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Pre-Budget Speech: Shed 6, Queens Wharf, Wellington

Rt Hon John Key
Prime Minister

6 May 2014

Pre-Budget Speech: Shed 6, Queens Wharf, Wellington

Good afternoon, it’s great to be here today.

I would like to thank Business New Zealand and Fujitsu for hosting this event.

Today I want to talk about the Budget that Finance Minister Bill English will deliver next week.

I will also announce two important initiatives that will be of interest to this audience.

But first I want to set the scene as Budget 2014 approaches.

This will be the National-led Government’s sixth Budget, and can I say Bill English is doing an excellent job.

Through his previous five Budgets he has steered us through the recession, the global financial crisis, and the aftermath of the destructive Canterbury earthquakes.

It has been a difficult few years for many, and the Government acknowledges this.

We have taken on a considerable amount of debt to protect the most vulnerable families, maintain living standards and support the rebuild of Christchurch.

However, we are moving into a period where we are seeing improved economic and fiscal conditions.

Next week we will see Budget forecasts showing that in the coming financial year, the Government will post a small surplus, followed by increasing surpluses in the years after that.

As we move into a period of fiscal surpluses, we can start lowering debt.

This Budget will also continue what we have done in the previous Budgets, which is to set out a longer-term path to repair the damage to our economy caused by excessive borrowing, consumption and spending under the previous Labour government.

What I can say is that just because there is a General Election coming in September, we will not be spending large amounts of new money.

That would stop us getting back to surplus, push up interest rates even higher, and prevent us paying down debt.

This Government won’t be losing sight of the need to maintain a tight watch on spending.

We don’t want to once more see the negative impacts of a long period of excessive government spending and debt-fuelled consumption.

Budget 2014 is about building on the success we have achieved so far.

New Zealanders are starting to see the results of our good economic management through difficult times.

We acknowledge that everyone’s situation is different and some people are finding things challenging.

But the benefits of a sustainably growing economy are there to see.

For example, as economic momentum has picked up over the past two years, the average full time wage has gone up 5.8 per cent while inflation has gone up just 2.6 per cent. The average wage is now $54,700.

We have the opportunity now to lock in the benefits of a growing economy for households and businesses up and down New Zealand.

That is provided that we stick to our successful programme.

This term, our programme is based on four main priorities.

These are to responsibly manage the Government’s finances, build a more competitive and productive economy, deliver better public services for New Zealanders, and rebuild Christchurch.

We want a more competitive and productive economy so we can deliver more jobs and higher incomes.

The Government has a comprehensive business growth agenda to help us achieve this aim.

The agenda is about making it easier for businesses to access innovative ideas, export markets, capital, skilled workers, resources and the public infrastructure they need to grow.

One of the result targets in our plan for better public services for New Zealanders is reducing long-term welfare dependency.

I mention the business growth agenda aim of providing skilled workers alongside our objective to reduce long-term welfare dependency because they are inter-related, and are the subject of today’s announcements.

Apprenticeships
The country has a big job on, increasing the skills of our workforce.

In January last year I announced the Apprenticeship Reboot.

It was a scheme to pay eligible apprentices or trainees a subsidy of $1000 towards the cost of tools or off-job course costs, or $2000 for those in priority trades.

Employers have also been eligible under the scheme for an equal payment.

Alongside this initiative, I announced an apprenticeship overhaul involving a single combined nationwide scheme called New Zealand Apprenticeships, to get more apprentices qualified, especially in construction trades.

The Apprenticeship Reboot and reshaping of the system has been very successful, and I’ll talk more about that in the moment.

First, I want to give you some background on the reasons why the National-led Government reformed this important area.

In the decade to 2010, funding for Industry Training Organisations trebled, but these increases were not matched by enough accountability.

Sure, there was a rise in recorded industry training participation.

But under the Labour Government, up to 100,000 people a year listed as being in industry training were in fact “phantom trainees” who achieved no credits, and, in some cases, were no longer alive.

So with our reforms we have overseen a move to focus industry training on results – alongside a similar move in the wider tertiary sector.

That is because it is results that determine the skill levels of the workforce.

There is a big opportunity available to us over the next few years to train more New Zealanders in vocational careers that will set them up for their working lives.

To make the most of this opportunity, we must have a responsive, high-quality industry training system.

The apprenticeship reboot I announced in January last year was so successful that by October, 8000 people throughout the country had signed up for training in apprenticeship programmes.

That happened in the space of just seven months – when the normal sign-up rate for a full year was 7000.

Because of this demand, in December last year we expanded the reboot to a total of 14,000 places. And they too have been filling up quickly.

Today, I am pleased to announce that the scheme will be expanded again because of continuing high demand.

Budget 2014 will provide up to $20 million to expand the Apprenticeship Reboot by 6000 places.

This move will boost the total number of places to 20,000.

