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Questions and Answers - 17 March 2011

(uncorrected transcript—subject to correction and further editing)




Prices—Minister’s Statement

1. Hon ANNETTE KING (Deputy Leader—Labour) to the Minister of Finance: When he said recently “where the Government does have some influence, we are working hard to keep prices low”, which prices was he referring to?

Hon BILL ENGLISH (Minister of Finance): I was referring to specific examples, such as interest rates. We have worked hard to control Government spending, so that we do not put upward pressure on interest rates. Floating mortgage rates are about 5 percent below where they were at under the previous Government. With regard to the emissions trading scheme, we have put in place a system that halved the costs of the emissions trading scheme. In electricity, we have increased competition so that households do not face a 72 percent price rise, as they did up to 2008. We have worked hard to bring the out-of-control ACC scheme under control, so that levies do not have to keep increasing.

Hon Annette King: If, as he claimed on Sunday, the Government is working hard to keep prices low, why did he allow Government-controlled prices such as car and motorbike registration, ACC levies, early childhood education fees, GST, and the cost of doctors’ visits, to name but a few, to go up at a time when economic commentators are saying households could face a period of significant misery in New Zealand?

Hon BILL ENGLISH: We have had to strike a balance between recognising that pressure on households on the one hand, and cleaning up the mess left by the previous Labour Government— for instance, the car licensing system was tens of millions of dollars in deficit. We are doing our best to close that massive deficit in the car licensing system without passing on all the costs to licence holders.

Hon Annette King: What action will the Government take to control petrol prices now that they have reached $2.15 a litre, which is something National demanded that the previous Government do when the price reached $2.03 a litre, and which is something that while in opposition National thought obviously the Government could do something about?

Hon BILL ENGLISH: Unlike the previous Labour Government, we do not claim to be able to control everything. Consumers and households are doing their best to deal with rising oil prices. As the member knows, the Government does not have too much influence over Colonel Gaddafi, but maybe the Labour Party does.

Hon Annette King: What action will the Government take to reduce the cost to New Zealand families of milk, which has gone up by 37c a 2 litre bottle, given that John Key said in 2008 that families had to ration milk to their children because of the price and that the then Labour Government should do something about it?

Hon BILL ENGLISH: As the member will know, New Zealand is a beneficiary of high commodity prices. More people want to pay us more for more of our product than ever before, and some of those prices are reflected in domestic prices.

Chris Tremain: What is the outlook for inflation, and how does this compare with past inflation?

Hon BILL ENGLISH: Of course, there has been a spike in inflation because of the increase in GST, but, if we look at Reserve Bank forecasts for this calendar year, we see it projects there will be inflation of 2.3 percent; in 2012, of 2.2 percent; and in 2013, of 2.5 percent. Over those 3 years, the rate in each year is about half the rate that inflation was at in 2008 when Labour left office, which is why no one believes the Labour members when they complain about rising prices.

Hon Annette King: If New Zealanders are better off following the tax cuts and the wage increases, as he constantly claims, can he explain why people are feeling the impact of food, grocery, accommodation, insurance, and petrol rises at the fastest rate in almost 20 years, and does he believe that people are just making it up when they say they are facing a struggle at this time?

Hon BILL ENGLISH: They feel those prices because they are out there every day doing their shopping and paying their bills. They have not all had significant wage increases, but they have had after-tax increases in their wages. The member seems to be going down the track of, I think it was, the Herald on Sunday, which tried to claim that inflation was at the same kind of rate it was at back in the mid-1980s when it was actually 17 or 18 percent. Current inflation is actually around 2 to 3 percent.

Earthquake, Christchurch—Effect on Government Finances

2. DAVID BENNETT (National—Hamilton East) to the Minister of Finance: What are some of the likely impacts on the Government’s finances of the Christchurch earthquake?

Hon BILL ENGLISH (Minister of Finance): First of all, as the weeks go by we are getting better information about the costs of the earthquake, but a couple of things are clear already. The first is that the earthquake is likely to delay slightly the New Zealand Government’s return to Budget surplus, and, secondly, that meeting the Government’s share of the immediate earthquake costs will require quite a substantial front-loading of Crown debt in the next year or two—that is, to meet costs such as the wage support package, the rescue and recovery costs, and transitional housing. It means the Government will have to borrow more over the next couple of years. Therefore, it is important that we put in place a plan to get our debt back to acceptable levels.

