Q+A: Shane Taurima interviews Finance Minister, Bill English
Points of interest from this weeks
Q&A:
Shane Taurima interviews Finance
Minister, Bill English
Finance Minister,
Bill English, gives absolute commitment of surplus in
2014/15: “10 out of 10 [chance of reaching surplus]… the
government’s determined to get to
surplus.”
Another zero budget unlikely, as
English says “it’s not that easy to
achieve.”
Minister hints at government plans to
shut down old, “inhumane” prisons: “there are likely
to be the closures of some prisons.”
Partial
asset sales: English promises “widespread ownership by a
large number of small investors”, not just KiwiSaver
funds, and “a large pool [of shares] for New Zealanders to
go and buy…”
Mum and Dad investors will be able
to ring the government “directly” on the day the shares
float to buy shares.
Section 9: Government will pay
100% of Treaty claims for the assets of mixed ownership
assets, even though it only owns 51% of the
company.
“It’s not [taxpayers] picking up the
bill for private investors; it’s just the government
meeting its obligations under the Treaty.”
“No
signs of some runaway bubble” in Auckland housing, despite
rising number of 90 percent-plus mortgages.
“Some
sign of growth and lending from banks is actually positive
for the economy and positive for the Auckland housing
market.”
Q+A, 9-10am
Sundays on TV ONE. Repeats of Q&A will screen on TVNZ7 at
9pm Sundays and 9am and 1pm on Mondays.
Q+A is
on Facebook, http://www.facebook.com/NZQandA#!/NZQandA
and on Twitter, http://twitter.com/#!/NZQandA
Q+A: SHANE TAURIMA INTERVIEWS BILL
ENGLISH
SHANE
TAURIMA
Deputy Prime Minister, good morning and
thank you for joining us this morning.
BILL
ENGLISH - Finance Minister
Good morning,
Shane.
SHANE The Prime Minister
said this week that you’re still on track to get the
government books back to surplus in the 2014/15 year.
What’s the chance out of 10 of still achieving
that?
BILL Well,
that’s what we’re working on. It’s certainly going to
be a challenge. You’ve got the uncertainties of the
earthquake, uh, you’ve had a bit of softness in the
economy. The government’s got a pretty strong expenditure
control programme in place, so we’re determined to get to
that surplus. And along the way we’ll continue to maintain
entitlements. On the first of April, National Super will go
up, benefits will go up, Working For Families will go
up.
SHANE Out of 10, though,
minister, the chances of reaching that
surplus?
BILL Oh,
well, 10 out of 10. Nine out of 10. 10 out of
10.
SHANE Pretty convincing.
Projections now only have you just squeaking into surplus.
What happens, as you’ve alluded to, if the financial
climate changes?
BILL
Well, look, anything could happen, and as I’ve
said before, if there are some extreme events globally, then
you’d probably have to rethink it. There don’t appear to
be signs at the moment of those extreme events. We’ve got
our own uncertainties, particularly around the earthquake,
because the numbers there just keep moving around But the
government’s determined to get to surplus.
SHANE Because what I’m trying
to get clear is just how important this surplus is to you.
If your income, for example, keeps falling, do you just keep
cutting until you reach
surplus?
BILL Well,
we’re not in that situation. How we’re dealing with this
is to put in place quite a predictable track for government
spending. The government services have known for a couple of
years now that they weren’t going to get any extra money.
Health and education, they’ll get some extra money.
We’re also looking at the long-term drivers of our costs,
such as welfare dependency, our pretty expensive law and
order system. So we’re focusing on the longer term as well
as getting savings in the next year or
two.
SHANE But the chance is
nine out of 10, 10 out of 10. It seems very important to
you, so do you just keep cutting to be able to reach that
target? That’s my question.
BILL Well, those
kind of slogans actually aren’t useful. This is about
controlling our long-term cost drivers, like welfare
dependency, uh, making sure we’ve got a competitive
economy so that tax revenue is growing, keep a tight rein on
public expenditure. It’s just like a household or a
business trying to get rid of their overdraft. The reason
it’s important is because our government debt has been
rising rapidly through the recession. It started at $8
billion net debt in 2008. It’s currently around 50. It
won’t stop rising till it gets to over 70, and we need to
stop that debt rising
SHANE
Wouldn’t another zero Budget help? Wouldn’t it
help? Because you mentioned before new money for health and
education in this year’s Budget. Wouldn’t another zero
Budget help you out?