This extension means we have doubled the number of apprentices that can get their training costs subsidised since the scheme was first announced.

The reboot is getting more apprentices qualified, especially in the priority trades we need for the Christchurch rebuild, and the house construction boom in Auckland.

It is also giving those apprentices vital vocational skills to set them up for the working lives.

‘$3k to Christchurch’
My second announcement today relates to the labour market in Christchurch and support for the rebuild following the devastating earthquakes of 2010 and 2011.

As you will all know, the National-led Government has introduced comprehensive reforms to our welfare system.

We want to help those in genuine need, and the welfare system will always be there to support them.

But we are also aware that long-term welfare dependency can become a trap, leading to a life of limited outcomes and limited choices.

Getting off welfare and into work means a better life, and better opportunities, for beneficiaries and their families.

We are making progress – about 1500 people a week are moving off benefits and into work.

We believe that anyone who can work should be in work, in training, or actively looking for a job.

The rebuild of Christchurch creates opportunities for beneficiaries who are seeking work. And the Government wants to help them reach towards their potential.

There is no doubt the rebuild is creating employment in many sectors.

The area of greatest labour growth in the Canterbury region has been in the construction sector, which has increased its workforce by 90 per cent since the earthquakes.

But labour market growth has not been confined to construction.

There are opportunities in hospitality, retail, and other areas too.

The unemployment rate in Canterbury is the lowest in the country – at 3.4 per cent in the December quarter Household Labour Force Survey.

The same survey showed the male unemployment rate was just 2.3 per cent.

And as at March this year, there were fewer than 3000 beneficiaries with full-time work obligations in the Canterbury region, and slightly fewer with part-time work obligations.

Meanwhile, outside Canterbury there are a large number of beneficiaries who could move to the region for work if they had the financial means or impetus to do so.

In fact outside Canterbury, there are currently around 19,000 beneficiaries required to be available for part-time or full time work in the 18 to 24 age bracket alone.

So today I am pleased to announce a new initiative to further support the rebuild and at the same time help job-seeking beneficiaries outside the region gain work.

It’s called ‘$3k to Christchurch’, and it has two parts.

The first part is Work and Income actively promoting through advertising and direct marketing, job opportunities in Christchurch and surrounding districts to beneficiaries outside the region.

This will involve staff discussing with beneficiaries if moving is an option, and looking at whether their skills and a job in Canterbury can be matched up.

The second part is providing a lump-sum, one-off $3000 payment to beneficiaries interested in moving to Christchurch or surrounding districts who gain a confirmed job offer.

To be eligible, a beneficiary would need proof of a confirmed full-time job offer of at least 30 hours a week and for more than 91 days.

The initiative is about offering people new opportunities, but it will not be compulsory for anyone to move.

There will be a few rules for this money, but we have deliberately tried to keep the scheme as simple as possible. Those rules include:
• Beneficiaries will not be required to provide proof of costs.
• The money will be paid in one lump sum, and it will be non-taxable and exempt from any income and asset tests.
• In most circumstances the payment would be non-recoverable, but situations where it may have to be repaid would be for cases like misconduct leading to dismissal.
• The offer will be open to all ages who are on benefits, but with a particular focus on those aged 18 to 24.

Budget 2014 will allocate $3.5 million for this initiative, which will operate for 12 months from the 1st of July and allow up to 1000 beneficiaries to access the grant.

I want to acknowledge here that the Government recognises there is a shortage of accommodation in Christchurch.

However, we are working to help alleviate the housing shortage.

Housing Minister Nick Smith recently signed a Housing Accord with the Christchurch City Council which aims for a collaborative approach to resolving housing-related issues in the city.

This includes boosting the supply of temporary, affordable, and social housing.

I understand that some large employers are also providing accommodation for workers for short periods of time for the rebuild.

We also have in place a Land Use Recovery Plan for the region which allows higher density housing and has freed up more land for residential development.

In addition to all this, it may be that beneficiaries have other options as well – like staying with relatives or friends.

So, although the housing situation is far from ideal as a result of the earthquakes, I am confident that through a mix of potential options, beneficiaries moving to Christchurch can be accommodated.

The Government also acknowledges that the scheme may create equity issues with other regions suffering labour shortages, but we consider Canterbury is a special case.

The rebuild is one of the Government’s four main priorities and it is vitally important the momentum of the rebuild is maintained and enhanced.

Conclusion
In conclusion, we have an opportunity this year to lock in the benefits of a growing economy for households and businesses up and down the country.

But we can only do that if we stick to our successful programme.

If we do, it will mean more jobs being created.

It will mean incomes continuing to rise faster than the cost of living.

It will mean more opportunities for hard-working Kiwis to get ahead here in New Zealand.

It will mean safer communities and lower crime.

And it will mean more health services for our health dollars, and higher achievement in our schools.

I am sure that next week’s Budget will represent another positive step on the road to meeting these goals.

Thank you.

ENDS

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