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Q + A Episode 11 - Bill English Interviewed by Corin Dann

Q + A Episode 11
BILL ENGLISH interviewed by CORIN DANN

CORIN: Mr English thank you very much for joining us. Of course one of I guess the leading points of your budget was the free healthcare for the under 13s, and that was an injection of money into health. But a number of commentators, the likes of Brian Fallow and others have suggested that in fact if you take into account population, price increases, inflation etc, you're actually going to see a decrease in funding to the likes of health and education over coming years. Is that correct?

BILL ENGLISH – Finance Minister
No it's not. There's a bit of confusion over how these numbers are presented in the budget, but year on year we've been putting up health spending. Now it hasn’t been going up near as fast as it was when the previous government was in power, and that’s because we haven't had large surpluses, we've had deficits, and we've been probably more generously funding our public health system than most developed countries, where cuts and mass sackings have been the flavour of the last few years.

CORIN: But you are cutting the spending as a proportion of the size of the economy aren't you? So if you have rising population, you’ve got rising migration, which we can get to in a minute, there is going to be a lot more pressure on those health services, and you're not actually increasing at the rate of inflation are you?

BILL: Well the roughly the rate of inflation, look the health sector can always, does argue for more, because there's more technology and so on. They have done a very good job over the last four or five years of achieving better results. You know our immunisation rates are the highest…

CORIN: Are you saying they’ve gotta keep doing that, because that’s where the pressure's going to come on isn't it, particularly with that ageing population?

BILL: Well it's lifted a bit this year, because we've got surpluses that are sustainable there's always the potential to lift it a bit further in future years. But like everyone else in our country they have done a good job of achieving more for a bit less increase, but relative to all other parts of government health has been generously funded for the last six years, and it remains so this year.

CORIN: Can I pick you up on that. So you're saying because obviously you’ve talked about the 1.5 billion dollar cap, the extra 500 million dollars that you're going to have at your disposal – are you saying or hinting there that health could be in line to get a little bit more? I mean you don’t have to do taxcuts do you? You could put it into social spending.

BILL: Well look there’ll be a long queue and I'm sure health will be doing their best to fight their way to the front of it. But yeah we lifted the discretionary allowance from a billion to a billion and a half. That’s about half what it used to be back in the good old days, but there's a lot of demands in our community for more public services, better public services, and as we've indicated we also have the possibility of modest tax reductions.

CORIN: What do you prefer? What does your instinct tell you? I mean would you rather see that money going into social areas rather than a taxcut?

BILL: Oh look we'll do what we've done in past budgets and that’s work pretty hard to get the right balance. There's never one single answer to where to put the dollar, but you know there's a lot of people who'd like to see a bit of recognition of their efforts over the last five or six years, people who don’t always qualify for the support for those who are on the lowest incomes. But on the other hand there will be some real pressures in our public services that we need to respond to.

CORIN: That support you talk about, is that a reflection that we aren't seeing the strong wage gains that you would like to see? I mean would you like to see more wage gains? That would take the pressure off you to have to provide taxcuts.

BILL: Well government's in the business of trying to create conditions for an economy that does deliver consistent wages, and that’s why we've outlined the fact that if the forecasts in the budget are realised, that average wage will rise by about $7,500 dollars over the next four years. So that is certainly a top priority. The better paid people are, the more of their material needs the market economy delivers, the less the government needs to provide in support. I think our work on the housing market is pretty important in that respect, a lot of the support that’s gone into New Zealand households over the last 15 years has been driven at least in part by the fact that house prices have doubled up to 2008, and people needed cash to fill the gap.

CORIN: I want to pick you up on that, because Nick Smith said on this programme a couple of weeks back, 20 years it might take in order to get that proportion of how much people are earning and how high those house prices are, back to some sort of normality. That’s a long long time. Surely you should be coming up with a budget with an economy that can do that faster.

BILL: Well I'd like to be more optimistic than that. The housing market is complex, the local councils are the ones who make decisions and they're subject to a whole lot of political pressures, local pressures that aren't on national government, and we're working closely with them, but I have to say they have responded remarkably quickly. And Auckland there's now 33,000 new sections coming in the pipeline over the next two or three years. Even two years ago we wouldn’t have imagined that, and it's starting to shift perceptions in Auckland about capital gain.

CORIN: You need to see your economy growing at a speed limit of about 3% for a decade or so before you start to get people's incomes up to anywhere near you know serviceable mortgage levels, aren't they?

BILL: Well look that’s any way you can do the calculations, but we know that more supply and more flexible supply will mean that when people go to the more demand in the market, more houses available, prices won’t go up. There are places in the world where house prices have been relatively flat for quite long period of time, and that’s probably about the right result. Incomes rising, prices relatively flat, then more people can afford them.

