Public sectors didn’t understand their own departments: English
June 9 (BusinessDesk) – Senior managers of government departments had little understanding of how their organisations ran when the government took office in 2008, says Finance Minister Bill English.
Addressing a Trans-Tasman Business Circle lunch in Wellington, English said that while people in the capital were more sceptical, the rest of the country have “tears of joy” in their eyes at the government’s plans to rein in the public sector after a decade of heavy spending increases.
However, public service bosses were grasping nettle.
“I’m impressed that departments realise these are not circumstances they can wait out,” he said. “Two years ago, most public sector heads did not understand their organisations. They have a better grip on it now”, following benchmarking studies and a steady focus on cost reduction.
“They now need better industrial relations,” said English. “We can’t get through this process without intensive engagement between management and, particularly, front line staff.”
Nonetheless, the actual cuts expected of government departments over the next four years amounted to only 1% of total spending, in keeping with the government’s political strategy of making “reasonably significant but not too scary decisions” on the way to its longer term goals.
“That recipe appears to be working,” English said. “Despite having delivered the tightest Budget in 20 years, we have got pretty broad public approval for it. They understand why we’re doing what we are doing.”
If the latest Budget’s forecasts were correct, New Zealand could expect to be one of only two developed economies in the Organisation for Economic Cooperation and Development to be running a Budget surplus by 2015.
English acknowledged widespread post-Budget scepticism of the Treasury’s economic forecasts, but insisted not only that they were not always wrong, but that the shape of New Zealand’s economic recovery was becoming clearer.
The highest prices for agricultural commodities since the Holyoake years would underpin the recovery, while there was no question about whether or not $15 billion to $20 billion would be spent rebuilding Christchurch over the next three or four years.
“It will be spent,” he said, and the impact on the New Zealand economy would be, relatively speaking, three times as great as the rebuild required by the Japanese tsunami.
However, he predicted the non-tradeable sector – businesses not involved in producing for export and import substitution markets – would continue to find times tough for the foreseeable future.
“The great thing about this global recession is that it was an unambiguous signal to stop borrowing up large and spending. That’s why it’s still tough running a retail outlet in Willis Street (in Wellington’s central business district). There has been a big shift in New Zealanders’ attitudes.
“Miserable economists expect people to back to old bad habits” once the economy improves. “However, I believe in you,” English told the high end Wellington business audience.
On partial privatisations, English said New Zealand had taken an “Albanian” approach in the last decade, selling no significant state assets while countries like Communist-ruled China had pursued such policies vigorously.
“We need to get our capital markets charged up again. There’s potential in those businesses to expand quite a bit more than they would with any conservative supplier of capital” such as the government.