David Bennett: What will be the impact on likely fiscal deficits and net Crown debt as the Government meets the immediate costs of the earthquake?

Hon BILL ENGLISH: When the Prime Minister delivered his Prime Minister’s statement earlier in the year, he said that the Government intended to get back to Budget surplus in 2014-15. Now, with the effect of the earthquake and the need to borrow to fund those costs, the surplus is now more likely to occur in 2015-16. It looks as though our deficit before gains and losses could be more than 8 percent of GDP, which amounts to around $16 billion. In December we announced a revised forecast of $11 billion, which is likely to increase. Net Crown debt is also likely to rise, from around the forecast 28 percent of GDP in 2014 to around 30 percent.

Hon David Cunliffe: What percentage of the additional expected $4.9 billion increase above the forecast in the operating deficit before gains and losses for this year is a result of the stalled economy, which New Zealand has been suffering from since as early as June 2010, well before the earthquake hit Canterbury?

Hon BILL ENGLISH: I could not give the member an estimate of the exact proportion, but a significant proportion of the increased deficit this year will be just the immediate cash costs of the earthquake. Some of it will be reduced tax revenue because of the stall in economic activity in Christchurch, and some of it—who knows, maybe a quarter or a third—could be because of a slower economy, which was happening regardless of the earthquake.

David Bennett: What will be the basis of decisions about the Government paying its share of earthquake costs and ensuring that net Crown debt returns to pre-earthquake levels?

Hon BILL ENGLISH: The Government will continue with its considered and consistent way of making decisions on economic issues. The Government has made the decision that because it is impractical to find short-term, large-scale savings in public spending, we will be borrowing to cover the costs of the earthquake. Any other changes we make in Government spending will be made on their merits rather than just because we need to fund the earthquake recovery.

Hon John Boscawen: Does he think that revenue raised from mining schedule 4 land would mitigate the financial effects of the Christchurch earthquake; if so, what actions will the Government take to explore mining on schedule 4 land?

Hon BILL ENGLISH: The Government has explored that option. There is no doubt, though, that the effort that has been put into getting petroleum and gas resources on the list for exploration companies could yield more revenue in the future, and that would help us repay the debt that we will incur in the next year or two on the Christchurch reconstruction.

Hon John Boscawen: Does he think that the comments of the Minister of Energy and Resources on 26 August 2009 that no mining on schedule 4 land had potentially “denied significant opportunity for economic benefit at both a national and regional level” are more relevant now that the economy is struggling with the effects of the Christchurch earthquake?

Hon BILL ENGLISH: It is not the Government’s intention to revisit the conclusion of the debate on schedule 4, but that does not mean we cannot have a strong and growing economy in the future. In fact, in the regions high commodity prices will begin spilling over into the domestic economy in the next 12 or 18 months, and, despite the fact that they cannot mine schedule 4 land, I think that part of the economy will start growing with some strength.

Economic Development, Acting Minister—Statements

3. Hon DAVID PARKER (Labour) to the Acting Minister for Economic Development: Does he stand by all his statements on economic development?

Hon DAVID CARTER (Acting Minister for Economic Development): I stand by all statements I have made as Acting Minister for Economic Development.

Hon David Parker: When he said in Parliament yesterday: “We want to invest in innovation— Labour opposes that.”, was he referring to the research and development tax credit that Labour introduced and National scrapped, or to National’s other cuts to innovation?

Hon DAVID CARTER: I was referring particularly to the Primary Growth Partnership, which has been in action now for 18 months. We have seen $475 million worth of projects get under way. That sort of innovation spending is serious spending. It is not like the phoney schemes that Labour used to announce.

Hon David Parker: When the Minister said yesterday: “We intend to improve skills—Labour opposes that.”, was he referring to the $55 million that his Government cut from industry training in the last Budget?

Hon DAVID CARTER: I was referring particularly to the work of my colleague the Hon Anne Tolley, who is trying to address the serious situation in New Zealand, where a large number of schoolchildren leave school without the ability to adequately read and write. That is the legacy that that member and his Government left.

