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The Nation: Finance Minister Grant Robertson

On Newshub Nation: Simon Shepherd interviews Finance Minister Grant Robertson


Simon Shepherd: On the eve of the Finance Minister’s first budget, he described it as the first part of a transformational trilogy, but reviews have been mixed; it’s been praised as solid and sensible, while critics say it was boring and a bit too timid. Well, Finance Minister Grant Robertson joins me now to answer those questions. Good morning, Minister. Thanks for joining us. Okay, so, you have an economy that’s growing at 3 per cent a year, surplus going from $3 billion to $7 billion over five years. You’ve been blaming the Nats for a lot of underfunding, but shouldn’t you be thanking them for handing you such a solid economy?
Grant Robertson: Well, I’m certainly thanking the businesses and workers of New Zealand who’ve contributed to building up the economy over recent years, and, look, yes, New Zealand’s economic growth relative to the rest of the world has been solid. The issue that I think we all fought the last election campaign on was the distribution of the benefits of that growth — have we actually kept up with funding our public services? Are people on low and middle incomes actually seeing a boost in their incomes? That’s what we’ve set about addressing in this budget and in the work that we did before Christmas.
So you’re going to address that with these expanding surpluses and these great forecasts from Treasury, but some of the economists are saying these Treasury forecasts are overly optimistic. Are they too optimistic, and do you actually trust those kids in the Treasury?
I certainly think that Treasury’s economic forecasting stacks up over the years. If you look at it over 10, 20 years, you’ll see that their forecasts are as accurate as anybody else’s. But they are, obviously, forecasts, and one of the reasons to be careful about our expenditure is to make sure that if economic conditions change, we’ve got a buffer. That’s one of the reasons to have a decent-sized surplus. It’s one of the reasons to be careful about government expenditure.
Are you really concerned that there is going to be an economic shock — a recession — on the way soon?
Well, we always have to be mindful of that. If you look at the history of the global economy, years ending in 8 haven’t been as good as they might have been. I don’t see an immediate sign of that in the global economy. In fact, global growth forecasts are around 3.5 per cent to 4 per cent. But we’ve got to be mindful that we live in an era where there are security risks. There are geopolitical issues that we’ve got to look out for. So we are going to be cautious about our spending and the surpluses we leave ourselves.
Well, part of that caution is your self-imposed 20 per cent debt cap on core crown debt. Why is that necessary?
That’s what allows us to have surpluses — or, rather, that’s what we pay back with the surpluses — is to reduce that debt. New Zealand entered the last global financial crisis with very low levels of debt, and that allowed us to weather that storm well. We’re a small country; we’re exposed to greater risks in the global economy than other countries are. We’ve also shown ourselves to be prone to natural disasters, and we’ve got to be able to cope with any of those. And then right at the moment, we’ve got the immediate issue of Mycoplasma bovis, where we don’t know the exact extent of the cost that will fall upon the government and, indeed, on farmers for that. So keeping our debt levels low, lower than other countries do, is actually important for New Zealand to be able to withstand things that are beyond our control.
Sure, but are you also pandering to business? I mean, business confidence has been somewhat shaky about your government. Is this just an outright ploy to say, “Hey, you can trust us”?
No. This is about what we believe is the right thing to do. Now, we want to continue to work with the business community — we want to make sure that our policies line up with what will help businesses grow sustainably — but this is a prudent and careful approach, and I don’t apologise for that. We have a plan here. The plan is a three-year one and hopefully a six-year one and hopefully a nine-year one. This is the first year of that plan.
Are you actually being upfront about your level of debt? Are you squirrelling some of your debt away in other areas that we can’t see? You know what I’m talking about.
I do. What we have done is built on what the previous National government did.
And does that make it right?
Well, it does in this case because it’s Housing New Zealand, who have a big programme of work ahead of them, being able to borrow against their own balance sheet — also the Crown Infrastructure Partners, who are working for the urban infrastructure developments in New Zealand, being able to borrow as well. That’s a sensible approach. Even if they borrowed to their absolute cap, all that would do is shift net debt just above 20 per cent, which is our target anyway.