BILL
Well, yes, it certainly would. The question is how
you achieve a zero Budget, and what we’ve been trying to
do is get the right balance between maintaining
entitlements, continuing to ensure New Zealanders have the
public services that they need. At the same time as doing
that more efficiently, getting some assistance from the
government share offer that’s going to be coming through
over the next 18 months
SHANE
Sorry, if it will help, why not have another zero
Budget?
BILL Well,
because it’s not that easy to achieve a zero Budget at the
same time as the objectives I’ve just talked about. We
will certainly be running a tight rein on government
expenditure. At the same time, protecting the most
vulnerable and ensuring public services can be maintained.
SHANE $900 million on a new
prison. Is that money well
spent?
BILL Well,
that’s the cost over 20 or 25 years. What we’re
doing-
SHANE But is it money
well spent?
BILL
Well, look, we’d be better not having to lock
more people up, but the fact is there are bad people out
there who should be locked up. There are also very old
prisons that we can’t continue to use because they’re
not effective and they’re, in some cases, inhumane. So
it’s an expenditure we have to have. The good news is that
where we were told a couple of years ago we’d need two or
three new prisons, there’s going to be one, and that’ll
be it.
SHANE We’re told
you’re going to close down two prisons to build a new
one.
BILL Well,
there’s a number of prisons that should be closed because
they’re so old and they don’t work to help with dealing
with recidivism and just humane treatment of
prisoners.
SHANE But can you
confirm to us this morning that there will be two prisons
closed down?
BILL
Uh, no, I can’t confirm that. There’s work
going on now. What I can say is there are likely to be the
closures of some prisons.
SHANE
What about the cuts to the Department of
Corrections? How many cuts is this department
facing?
BILL Well,
look, it’s not about cuts. And I know you like to keep
using the word. It’s about effective services. And the
fact is after 10 years of a lot of money going into public
services, we have to do the same as every household and
business and look at how effective our spending is. In the
case of Corrections, three years ago we actually put a lot
of extra money in, because the probation service was under
pressure. That extra money is staying there, but they have
become very focused, partly because of the PPP, actually,
the contract. They’ve become very focused on how to reduce
reoffending and how to do their job more efficiently, like
most of the rest of the government services. So they’re
headed in the right direction.
SHANE
And I suppose that begs the question - what about
these front line staff that you’re talking about? How
many-? You don’t like the word ‘cuts’, but how many
job losses are we expecting
there?
BILL Well,
look, I mean, across the public service, as we’ve
signalled this week, of course there will be some
redundancies. The public services grew very rapidly through
the first decade of this century, and we’ve been
stabilising that and pulling it back, and that has focused
largely on back-office staff. Actually, front line staff in
Corrections have increased. There are more doctors, there
are more teachers, there are more nurses. There are likely
to be less back-office staff.
SHANE
In May 2011- I want to move on. In May 2011, the
government was borrowing $385 million per week. That’s now
down to $110 million per week The projection for next year
is closer to $20 million per week. The cost of the
government borrowing money is at historic lows. So here’s
the question - isn’t it a good time to borrow more money
to invest in a big project or whatever may boost the
economy?
BILL Well,
we’re investing in big projects - actually using some of
those borrowings that you’re referring
to-
SHANE But borrowing more
money - that’s the question. Would you consider borrowing
more money?
BILL We
don’t want to borrow any more than is currently planned,
and the current plans still require billions of extra
borrowing over the next two or three years until we get to
that surplus. We’re in a world that is increasingly
hostile to debt. We already have high levels of debt as a
country when you add the government and the households
together. We don’t want to be in a zone where any lender
starts worrying about New Zealand’s debt levels. That is
why we must stop it rising, and we will.