Hon David Parker: When the Minister said yesterday: “We need to improve trade opportunities.”, was he referring to the need created by his Government’s lack of an adequate economic plan, which has resulted in unemployment increasing by over 50,000 people since he took office, and the second recession—National’s recession?

Hon DAVID CARTER: No. Again, I was referring to the excellent work by my ministerial colleague the Hon Tim Groser and the work he is doing on trade negotiations with Malaysia, Hong Kong, the Gulf States, the Trans-Pacific Partnership, Korea, and Russia.

Hon David Parker: Why, instead of ineffectually trying to blame others for the Government’s failure, will he not take responsibility and admit what many business commentators are saying— namely, that the second recession is National’s responsibility and that its management of the economy is lacklustre and failing?

Hon DAVID CARTER: I note that when Mr Parker raises the many business commentators, he never manages to mention them by name, so I suspect many of them are his left-wing, loony mates.

Earthquake, Christchurch—Accident Compensation Claims

4. Dr JACKIE BLUE (National) to the Minister for ACC: How many claims has ACC received since the tragic earthquake on 22 February and what steps has the Government taken to facilitate prompt compensation for those seriously injured?

Hon Dr NICK SMITH (Minister for ACC): As at this morning, 5,907 claims had been received. These claims included over 3,000 soft tissue injuries, 1,010 lacerations, 437 fractures, 419 neck injuries, 183 head injuries, 47 burns, and six amputations. The lunchtime earthquake created uncertainty about whether injuries were workplace or non-work accidents. The difference determines whether the employer or the employee meets the cost of the first week’s compensation. The Government has decided, through a special Order in Council for ACC, to pay this first week, which benefits both employees and employers and removes any debate at this difficult time.

Dr Jackie Blue: Has the Minister received any estimates of the costs of accident compensation claims from the 22 February earthquake; if so, are these costs likely to impact on current and future levies for the scheme?

Hon Dr NICK SMITH: The 22 February earthquake will be the accident compensation scheme’s largest-ever single event involving claims. Its latest estimate of the total number of claims is 7,500, and this has enabled an update on the estimated lifetime costs, at approximately $200 million. This estimated cost needs to be considered in the context of claim costs per year of about $3 billion. ACC has worked very hard over the past 2 years to improve its financial position, and I am hopeful that the cost of the earthquake claims will be able to be met without any levy increases.

Chris Hipkins: Will the cost of providing the first week of income compensation under the scheme, which he has announced, be funded through the ACC work account; if not, how will it be funded?

Hon Dr NICK SMITH: For those who were seriously injured, who will be eligible for that extra week of compensation, that funding will be taken from either the earners account or the work account, in exactly the same way that the future week’s compensation will be. I note that a higher proportion of claims than the overall average for ACC are actually in the work account. That is not surprising, given that a large number of people would have been at work at the time of the earthquake, and given the number of people injured in the central business district of Christchurch, where there would have been a higher proportion of working people.

Dr Jackie Blue: Are foreign nationals who were injured in the 22 February earthquake and the families of the deceased eligible for support from accident compensation, and what endeavours have been made to ensure that they are well informed of their entitlements under the scheme?

Hon Dr NICK SMITH: Yes. At the core of our unique no-fault, 24/7 scheme is automatic entitlements for everyone, including overseas visitors, as the trade-off for the loss of the right to sue. Foreign nationals who have been injured are eligible for emergency care, treatment, and rehabilitation in New Zealand and for lump-sum compensation for significant injuries. Income compensation is also available if the foreign nationals were working and paying tax and ACC levies in New Zealand. Families of the bereaved are eligible for a funeral grant. Dependants of the deceased may also be eligible for a survivor’s grant and income compensation if the deceased was working and paying taxes and ACC levies in New Zealand. The accident compensation scheme does not differentiate based on which country a foreign national comes from, nor should it.

Earthquake, Christchurch—Entry into Central Business District Red Zone

5. Hon MARYAN STREET (Labour) to the Minister of Civil Defence: What is the basis for according priority to entry of the red zone in the Christchurch central business district?