But is it a sensible approach when you say you’ve got the government, who can borrow at low interest rates, like someone’s mortgage, and then you’re pushing it out to the credit card, which is going to have a higher interest rate?
No, not at all. I mean, Housing New Zealand will be able to borrow in the same market that the government is. They’ve actually been doing it, as I say, on the basis of the policy the previous government brought in. They will do a good job of that. We’ve got the Debt Management office at Treasury who manage the overall borrowing programme for New Zealand. But, as I say, in the end, in terms of net debt, it doesn’t actually shift the dial that far.
So Housing New Zealand will get the same rate as the government?
I would certainly hope so.
Right. It’s not guaranteed, then.
Well, Housing New Zealand’s borrowing in the same market as the government with a very large balance sheet.
Okay. You’ve talked a really big game leading up to the election — big expectations. You’re talking about nine years of underfunding. Why not do things a little bit differently? Why not just throw out the rules and be really transformative?
Well, look, this is the first of three budgets this term, and I think I said in my budget speech these are the first steps towards a transformation, but we can’t transform the economy if we haven’t got the foundations right, and the underfunding of public services in New Zealand over the last nine years has to be arrested, and then we build from there. I really do encourage people to look at this as the first of those three budgets. We cannot make the big changes New Zealand needs to make, both in our society and our economy, if we don’t have the foundations in place.
You keep talking about this as a trilogy. All trilogies want to come out with a blockbuster, right? And money’s never been so cheap, and you’re hamstringing yourself by your own fiscal responsibility rules here.
No, I don’t agree with that at all. We’re making big and significant investments at this point. We have a slower debt-repayment track than the previous government. In cash terms, of course, the amount we’re borrowing does go up over the next few years, but the economy grows as well so we can meet our debt targets.
As long as those Treasury forecasts are accurate.
Well, I think, yeah, even if those Treasury forecasts were wrong by a small amount, we would still be seeing the economy grow to the extent that we can keep to our rules. But, look, we are spending $42 billion over the next five years in capital projects, infrastructure projects — that’s $10 billion more than the previous government had — so we are making a difference here, but we’re balancing that against the long-term need to look out for future generations.
Okay. Let’s talk about making a difference and let’s get down into what you’ve budgeted for Maori development. So $37 million —that’s less than half of what National had last time. And also Kelvin Davis promised $20 million more for Whanau Ora, so you haven’t really delivered that, have you?
Well, let’s unpack that. In the first place, the money that got put in Budget 2017, much of it actually didn’t come to fruition at all; it had the real feel of some election-year promises. When we went looking to see what that money had been used for, we couldn’t actually find it, and it’s not responsible, as a minister of finance, for me just to roll over funding that we can’t see the purpose for. What we’ve done is we have put in place some very good and specific projects around housing and education and training for Maori, and it’s vitally important to remember that the Families Package, which will deliver increases in income to families — $1.5 billion to Maori families over the next five years. So I think we’ve done the right thing there. If I can answer you on Whanau Ora as well…
Yup, quickly.
Whanau Ora is the subject of a review. Once that review is completed, we’ll come back to the table. We support the principles of Whanau Ora, but, again, if you’re doing a review, it doesn’t make a lot of sense to push the money up at the same time.
Look, you’ve got all seven Maori electorates. You’ve got 13 Maori MPs, okay. And the Prime Minister said it’s better to promise and not achieve than just do business as usual, and she made a big point of equality in her Waitangi speech, didn’t she?
Absolutely, and that’s—
So are you letting your voters down?
Far from it. When I speak to our Maori MPs and when I went around the Maori electorates during the election campaign, the issues that were being raised with us by Maori voters were housing, education, health, lifting the incomes of our people. We are addressing those issues — the Families Package before Christmas, the investments we’re making now. We do want to develop programmes that support Maori to thrive, but we’re not just going to carry on funding that, actually, the previous government threw in without even knowing what it was going to achieve.
But you’re talking about mainstream polices here. Do Maori thrive when they are mainstream policies?
