Q+A: Finance Minister Grant Robertson
Q+A: Finance Minister Grant Robertson interviewed by
Finance Minister Grant Robertson told TVNZ 1’s Q+A programme salary and wage earners need to ‘see a better dividend from growth’.
‘And we’re acutely aware of the fact that over a long period of time, teachers, nurses have said, ‘Well, we haven’t received the dividend that we’ve seen from the growth in the economy.’ They’re not alone in that. We’ve got to take a realistic approach, but we’re very live to the fact that those groups of professionals probably haven’t seen the benefit they should’ve in recent years.’
CORIN So they are in
line for a reasonable bump?
GRANT Yeah, look, they are in line for a negotiation with us. You know, when people start throwing figures like 16% around, you’ve got to be pretty careful with a number like that. But it is time for New Zealand wage and salary earners to see better dividend from growth
The Finance Minister also refused to commit to the previous government’s $20 billion spend on defence over the next 15 years.
‘I don’t think it’s responsible at the moment to commit to any number until we’re completely clear about the way that we go about our procurement. What I am saying is that we understand the importance of New Zealand playing its part in the world.’
Q + A
Interviewed by CORIN DANN
CORIN And Grant
Robertson sat down with me for his first Q+A interview for
the year. We covered a lot, but began with the government's
tax working group which this week announced the scope of its
review. I asked Mr Robertson if Labour believes a new tax on
wealth is really
GRANT The philosophical basis of the tax working group is that we need a better balance into the tax system, and it’s absolutely clear that we’ve had a tax system that has incentivised speculation, particularly in property. We want this working group to come up with ideas about how to get that better balance. I’m not going to dictate at this point in the process exactly what that should be beyond what we’ve already ruled out in the terms of reference. It’s really important now that New Zealanders engage with the tax working group and make clear what they think the priorities are. We’re going to get a first report back from them in September and then a finalised report in April next year. That’s the time frame. I don’t want to prejudge it. But it’s quite clear that by going into this tax working group the way that we have, we’re not satisfied at the moment that, for instance, wage and salary earners are getting a fair deal versus those who’ve speculated in the housing market. We can do better than that. That’s what we’re looking for from the group.
CORIN You have talked in speeches in the last couple of weeks about what you call a just transition when we’re talking about the future of work, the rise of technology taking people’s jobs and helping people make the transition. When you were in opposition, you talked about a universal basic income, whereby a government effectively would give people some money to help with that transition. Is that an idea that still lives in this term in your government?
GRANT I don’t think it’s in this term, no, because I think we need to look at the trials that are taking place overseas for that. We actually have a separate piece of work underway which is about the interaction between the welfare system and the tax system that Minister Sepuloni is leading. In that, we want to make sure that we get the incentives to work right, that we have a system that actually supports people through those transitional periods.
CORIN What would that look like?
GRANT Well, I mean, a good example for you is the kind of active labour market policies that I think we need to see more of in New Zealand. How do we make sure that somebody who’s in an industry where we know that jobs are going to start to disappear in the future is being supported to train and retrain in advance of that? It’s one of the reasons why the first year fees free that we’ve brought in is actually targeted particularly for people who’ve never had post-secondary school education and training. Many of those people are in industries which are changing hugely. We believe that we can do more in that space, and we want to make sure that the welfare and tax systems are lined up to allow that to happen.
CORIN How does someone in their 30s — their job’s suddenly become obsolete because of the changing economy; yes, they can go and do education free if they haven’t trained already — but how do they support a family, how do they live?
GRANT Let’s be clear. We still have income support systems. And one of the things this piece of work that Minister Sepuloni is doing is going to focus on how to make sure we maximise the value of that, people get supported through their training. But, actually, I think we’ve got to look beyond the idea that you need to go away and do a year’s course. Actually, one of the really important parts of this just transition is going to be getting training programmes that are delivered in such a way as that they support people through short courses and while they’re in work. I was in Singapore last week, talking to them about their work in this space, which was really interesting. They’ve mapped industry transformation plans. They’ve sat alongside that and said, ‘What’s the skill mix we’re going to need in this area?’ And they’re talking about a series of modular educational offerings delivered often online for people when they’re in work. That is the kind of innovative thinking we’re going to need if we’re going to be allowing people to continually learn throughout their lives. Some people, sure, will go away and do a two-year diploma or a one-year course, but others are going to need those short modules while they’re still working.
CORIN Sure. Let’s talk about, I guess, your focus on the government’s books. You have just got an extra $700 million, basically, according to Treasury, and more importantly, it’s built in; it’s looking like it’s built in. Does that mean that you can now give teachers, for example, the 16% pay rise they want over two years?
GRANT Look, one doesn’t want to count one’s chickens before they hatch. Treasury are looking at, you know, the increase tax take as being something that they now believe will sustain itself through the full year. But we’ve got to be very careful. That money has to be spread across a lot of different priorities and over a number of years. We’re going to be sitting down over the next couple of weeks and finalising the Budget. And we’re acutely aware of the fact that over a long period of time, teachers, nurses have said, ‘Well, we haven’t received the dividend that we’ve seen from the growth in the economy.’ They’re not alone in that. We’ve got to take a realistic approach, but we’re very live to the fact that those groups of professionals probably haven’t seen the benefit they should’ve in recent years.