Hon JOHN CARTER (Minister of Civil Defence): The priority that the national controller accords is safety first, and needs second.

Hon Maryan Street: How many business owners and residents are still unable to access their offices and homes in the red zone?

Hon JOHN CARTER: I do not have that information to hand. The member can put the question in writing if she wishes to find out that information.

Hon Maryan Street: How many business owners could have been given access to equipment and records that are vital to restarting their businesses, if time and resources had not been diverted to escorting the Prime Minister through the red zone on repeated occasions?

Hon JOHN CARTER: That is such a silly question that I am not sure how to answer it, other than to say the controller gives priority to the appropriate people to enter the red zone when necessary.

Hon Maryan Street: Then how does the Government explain its priorities to the people of Christchurch and the business owners of Christchurch, when repeated access for the Prime Minister appears to be taking precedence over access for business owners and central business district residents?

Hon JOHN CARTER: The controller is very aware of the needs of all the business people and business owners and is doing an outstanding job, as far as I am concerned.

Earthquake, Christchurch—Government Support for Non-governmental Organisations

6. NIKKI KAYE (National—Auckland Central) to the Minister for Social Development and

Employment: What support is the Government giving to non-governmental organisations in Christchurch affected by the earthquake?

Hon PAULA BENNETT (Minister for Social Development and Employment): A lot of hard work has gone in very quickly. Funding coordination and facilities have been provided. On the Friday directly after the earthquake the Prime Minister, the Deputy Prime Minister, and I had a conference call with 17 major non-governmental organisations to work through what support is needed and how we can help. To help we have also hired the Christchurch netball clubrooms at Hagley Park for non-governmental organisations to use as needed.

Katrina Shanks: What other Government support has been available in Christchurch?

Hon PAULA BENNETT: We have used the Community Response Fund underspend to ensure continuity of payment for those non-governmental organisations that need it; we did that really quickly. A key focus has also been trauma counselling. We have 262 counsellors on the ground and others around the country. We will also have a number of counsellors and welfare volunteers at the memorial service tomorrow—350 in total. And, of course, the Student Volunteer Army has been out in great force. We were able to provide them with $20,000 worth of funding.

Hon Annette King: Will she oppose the recommendation from the Hon Tariana Turia to cut funding for Te Rito Family Violence Prevention Strategy and from the Child Advocacy Group’s budget, in light of the report from the Minister of Women’s Affairs of increased family violence after the earthquake?

Hon PAULA BENNETT: Budget bids are yet to be assessed by Cabinet. They will be made in due course.

Earthquake, Christchurch—Rugby World Cup Matches

7. Hon TREVOR MALLARD (Labour—Hutt South) to the Prime Minister: What role did he or his department play in the decision to shift the Rugby World Cup quarter-finals from AMI Stadium to Eden Park?

Hon MURRAY McCULLY (Minister for the Rugby World Cup) on behalf of the Prime

Minister: Under the terms of the host union agreement, all decisions relating to locations and venues for Rugby World Cup games are the province of Rugby World Cup Ltd, a subsidiary of the International Rugby Board. With regard to the decision to move all Rugby World Cup games from Christchurch, the International Rugby Board, through Rugby World Cup Ltd, publicly signalled its wish to consult other stakeholders, including the Government. This consultation occurred through the Minister for the Rugby World Cup, who discussed these matters with the Prime Minister. With regard to the decision to select Eden Park as the alternative quarter-finals venue, the Prime Minister understands that this decision was made by Rugby World Cup Ltd on the recommendation of Rugby New Zealand 2011, on the basis of considerations outlined by Mr Martin Snedden yesterday. The Government was informed, but not consulted, in relation to that decision.

Hon Trevor Mallard: Did the Prime Minister’s office receive a report on or before 7 March that made it clear that there would not be sufficient accommodation in Christchurch for the quarterfinals?

Hon MURRAY McCULLY: I would need to check on which reports were received on which dates. But I can say that reports were received continuously in relation to accommodation from two different sources: firstly, Ministry of Economic Development officials were asked to assess the situation and report to the Government from time to time; and, secondly, Mr Snedden, as the chief executive of Rugby New Zealand 2011, made his own assessment, which was reported to the Government from time to time. To be more precise, I would need to check those reports.