There’s a combination of both. We need to do…
But not much on the targeted side…
But as time wears on over these next two Budgets you’ll see more in that area. We’ve got some in here now. We’ve got a programme in there that’s actually aimed at addressing shortages in terms Maori housing, Papakainga Housing Programme. We’ve also got a programme in there for young Maori who are not in employment, education or training. So we’ve got targeted programmes, but I can tell you from going around in the election campaign, it is those bread-and-butter issues that Maori voters wanted to see action on, and we’ve done that.
You’re also asking for patience from Maori voters as well, and yet they’re going through the process right now of deciding whether to be on the general roll or the Maori roll. Are you going to lose them? Are they going to go-?
I don’t think we will at all, and in fact, as I say, I think Maori voters put their faith in the Labour Party because they knew we would address the core issues that are worrying them and their whanau, and we’re going to do that.
Are you confident that this analogy of a ‘rising tide floats all boats’ is going to work? Because we’ve just seen in the prosperity index in Auckland – that’s the tale of two cities – worst inequality since World War II.
Look, we are committed to supporting Maori to thrive economically, socially as well. That will inevitably involve a mix of universal programmes and more targeted programmes. What we’re saying is in this Budget, in the package in this Budget and the 100-day plan, we’ve made significant investments in lifting the wellbeing of Maori, and there will be a mixture of those programmes going forward.
Okay. Let’s move on to… One quick question – do you think there has been less for Maori development here because Winston Peters doesn’t like race-based policies?
No, I don’t think that at all. The actual amount that’s reduced in the Maori development is relatively small because we have brought in new programmes as well as saying that the ones that were effectively ghost programmes in the last government have been pulled back.
So it’s not Winston Peters dictating this policy?
Far from it.
Okay, let’s talk about Winston Peters, your coalition partner. He got a billion dollars for a foreign affairs combined package, 3 billion for the Provincial Growth Fund over three years. Did you spend a lot of your Budget keeping Winston happy?
No, this Budget represents the combination of the coalition agreement with NZ First, the Confidence and Supply agreement with the Greens, The Speech from the Throne. It represents all of the parties in Government. But if we just pick out one of those things – the Provincial Growth Fund – all of the parties in Government want to see our provinces thrive. This is the biggest investment in lifting economic development in our regions in all of our lifetimes. We’re going to make sure that, actually, the regions thrive. And I think that is a transformational policy – saying that we’re actually going to be active on the ground, not just standing back, not the hands-off approach to the economy, but being there in the provinces is a major priority for all the parties.
But in keeping your political partners happy, the Regional Growth Fund, Provincial Growth Fund was a key policy for the coalition. But what did the Greens get? They got $100 million for the Green Investment Fund, $15 million for Sustainable Farming Fund – small fry compared to what New Zealand First got.
Well, I’ve heard James Shaw and Marama Davidson both say since the Budget that they’re very happy. They’re a huge contributor to what we’re doing. If you just take a look at the Auckland Transport Programme, where Julie Anne Genter and Phil Twyford have been working together – they’re a $28 billion programme – huge investment in rail. We’ve got huge strides being made towards lowering the carbon emissions in our economy. Those sorts of issues are the ones the Greens have come to this coalition with, and I think they’re doing well out of it.
So Winston seems to be quite specific in what he’s asking for and let me ask you this – $4.8 million tax break for the racing industry. Why exactly is that necessary in this Budget? Is it just a particular hobby horse of Winston Peters’?
Well, last time Minster Peters was in charge of Racing between 2005 and 2008, tax changes were made for the bloodstock industry. It’s his view that those haven’t been implemented properly. This is some funding to support that. It’s a fairly modest change, but it’s one that will support an industry which I might say employs, as part of your earlier comment, a lot of Maori as well. So, you know the racing industry is one that’s important to him. I absolutely acknowledge that.
And so you’re happy to give it to him?
I am, because this is actually implementing a policy that should have been implemented a decade ago.
But let’s compare it to the amount of money that you put towards fighting towards cybercrime, which is less – $3.9 million over four years. Cybercrime has the potential cost the economy a lot.
I think you need to be a little bit careful about that comparison, because there’s already a lot of money that goes into combating cybercrime. That’s the additional funding that’s gone into it, so you’re not really comparing apples with apples there.
Okay. Do you think people will look at the bloodstock issue and say, ‘Really? Is that one of your priorities?’