CORIN: Okay, so how long do you think before we can get to that sort of sweet spot you're talking about there?

BILL: Oh look I think we're making good progress getting the top off a housing market that has been running too fast. I wouldn’t want to hazard a guess about just when we'll get to a sweet spot. The job at the moment is simply to get more houses on the ground faster so prices stop going up at 15% a year.

CORIN: Isn't the growth outlook though a little bit disappointing? And that’s where the ambition factor comes in here. While you do certainly have some good growth over the next couple of years, it drops back to around 2%. Now that isn't – you would have thought given the conditions we'd be aiming for a bit higher than that wouldn’t we?

BILL: Well we'd certainly want to aim for higher than that. That’s what Treasury does…

CORIN: Treasury say it's 2%.

BILL: Yeah and that’s partly a function of how they do the forecasts, but you're quite right, our job in this budget and in certainly subsequent budgets is to look through the growth over the next two or three years, because that is – it's positive, it's good 4%, as good as you'll find anywhere in the developed world. But beyond that we need to look to create the conditions for investment, so beyond that we've got a vigorous export sector for instance.

CORIN: So why not look for example I mean to the ACT Party, they're talking about you know flat tax rates, things that would you know seriously generate some momentum in the economy. Why not got for a more reform based agenda?

BILL: Well we've got a pretty reform based agenda, and people understand it pretty well and trust the government, so they're going with it, we're getting a lot done.

CORIN: Can you tell me what that reform based agenda is, because I mean most of the time your government is saying you know we're about small micro management of the economy, doing the little things right, is that what you mean?

BILL: I'll give you a good example of a pretty hard one. One of the drivers of growth at the moment has been the success of the dairy industry. There's also public concern about the quality of our fresh water. We're about to implement if we can get re-elected, a national framework to ensure that our fresh water is of adequate if not high environmental quality, and it's quite hard work, quite a big reform to get all that organised so New Zealanders can be reassured that their environment is not being degraded, but the dairy industry can continue to produce the dividends that it does for this country.

CORIN: But again that’s more of the same isn't it? I mean you compare that with Labour's policies, and we'll get to them shortly, they have a capital gains tax, they’ve got monetary policy changes. They’ve got some serious reforms to the economy which they say will adjust the settings, and boost that speed limit.

BILL: Well they haven't produced any numbers that show any impact of any of those policies. We make no apology for the fact that we are dealing with real issues that people who invest capital and turn up to work every day say in the dairy industry, actually have to deal with today, and for the next four or five years. When you’ve got a big generator of growth like the dairy industry you need to make sure that it's broadly acceptable to Kiwis and that we see the benefits of it and reduce the costs of it. That’s not incremental, it's a big step, it's an important step for the sustainability of our economy and the sustainability of our environment.

CORIN: Can I cut to Christchurch, some question marks there about perhaps the need for more funding in future budgets, given the pace and the time line of the rebuild. We know Christchurch is talked about being 500 million dollars short with its funding. Will you come to their aid?

BILL: Well look there's going to be ongoing argy-bargy between the Government and Christchurch City Council about just where the number fall in what is a 15 billion dollar spend for government, and a lot of pressure for the Christchurch City Council. And that’s been a constructive debate and I don’t see any reason why it would…

CORIN: Do you think that the Christchurch City Council should sell assets in order to pay some of this cost, that it's time they started to divest some assets to pay for others?

BILL: Look I think they're looking at some decisions that they wouldn’t have looked at before, and that’s partly about keeping faith with the New Zealand taxpayer, you know everyone else has put in the 15 billion and the people of Christchurch, and the Council I think could respond to that by looking pretty hard to get your own affairs organised. So for instance they're talking about doing something with their portfolio of 2000 social houses, and I think that’s a positive move.

CORIN: But yes or no to asset sales, do you think the Council needs to look at it?

BILL: Well look apparently they are looking at it, but that’s their business. All I'm saying is that the rest of the country wants to see Christchurch City Council do what their own councils are doing and that’s making a few hard decisions to live within their means.

CORIN: Just very quickly on tax cuts. If you were to go with tax cuts who would benefit? Can you give us some specific sort of target bracket if you like of those people that you're going for there?

BILL: No I can't. I mean we haven't constructed a taxcut package. You raised issues earlier on about other pressures on public spending that we would have to take into account. We've simply signalled that it is a choice, and it's good that we're in a country that has those sort of choices. In Australia they're putting taxes up and they're cutting spending. We have the possibility of further reduction in taxes and increasing spending, and it's not a bad outlook.

CORIN: Finance Minister, Bill English, thank you very much.

ENDS

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