SHANE We have a housing crisis
in Auckland, minister. Why not borrow more money? If we
carry on with this theme, why not borrow more money to
invest in a massive building programme, for example, in
Auckland to help drive down those
prices?
BILL Well,
we’re putting a lot of money into Auckland and into the
roading infrastructure. With respect to housing, I mean,
some of this is going to be a catch up from a period of
years where there wasn’t much new housing construction
started. That is starting to pick up. With respect to the
government’s contribution, we have a very large stock of
houses through Housing Corp in Auckland. Roughly a third of
them are the wrong size, in the wrong place and in poor
condition, and we’re going through a very large-scale
exercise to correct that so that we can actually help more
people who have housing problems.
SHANE
But is that on your radar? Is that part of your
thinking at the moment - to borrow more money to invest
into, as I say, a big, massive building project here in
Auckland to help address that
crisis?
BILL Uh, no,
we’re not. What we are doing there is talking with the
council about their plans. We want to make sure that under
the council’s plans, they take notice of housing
affordability, that they make rules that are going to enable
more and lower-cost housing; not less and more-expensive
housing that would have to be subsidised by the tax
payer.
SHANE The numbers this
year show that first-home buyers are getting back into the
market in big numbers. They’re cashing in their KiwiSaver,
taking 90% or plus mortgages and spending more than they can
afford. Isn’t this your worst
nightmare?
BILL No,
it isn’t. Look, there’s some pressure in the Auckland
housing market, but there are no signs of some runaway
bubble. And bear in mind here that neither the banks in New
Zealand nor the people who lend to our banks are going to
finance some housing bubble right now. So even if there’s
a few prices spiking up at the moment, credit growth - the
amount of money actually leant for new mortgages - credit
growth is actually around zero, and
that’s-
SHANE Let’s talk
about the banks, because we have figures on that too. These
banks are giving 90% or more mortgages. ASB mortgages with
an LVR over 90% had jumped by a massive, massive $406
million in the three months till December. Westpac -
they’ve increased by a total of $143 million in the same
period. Is that responsible
lending?
BILL Well,
look, we can’t have it both ways here. If there’s a
shortage of housing in Auckland, then you’re going to have
a bit more lending in order to enable the construction of
more houses to alleviate the shortage. So, yes, we would
expect a bit more money going into the housing sector. That
is how you get more houses that respond to the demand
that’s there.
SHANE So are you
saying to banks, ‘Lend more. Lend more. These 90% or more
mortgages - lend
more’?
BILL No,
what we’re saying to banks is they have to comply with the
now stricter requirements on their capital arrangements,
which will prevent them from financing a runaway housing
bubble. But some sign of growth and lending from banks is
actually positive for the economy and positive for the
Auckland housing market.
SHANE
What advice do you have for the young couple
watching this morning wanting to buy their first home? What
do you say to them?
BILL
Well, the first thing is they need a competitive
economy where the prospects for income increases are good,
and New Zealand compared to most countries is doing a
reasonably good job of that. We’ve got moderately good
prospects ahead of us. Secondly, I’d say look around the
country at the housing market, because there are plenty of
opportunities around New Zealand for first-home owners to
get in. It’s harder in Auckland.
SHANE
Obviously save for a deposit. What’s your advice
around that?
BILL
Well, look, they don’t need my advice because the
figures tell us they are saving. New Zealanders have turned
around their savings behaviour in the last two or three
years, and it looks like they will continue to save more.
Younger New Zealanders are doing that. Older New Zealanders
are paying off their debt, and that’s a good thing
too.
SHANE Let’s move on to
state assets. Do you think-? Do you believe you have a
mandate?
BILL Yes,
we certainly do, and we’re getting on with the process.
Look, there’s been some criticism about it, but we need to
get in $5 billion to $7 billion to help us pay for the new
public assets that we need, like our schools and our
broadband, without going and borrowing more
money.
SHANE So is that your
mandate? To make ends meet, if you
like?
BILL Well,
look, the government announced its policy 12 months ago. We
had a whole election campaign focused on it. We got voted in
as the government. We’ve been absolutely clear. There’s
no debate about the mandate.
SHANE
But even if the 47% that voted for National at the
last election all agreed with your policy, it’s still not
a clear majority, is it?