CORIN So they are in line for a reasonable bump?
GRANT Yeah, look, they are in line for a negotiation with us. You know, when people start throwing figures like 16% around, you’ve got to be pretty careful with a number like that. But it is time for New Zealand wage and salary earners to see better dividend from growth. That can’t all happen overnight. Some of it’s actually about lifting our productivity. Some of it’s about making sure that we prioritise areas like health and education better than has been done in the past.
CORIN So when does the hairdresser see a gain of 8%? Because, you know, the private sector’s still only looking at 2% if they’re lucky.
GRANT I’m not naming a number like 8%, Corin; you are.
CORIN No, that’s fine.
GRANT What I’m saying is we recognise that in these professions from time to time there needs to be discussions. We are the employer of those people.
CORIN Sure, but putting that aside, for those in the private sector who aren’t government employed, when can they expect to see wage gains above 2%, you know, 3%, 4%, those sort of gains, that they’re looking for?
GRANT Look, we’ve seen a fairly sustained period of low inflation, and obviously that has a big impact on the kinds of outcomes people will get. But we’re looking at some overall changes in the way industrial relations works. We want to see people get decent wages. That coincides with a lift in productivity. We’ve got to be lifting the value of what we do. Government can do so much. We can lift the minimum wage; we’re doing that. We can make sure that people in the core public sector are paid the living wage; we’re working towards that. But in the end, it’s the overall growth of the productivity of the economy that will flow through to people in the private sector getting bigger wage increases.
CORIN How quickly can that happen?
GRANT Well, look, we want to start seeing it over the term of this government. And the forecasts that we’re seeing from Treasury are talking about a 3% average increase in wages. That’s higher than we’ve seen in the past. We’re helping to stimulate that with the investments that we’re making in the economy. Productivity improvements will go with that.
CORIN You must be getting a lot of spending demands, I imagine, from your colleagues at the moment. A couple of quick-fire questions on that. A billion-dollar prison — is that going to happen?
GRANT Yeah, we’re still working through that, and you’ll know from the comments that Minister Davis has made publicly that this is a government that agrees with Bill English that prisons are a moral and fiscal failure.
CORIN It must hurt you, though, having to come up with a billion dollars for a prison.
GRANT We’ve got a plan to reduce the overall prison population. Where any prison rebuild fits within that is a live discussion at the moment.
CORIN Still live, okay. Can you give an assurance that you will commit to the $20 billion worth of defence spending over the 15-year period that the last government committed?
GRANT What we’ve committed to is a review of defence procurement, because I’m not convinced New Zealanders have had value for money from defence purchases in the past. When you look around the world, it’s one of the most challenging areas of procurement. There is no doubt there will need to be some updating and upgrading of our defence capability. But I’m not going to pin myself to a number at the moment when I’m not even confident about the basis of the procurement.
CORIN Because this is important for not just the spending on defence but in terms of foreign policy, in terms of the signals we send to the rest of the world and our partners in Australia. Are we going to spend the $20 billion in the 15 years or not?
GRANT At the moment, what I’m focused on is doing a review of procurement so I can even get ourselves to a starting point of saying, ‘Is that $20 billion number a relevant number?’ What I can say is that we understand the importance of having a robust, flexible, adaptable defence force that plays its part in the world. New Zealand should do that, and it will do that, but I’m not going to write out a blank cheque at the moment without knowing exactly what value for money we’re getting for those purchases.
CORIN So is it fair to say you can’t commit to the 20 billion over 15 years at this point?
GRANT I don’t think it’s responsible at the moment to commit to any number until we’re completely clear about the way that we go about our procurement. What I am saying is that we understand the importance of New Zealand playing its part in the world. The way New Zealand defence forces work in peacekeeping is a really important part of our role as an international citizen. We’re committed to that. But saying a number right now is actually irresponsible when we haven’t even got the procurement systems in place to ensure value for money.
CORIN Is Ron Mark on board with that position?
GRANT Yeah, Ron is, because Ron was very much part of the discussion that said, ‘Let’s review procurement in the defence area so we’re getting value for money.’ He’s a strong advocate for the defence force getting resources. We’re having those discussions right now.
CORIN Does New Zealand need rich foreigners, billionaires coming into New Zealand and investing?
GRANT We certainly need foreign investment in New Zealand, and we’ve never shied away from that. It’s really important for us that we sort our housing market out, that we give New Zealanders a fair go at buying their first home, and that’s why we’ve made the changes we’ve made around the rules on residential housing, the purchase of existing housing.
CORIN But do we need these billionaires? A lot of people are talking about billionaires not wanting to come and not wanting to build their golf courses. Do you care?