Hon Trevor Mallard: When did the Prime Minister become aware that an in-principle or provisional decision had been made to shift the quarter-finals to Auckland before Rugby World Cup officials began their trip to New Zealand?

Hon MURRAY McCULLY: The Prime Minister was not aware that any decision was made, as asserted by that member. The Prime Minister was aware that officials from the International Rugby Board were coming to New Zealand for the purpose of meeting the other stakeholders, formally consulting, and then making a formal decision in relation to the games scheduled to be played in Christchurch.

Hon Trevor Mallard: Why did the Prime Minister, as recently as yesterday morning, hold out hope to the people of Christchurch that the quarter-finals would be held there, when an informal decision, as the Minister has just replied, had been made that they would not?

Hon MURRAY McCULLY: The Prime Minister was acting on the advice of the Minister for the Rugby World Cup. The Minister for the Rugby World Cup was told on Monday of this week that the board of Vbase, the Christchurch City Council - owned company that administers AMI Stadium, was receiving a briefing from the engineers who had done their scoping work over the previous days. That meeting, I repeat, occurred on the afternoon of Monday this week. On Tuesday of this week the Minister for the Rugby World Cup went to Christchurch to meet Vbase, to receive details of that report and to enter into discussions, and on the following day—yesterday—the parties all met, including the visiting International Rugby Board executives, to make the final decisions.

Hon Trevor Mallard: Why was the Prime Minister not involved in the announcement of the decision to shift the quarter-finals from Christchurch to Auckland?

Hon MURRAY McCULLY: The Prime Minister has enormous confidence in his Minister for the Rugby World Cup. He was aware that that Minister was keeping himself closely informed of developments in Christchurch, and was visiting Christchurch on Tuesday. The Prime Minister would not have been aware in time of the meetings taking place yesterday to shift his timetable in order to be there, if he had wanted to. But his attendance might well have been taken by his Minister for the Rugby World Cup as an indication of a lack of confidence—which would have been disappointing.

Hon Trevor Mallard: Who, if anyone, advised him that attending to matters in his room was a higher priority than attending Parliament while questions on this matter were being dealt with yesterday?

Hon MURRAY McCULLY: I think that at the heart of the member’s line of questioning is the suggestion that somehow the decisions should have been made sooner and announced sooner. I want to repeat what I have said publicly. The people of Christchurch, who take great pride in their rugby prowess, have suffered a significant tragedy. The decision to take away from Christchurch all of the Rugby World Cup games was made most reluctantly by all of the parties who were consulted by the International Rugby Board. For the member to suggest that somehow that decision, which was indeed hurtful, should have been made without all of the evidence being assembled and properly considered by those parties is, frankly, an insult to the people of Christchurch.

Hon Trevor Mallard: I raise a point of order, Mr Speaker. That was a very long answer to a question that was not asked. It was a very clear question as to whether the Prime Minister was advised not to attend Parliament yesterday and to stay in his office. That question was not answered.

Mr SPEAKER: If the Minister wishes to answer it further, I will sit down in a moment. But let me point out that it is against the Standing Orders to make any reference to the absence of a member from this House. I did not rule the question out of order, because I wanted the Minister to have the opportunity to handle it in the way that he saw fit. I do accept that he did not answer the particularity of the question, but the question is a pretty marginal one anyhow. If the Minister has anything further that he wishes to add to it, I do not want to prevent him from doing that.

Hon Trevor Mallard: I raise a point of order, Mr Speaker. I invite you to review the tape. The question was very carefully drafted. It gave no indication of whether the Prime Minister accepted that advice, if it was received.

Mr SPEAKER: That is a very fine line that the member points out. The implication of the question was that the Prime Minister was not present in the House. But I do accept the point the member makes that the question did specifically ask who had advised the Prime Minister—I cannot remember the exact wording. If the Minister could deal with the actual particularity of the question, that would be helpful.

Hon MURRAY McCULLY: The Prime Minister is perfectly capable of making decisions about his own diary and timetable without advice. Right at this minute the Prime Minister is extremely busy attending to important matters of State that are the result of some very tragic events that have occurred in New Zealand in recent times. That causes the Prime Minister to think very carefully about the allocation of his valuable time.