BILL
Look, you can’t get a better mandate than an
election campaign on an issue where you get elected. I think
what we’re finding now is people are more and more
interested in what the offer of shares is actually going to
look like, they want to know more about the companies, they
want to know how they’re going to be able to participate,
and that includes people who haven’t always agreed with
the policy but still want the
opportunity.
SHANE Let’s talk
about those investors and namely and Mum and Dad investors,
because isn’t it right - you simply arrange for big funds
to basically pre-order shares. Is that
right?
BILL Uh, no,
and, look, this is broader than Mums and Dads - a whole lot
of New Zealanders who aren’t necessarily Mums and
Dads-
SHANE Bigger than Mums and
Dads?
BILL Yes,
look, it is- As we’ve said-
SHANE
The Mums and Dads that gave you the mandate that
you say that you have to put this
through?
BILL
That’s right, and we’ve said we want 85% to 90%
of these companies in New Zealand ownership. That will mean
widespread ownership by a large number of small investors.
And even for those who can’t participate, they will be
indirectly participating because their KiwiSaver will be
buying- the KiwiSaver fund will be buying shares. ACC, to
whom they pay levies, will be buying shares. Uh, the New
Zealand Super Fund, to whom they contribute tax, will be
buying shares as well. So all New Zealanders, one way or
another, will be participating.
SHANE
Just clarify it for us, please. Will Mum and Dad be
able to ring up a broker on the morning of the share float
and buy a bunch of
shares?
BILL Uh,
yes. In fact, they probably won’t have to ring a broker.
They’ll just be able to register directly themselves and
the government will deal directly with
them.
SHANE What percent will be
in to them and not the
funds?
BILL Well, as
we’ve said, we want 85% to 90%. We’ve yet to make the
decisions about exactly what the different size, the
different pools will be, but there will be a large pool for
New Zealanders to go and buy shares if they want to buy
them.
SHANE Telstra in
Australia, for example, was sold off, and there’s a
capping law on how much of it non-Australians can own. So
why not do the same
here?
BILL Well,
we’ve set out the government’s target, which is 85% to
90% New Zealander ownership, so that’s the 51% that is the
government share that’s going to be retained, uh, and then
of the rest we want to see New Zealanders - both individuals
and institutions - get the significant majority of those
shares, and we’ve made the quite
clear.
SHANE Because the
mixed-ownership sales, Crafar farms - it seems like
anyone’s money is as good as anybody’s else’s, no
matter which country you come
from.
BILL Well, I
think you’re generalising a bit here. The Crafar farms
dealt-
SHANE Do you not agree
with that?
BILL Uh,
no, I don’t, because the government has made its policy
objective clear, and people will be able to see very clearly
whether it’s been achieved. We want majority 85% to 90%
New Zealander ownership of these
assets.
SHANE Just very quickly.
The Treaty clause section 9. If the Treaty clause applied
only to the government, who pays if a Treaty claim needs to
be dealt with? And I’ll give you a quick example. If
there’s a claim against a dam owned by Mighty River Power
and the iwi is to be paid $50 million. Under section 9, who
pays? The government?
BILL
Yes, the government pays, because it is the
government who has the obligations under the
Treaty.
SHANE So the government,
the tax payer, picks up the bill for private
investors?
BILL
Well, it’s not picking up the bill for private
investor; it’s just the government meeting its obligations
under the Treaty. And these kinds of things go on all the
time. When there’s claimants who claim public land or who
have claims to compensation for land that was taken that’s
currently owned by householders and farmers, the government
picks up the tab.
SHANE So that
means that taxpayers pick up 49% of the bill for investors,
private investors?
BILL
No The private investors never had an obligation,
and they never will have an obligation. It’s only ever
been the Crown’s obligation. Whether iwi are claiming
farms or property of whatever was taken from them 100 years
ago, only the Crown has obligation to meet the claim, and
that’s how it will be.
SHANE
And let’s leave it there. Deputy Prime Minister,
Finance Minister, Bill English, thank you for your time this
morning.
BILL Thank
you,
Shane.
ENDS