Well, as you say, it’s about $4 million. It’s among many others. It’s an industry that employs a lot of people, particularly young Maori, and we’re committed to supporting it.
Okay. Transformation – that was a buzz word in all your speeches and Jacinda Ardern’s speeches leading up to the election – transformation, productivity. So we’re talking about Research and Development. You’ve got a billion dollars in your R & D incentives. But a company has to spend $100,000 on R & D in a year to qualify. So that’s going to cut out all the small, upcoming tech start-ups, isn’t it?
Yeah, there are other means by which they will be able to get funding and get support. The R & D tax incentive is targeted at businesses, giving them some certainty about the spending that they will do. We know that internationally, these schemes exist, and we know that if we want to be competitive in getting innovation going, we need a big, large-scale scheme like this. But this is the point – in order to start transforming the economy, we need to lay the base properly. R & D tax incentives, the Green Investment Fund, the Provincial Growth Fund, the money we’re putting into transport and infrastructure – they’re the basis of an economic transformation.
But there’s been some criticism of first the Provincial Growth Fund – there seems to be just a big pot for forestry and rail and not the kind of transformational technology – clean, green regional technology.
Well, we’re in the first year of that, and I think as I said on Budget day, I expect the balance and mix of the Provincial Growth Fund to change over the years. But that forestry work will be part of transforming that industry. One of the big issues is that we continue to rely on the export of raw commodities. What we want to do through establishing the New Zealand Forestry Service is start to move that industry up the value chain. So part of what the Provincial Growth Fund will do is actually move us in to areas of prefabricated timber, adding value to those products in New Zealand. But you’ve got to start somewhere. And the issue we’ve got is that the regions have not been given the attention they should’ve over the last nine years. We are now putting our stake in the ground on that.
Okay. Now, let’s talk about prefabricated, because that leads me on to prisons. You’ve allocated $198 million for 600 rapid-build modular units. Sounds like pop-up cells. Temporary Band-Aid for the solution and Corrections officers are concerned for their safety in these overcrowded prisons. So what are you going to do to reassure them?
Yeah, look, I think that the area of Corrections is one where the dropping of the ball by the last Government has not had enough attention.
Well, the ball’s now in your court.
It is very much in our court, and we’re dealing with it, so that’s why we put in place 600 rapid builds because otherwise we would have a real issue right now.
If you were going to deal with it, you would have approved the Waikeria prison.
Far from it, because my belief and the belief of this Government is just building more prisons is not the answer to dealing with criminal justice.
So what is the alternative?
Well, the alternative is to reduce the prison population and we will do that over the next few years.
That will take 15 years. You’ve got a growing prison population right now.
Right, actually why we’re doing the 600 build. But what we’ve got to do is actually have an integrated plan that reduces the number of people going to prison, that focuses more on prisoner rehabilitation. Building a big mega prison at Waikeria isn’t going to do that. Now, we’re working through our options about what we can do there, but that has to be part of a plan that addresses the second-worst incarceration rate in the world. Prisons don’t work, and so we have to make sure that we actually build a new programme of changing our approach to criminal justice. We will make sure that prison officers are safe, but it has be part of a wider plan.
Well, this is urgent, isn’t it? Waikeria and that decision needs to be made now.
Waikeria decision is in front of Cabinet, and it will be made in the very near future. But what myself and the Prime Minister and others have all been saying is that we need a completely different approach to criminal justice.
Alright. This is your first Budget – first Labour Budget in 10 years. You said yourself repeated it’s the first instalment in a trilogy. So is it a box office hit or is it at flop? I’m going to ask you to rate it out of five. How many stars are you going to give your own Budget?
Oh, look, it’s not for me to do that, Simon. I’m very happy with the Budget that we’ve put out. It was a privilege to deliver it. It’s one that I think does lay out the foundations for parts two, three and beyond from there. Others will give it a star rating, but I’m pleased with it.
You know sometimes with a trilogy, the last one is the flop?
Oh, no, the last one will be a great one. But it won’t be the last anyway. There will be a further instalment after that.
Oh, you’re confident of that? Okay, Finance Minister, thank you very much for your time.
Thanks, Simon.

Transcript provided by Able. www.able.co.nz


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