Hon Trevor Mallard: Did he personally deal with all the paperwork received in his office on this issue, or did he treat it, as he claimed to have done with the BMW issue, as a matter for his chief of staff to take responsibility for?

Hon MURRAY McCULLY: The Prime Minister, as I indicated in my primary answer, has taken considerable advice from his Minister for the Rugby World Cup on this matter. That Minister has been closely engaged in dealing with the parties over recent weeks, and, as appropriate, has seen fit to inform the Prime Minister of developments as matters have proceeded.

Hon Annette King: Can the Prime Minister explain why the Hon Steven Joyce, who answered questions on this issue in the House yesterday after the announcement was made, said on radio yesterday morning that no decision would be made for 2 days?

Hon MURRAY McCULLY: I am not familiar with the particular quotation that the member refers to, but I can say the Minister of Transport was answering questions yesterday, as I understand it, on behalf of the Minister for the Rugby World Cup, who was, I can confirm, consulting relevant parties in Christchurch.

Corrections System—Private Sector Investment

8. JACQUI DEAN (National—Waitaki) to the Minister of Corrections: What progress has been made toward the Government’s commitment to encourage private sector investment in the New Zealand corrections system?

Hon JUDITH COLLINS (Minister of Corrections): I am very pleased to report that three private sector consortia have been invited to tender for the provision of a new men’s prison at Wiri through a public-private partnership. The new facility will ensure that there are enough beds to cope with the forecast growth in prisoner numbers and the need to replace ageing prisons. The three consortia are led by experienced international prison management companies and each one includes a major New Zealand construction partner. A number of other New Zealand firms are members of, and advisers to, the consortia. It is expected that a final contract with the successful consortium will be in place by July 2012.

Jacqui Dean: What benefits will the new prison bring to the local community and to the wider region?

Hon JUDITH COLLINS: The 960-bed prison is a major project for the Auckland region and will bring significant economic benefits to the local community. It is expected that the development will inject approximately $1.2 billion into the region’s economy over the next 30 years. The construction and ongoing operation of the prison is expected to sustain 1,900 jobs and inject approximately $100 million in wages and salaries into the construction sector.

Earthquake, Canterbury—Trade Skills Training Policy

9. Hon DARREN HUGHES (Labour) to the Minister for Tertiary Education: What specific policy changes has the Government made to increase the number of apprenticeships and other building skills training programmes since the September Canterbury earthquake?

Hon PAULA BENNETT (Minister for Social Development and Employment) on behalf of the Minister for Tertiary Education: Following the September earthquake the Government first ensured that there were sufficient funded places to meet immediate demand for trades training. Government agencies commenced work with the Canterbury Employers’ Chamber of Commerce to develop skills requirements for the rebuild. Following the obviously much more damaging February earthquake the Tertiary Education Commission and other agencies, both Government and non- Government, are revising workforce planning and are in the process of mapping available provision and capacity from tertiary education institutions, private training establishments, and industry training organisations. We will see a move from other disciplines into trades that will now be in higher demand and we will increase places for trades training as required.

Hon Darren Hughes: Does that mean that he has taken papers to Cabinet specifically suggesting an increase in the number of apprenticeships and other building skills training programmes since the September earthquake?

Hon PAULA BENNETT: No. As far as I am aware there is still capacity there. In fact, the reason that the Minister is not here is that he is at Christchurch Polytechnic Institute of Technology today, where they are already saying there is capacity for trades training and they could take people as of today. They ask people to get in touch with them about that.

Hon Darren Hughes: Does the increase in demand for tradespeople in Christchurch following the two devastating earthquakes, which the Minister referred to, mean that the Government will restore the $55 million it cut from industry training last year, or does it still believe that funding for training will be underutilised?

Hon PAULA BENNETT: It is important that we go through this step by step. At the moment a consortium of businesses in Christchurch is getting together to analyse what skills will be needed. I know that the Minister has also been talking to the Minister for Social Development and Employment, and through Vote Employment they have been doing a skills analysis of what will be

needed. As those analyses are done—without getting ahead of ourselves as to what the need will be—there should be a true assessment of that need.

