entry of the people with those skills.
Labour-led governments have a proud record of delivering high-quality trade agreements that open opportunities for our exporters. The government will build on this record.
We have made progress with the Comprehensive and Progressive Trans Pacific Partnership. This agreement now balances improved market access with preserving our right to regulate in the public interest and also builds a progressive agenda in areas such as sustainable development, labour rights and gender equality.
We will continue to pursue this style of high-quality, progressive free trade agreement, with the European Union, UK and other nations.
Supporting Maori and Pasifika Aspiration
As we move towards the end of the major Treaty settlements it is timely to reset the dial on how the Crown and Maori work together, and how to focus on maximising the strength of Iwi. Through the work of both Minister Kelvin Davis and Nanaia Mahuta the government will support Maori in this process. At the same time, our economic goals will not be met if we do not improve the outcomes of Maori in employment, education and housing where there is still a significant and ingrained disadvantage.
Next Steps: HYEFU/BPS/100 Day Plan
The first steps in delivering on this government’s new economic strategy are included in our 100-Day Plan.
Just last night the first two significant pieces of legislation were passed - twenty six weeks Paid Parental Leave (at a cost of $325m over the forecast period) and the Healthy Homes Guarantee Bill that significantly increases minimum standards for rental housing.
Progress is being made on all the measures in the Plan. These include the introduction of a minimum wage of $16.50 an hour from 1 April 2018, in line with the coalition agreement with New Zealand First to lift that to $20 an hour, with effect in April 2021. Contributions to the New Zealand Super Fund will re-commence within the 100 Days. Student allowances and the living costs component of the student loan scheme will both increase by $50 per week from the 1st of January next year.
I want to highlight one part of the 100 Day Plan that will be one of the most significant policies this government will pass this term. Our Families Package. This is an ambitious programme to give low and middle-income workers a much-needed boost in incomes and address inequality and child poverty.
It is paid for by repealing the previous government’s tax cuts, which gave $400m per annum to the top ten percent of earners. Again, in the election the message on this was clear. New Zealanders knew that now was not the time for tax cuts. And that included more than half the CEOs in the Mood of the Boardroom.
This package will deliver increased targeted assistance to families through Working for Families changes, greater support for children in early years of life through Best Start, support for increased cost of living for our seniors and those on low incomes through a Winter Energy Payment and support to deal with soaring cost of rents through the Accommodation Supplement.
It is a major shift to improve families’ well-being, along with other initiatives such as the minimum wage, reducing cost of doctors’ visits and improving the quality of rental accommodation.
In less than a month of being in office, we have worked to develop the details and assess the costs of the plan. All the fiscal costs of the 100 Day Plan, which are currently being finalised, will be incorporated into the Half Yearly Economic and Fiscal Update. This will be released, along with the Budget Policy Statement, on Thursday December the 14th.
You will see when the Half Yearly Update is released that we are meeting our Budget Responsibility Rules, in particular the commitment to reduce net core crown debt as a percentage of GDP to 20% within five years of taking office.
One of the core elements of the 100 Day Plan is the reversal of National’s tax cuts. This provides $8 billion of fiscal headroom over the forecast period. This will more-than meet the costs of the 100 Day Plan and provide further resources to invest in Budget 2018 and beyond.
The Budget Policy Statement will outline our priorities for Budget 2018 and show the level of operating and capital allowances for the next four Budgets. These allowances provide the expenditure necessary to deliver our policy plans, including the coalition and confidence and supply agreements.
All these commitments – outside the 100 Day Plan, which will already be in HYEFU – are now subject to the normal Budget process to finalise details and costings. We will, however be providing the current estimates of the costs of the policies in the coalition and confidence and supply agreements at the time of the release of the Budget Policy Statement.
The HYEFU on 14 December will also include Treasury’s latest forecasts for the economy.
There have been a range of forecasts for economic growth since the new government was formed. Some are more pessimistic than others, with both the Reserve Bank and the OECD Economic Outlook more optimistic than some of the bank economists.
In general these economists agree that over the next year there will be some softening of growth as the housing market remains flat and as net migration tapers off slightly. Then, there is a consensus of a stronger growth track through 2019 and 2020 which is expected to be supported by government policies such as increasing R&D tax credits, increased wages and export growth.
In other words, we’ll be swapping out population growth and the buying and selling houses to each other as our two main growth drivers for much more sustainable ones. That sounds like a good description of our plan.
If that means slightly lower growth for a year while the transition to a productive economy occurs, then that will be a price worth paying.
As one economist put it, we will be passing on the baton of growth.
While I understand a new government and the change that comes with it will inevitability cause some uncertainty I think there is a clear understanding that the government’s policies will ultimately be good for sustainable growth.
Relatedly it is good to note that in the Reserve Bank’s Financial Stability Report released this week the Government’s Housing Plan was highlighted as a reason the Governor felt confident to ease LVRs.
It is sometimes easy to forget that it is little over a month since the government was sworn in. We are making good progress to building the better and fairer New Zealand we have been charged with doing by the public.
The foundations on which we are building our economic strategy are disciplined and careful fiscal and economic management, and a clear goal to see the well-being of all New Zealanders improve. We are moving at speed to implement a 100 Day Plan that will lift incomes and well-being. We are putting New Zealand back on a course of fairness, compassion and shared prosperity. It is early days, but the journey is an exciting one. I look forward to working with you all over the coming months and years.