GRANT What we want is good-quality investment that supports the productivity of the New Zealand economy. We need help as a small country with high living standards and aspirations to higher living standards, that we don’t have all the capital we need for—
CORIN There’s a funding gap, isn’t there?
GRANT Yeah, there is, and we don’t have all of the capital that we need. The trick here is to channel that investment into the productive side of the economy. Not into speculation around housing, but actually to supporting the growth of jobs in New Zealand.
CORIN But is there some collateral damage in that the policy on the residential homes is causing a lot of backlash from submitters? Understandably, they’re against it. But is there collateral damage in terms of it pushing away other investors that we need?
GRANT Look, I was in South Korea and Singapore last week meeting with investors who are dead keen to get in and support the activity that we want to do in terms of growing the productive side of the economy — building more houses, building more hotels to support the growth that we’ve seen in the tourism sector. That kind of investment is really positive. Those people know that New Zealand is a great place to invest. You know, the strength of New Zealand of having a stable, robust banking system, good rule of law, topping the Transparency International index — those are things that investors see very positively. Changes that we’re making in residential housing actually just line us up with other countries, like Australia. So I don’t think investors have anything to fear, and the ones that I met in Singapore and South Korea were excited about the opportunities in New Zealand.
CORIN What about immigration? Are you worried that the immigration numbers are simply not coming down? We are still at 70,000 net. The last month, went back up. I don’t know, what are you guys doing with immigration? I mean, all the rhetoric in the campaign was that you were going to turn the tap off, but it’s not been turned off.
GRANT I think there was a lot of rhetoric from a lot of different people in the campaign. What we’ve said is we want to make those criteria changes—
CORIN You said you’d turn the tap off.
GRANT No, what we said was that we would make criteria changes around things like international students and that leading into migration that actually isn’t providing the skills that we need. We know, we continue, and we always knew that we would continue to need high-skilled, high-quality immigration into New Zealand, and that will continue. Minister Lees-Galloway is working on those criteria changes right now. But it’s true to say the numbers haven’t come down yet.
CORIN But that creates problems for you, though, doesn’t it? Because it doesn’t give the upward pressure that you might want for wages, and infrastructure problems — it’s spaces in hospitals and schools.
GRANT Look, it’s been four months. I don’t think it’s unreasonable to suggest that we’ve got to take the time to get the criteria changes right. But we never said New Zealand didn’t need immigration. It does. It needs exactly the right kind of skills coming into the country.
CORIN No, but you did say that it would 20,000 to 30,000 less. Is it going to be 20,000 or 30,000 less?
GRANT What we said was we would change criteria, and those numbers were the estimate of the result of that. We’re now getting on with the work to do the changes in criteria that mean that the focus is on getting the migrants who provide the skills that we need today.
CORIN So if we get all those skilled migrants and we’re still at 70,000, is that okay?
GRANT I don’t think that’s likely to be the result, and I don’t think anyone’s forecasting that that will be a result.
CORIN You’re saying it’s possible?
GRANT No. I’m saying that our focus has never been on a number. Our focus has been on changing the criteria so that we get a quality mix of migrants who are coming in with the right skills that New Zealand needs. And we know that there are skill gaps there, and we’ve got to get on with the infrastructure and the building that we need. That does require people to come in now while at the same time we do the thing that hasn’t happened, which is train New Zealanders. We have to do both at the same time. We’re going to be investing, and we are investing a significant amount in training, but in the meantime we’ve got to keep building and we’ve got to keep doing the things that keep the economy moving.
CORIN Just finally, living standards framework, a well-being budget — can you tell New Zealanders how their lives will be in any way affected or improved by having a budget that focuses on well-being as opposed to gross domestic product?
GRANT Because people’s success in their lives doesn’t just depend on the GDP number. What matters, I think, to New Zealanders is that their environment’s healthy, that the water’s clean, that, actually, the people in their communities are feeling safe, that they’re getting more skills, that their communities are more connected to each other and to the world.
CORIN Why do you need a well-being budget to do that? Isn’t that what government’s supposed to do anyway?
GRANT Yeah, but it’s really easy when it comes to budget time to just focus on the GDP numbers. And they tell us something about the activity in our economy. What they don’t tell us enough about is the quality of life outcomes for New Zealanders. If we get this right with the well-being budget, we’re going to be able to say to New Zealanders, ‘Here is a budget that’s been created so that we know we’re improving the economy, the environment and our communities at the same time. And here is a set of success measures that aren’t just about GDP, but, actually, are about the overall health and well-being of our people.’ I think what New Zealanders will be able to do at that point is say, ‘Yes, that’s what it’s for. The economy is not an end in itself; it’s a means to a better quality of life.’ And the message that I’ve been giving ministers is that this is a three-year term. We have an amazing array of ambitious projects. We will give New Zealanders an idea on the 17th of May about the way we’re going to be rolling those out. Yes, of course it’s tight. A budget should be tight, Corin, because what that means is that you’ve balanced up those fiscal pressures alongside being responsible with the spending. That’s what people would expect us to do, and that’s what we’re doing.
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