Hon Darren Hughes: When will the House know whether there will be an increase in the numbers of actual apprenticeships and of people involved in other building skills training programmes, given that the building and construction industry training organisation was saying before the two Christchurch earthquakes that demand for building and construction workers was likely to increase dramatically if the country came out of recession?

Hon PAULA BENNETT: No one is under any illusion that there will not be a demand for those skills; there will obviously be a demand for them. We are analysing the capacity and what will be needed. We are doing that through a step-by-step planning process.

Dairy Industry—Wholesale and Retail Milk Market

10. SUE KEDGLEY (Green) to the Minister of Commerce: Will he use his powers under Part 4 of the Commerce Act 1986 to call for an investigation into the dairy wholesale and retail milk market, following the release of the Ministry of Agriculture and Forestry’s review of the domestic milk market in New Zealand; if not, why not?

Hon BILL ENGLISH (Deputy Prime Minister) on behalf of the Minister of Commerce: The Commerce Commission can, of course, on its own initiative, undertake an inquiry under Part 4 or an enforcement investigation if it has concerns. In respect of the Minister’s powers to initiate an inquiry, that capacity under Part 4 of the Commerce Act is related to concerns about monopolies. There would need to be a pretty tough test applied to make an inquiry justified.

Sue Kedgley: Does he agree that competition in New Zealand’s dairy wholesale market is limited by the fact that there are just two major players, Fonterra and Goodman Fielder, and that Goodman Fielder is required to purchase all its milk from its competitor, Fonterra?

Hon BILL ENGLISH: The member will be aware of the history of the structure of our domestic milk market. Going back to the formation of Fonterra in the early 2000s, there was agreement at the time to limit Fonterra’s capacity to be a domestic monopoly. Fonterra was required to sell some assets at the time, and for most of the last 10 years I think we have all been generally happy that there has been a sufficiently competitive domestic milk market. But clearly Fonterra has an interest in ensuring that the domestic milk market does not undermine its export strength.

Sue Kedgley: Does he agree that a company that controls around 95 percent of the market for dairy products has a virtual monopoly on the market and therefore has no incentive to minimise prices; if not, why not?

Hon BILL ENGLISH: I am not sure whether it controls 95 percent of the domestic market. It certainly controls a very significant proportion of the export market. There have been ongoing discussions in the context of dairy regulation between the Government and Fonterra about issues such as the transparency of milk pricing. I think we are all aware that New Zealand consumers must be protected from the potential for dominance of the market by Fonterra, and I believe up until now that both the previous Government and the current Government have acted to protect consumers.

Sue Kedgley: Does he agree that the fact that we have a virtual milk monopoly selling to a supermarket duopoly may be contributing to the high price of milk and requires further investigation; if not, why not?

Hon BILL ENGLISH: The arrangements around Fonterra certainly need to be kept under scrutiny continuously because there is always the potential that such a large company could influence the domestic market. However, there is not a lot of evidence that they have been behaving in a monopolistic manner. The market seems to have worked reasonably well over the last 10 years but I think it is natural that when prices rise, consumers are asking the question and we need to be able to demonstrate to them that they are protected.

Sue Kedgley: Does he agree that in a concentrated market dominated by a very small number of big players there needs to be scrutiny of how retail prices are set, so that consumers can be confident that the prices they are paying are fair?


Rahui Katene: Is he aware of the advice from the company Miraka Ltd, the majority of which is Māori-owned, that it saw the Ministry of Agriculture and Forestry and the Commerce Commission as playing a kaitiaki role in terms of ensuring fairness within the system, and what assurance can he give the House that fairness for consumers will be prioritised to protect New Zealanders from suffering further price increases on dairy products such as milk, cheese, and butter, which have already increased in price by 19.7 percent on average over the past 3 years?

Hon BILL ENGLISH: Miraka, as others, would expect the Commerce Commission and the Ministry of Agriculture and Forestry to be guardians of the consumer interest, and in this circumstance the Commerce Commission has the power to initiate an inquiry if it thinks there are grounds for doing so. I would say that an increase in prices of itself is not evidence of monopolistic behaviour. In this case it is plausible at least to believe that the sharp increase in export prices for dairy products is the main reason for the increase in the domestic milk price. If there is significant evidence that the price is being manipulated, then the Commerce Commission has the ability to inquire into that.

Sue Kedgley: Given growing consumer concern about the high price of milk, does he agree that an investigation is needed to see whether there is any evidence that high milk prices are a result of either insufficient competition in the sector or a dominant player abusing its market position and passing excessive margins and costs on to New Zealand consumers?

Hon BILL ENGLISH: As I have said, the Commerce Commission has the power to initiate an inquiry if it thinks there are grounds for it. A Minister can potentially initiate an inquiry. In both cases an increase in prices is not evidence in itself of market manipulation. But if there was significant evidence, then either the Minister or the Commerce Commission, I am sure, would consider it.

Sue Kedgley: Has he seen claims by farmers that they receive less than 30 percent of the price of the milk; and does he not think, therefore, that there ought to be a Commerce Commission investigation into what makes up the remaining 70 percent of the retail price?

Hon BILL ENGLISH: It is a time-honoured tradition among farmers to complain about the small proportion of the total price that they receive, and it has been going on for as long as I can remember. I do not expect that it will ever change, regardless of the market prices. But, again, I do not think that that in itself is evidence that the market is being manipulated, but I think we agree that we need to be very vigilant when there is such a major company with a large market share. If there is evidence that a company is manipulating the prices against the interest of consumers, then the Commerce Commission has the capacity to look into that.

Women’s Affairs, Ministry—Minister’s Support for Independence

11. CAROL BEAUMONT (Labour) to the Minister of Women’s Affairs: Does she support the retention of the stand-alone and independent Ministry of Women’s Affairs?

Hon PAULA BENNETT (Minister for Social Development and Employment) on behalf of the Minister of Women’s Affairs: I support the Ministry of Women’s Affairs. However, the Government has made it clear that it is focused on achieving greater value and excellence out of public services, so all Government agencies will continue to be under scrutiny. Kia ora.

Carol Beaumont: Why did she fail to rule out the merger of the ministry with another department, and state on Te Karere that she was not concerned about the Ministry, because the main aim of the National Government is that women manage their own initiatives and the Government is there to support?

Hon PAULA BENNETT: I certainly stand by that statement. I also refer to the Prime Minister’s statement, where he said: “this Government is building better outcomes from public services by being clear about New Zealanders’ priorities, by minimizing waste, scaling up what works, getting rid of what doesn’t …”.

Carol Beaumont: What advice has the Minister sought from her ministry about jobs and training for women in Christchurch?

Hon PAULA BENNETT: We are certainly looking at what the needs for women there are. The Minister has spoken to the Minister for Social Development and Employment, particularly around work for those who are stuck at home and are having problems with childcare and things as well.

Carol Beaumont: Does she see the rebuild that is required in Christchurch as an opportunity to make significant progress on the ministry’s goal of getting more women into traditional trades; if so, what action is she taking to ensure this happens?

Hon PAULA BENNETT: A woman can handle a hammer just as a well as a man and there is certainly room for them in jobs in Christchurch.

Greenhouse Gas Emissions, Agricultural Sector—Establishment of Fellowship Programme

12. JOHN HAYES (National—Wairarapa) to the Minister of Agriculture: What steps has the Government recently made to progress agricultural greenhouse gas research?

Hon DAVID CARTER (Minister of Agriculture): Last week Mr Groser and I were pleased to announce that as part of New Zealand’s efforts with the Global Research Alliance on Agricultural Greenhouse Gases we have established a major new programme. The Global Research Alliance Senior Scientist Award will support scientists from alliance countries to undertake exchanges on research programmes into agricultural greenhouse gas mitigation. Those programmes last for 6 months. This is a great example of the alliance getting down to the challenging task of tackling agricultural emissions.

John Hayes: What is the aim of the Global Research Alliance Senior Scientist Award?

Hon DAVID CARTER: It is a practical step aimed at finding the scientific solutions to reduce agricultural greenhouse gas emissions. It will build capability within the New Zealand science sector in this important area, and allow greater collaboration between research communities right across the globe. It is just another example of the substantial effort this Government is putting into developing practical options to enable the agricultural sector to reduce its greenhouse gas emissions.


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