The Nation: Lisa Owen interviews Steven Joyce
On The Nation: Lisa Owen interviews Steven
Finance Minister Steven Joyce says there will be increased investment in infrastructure and public services - health and education - to keep up with immigration in next month’s budget.
Joyce says Auckland Council is not spending enough on transport. He says the council is actually reducing expenditure on transport over the next few years, despite having income of $4 billion this year.
The minister says there will be more detail in the budget about central government’s financial support for Auckland’s City Rail Link. He says the detail will be a range, rather than a specific figure, and he won’t commit to paying for half of the project if the cost blows out.
Steven Joyce says he would like to raise tax thresholds to reduce income taxes, and is committed to do so in the next budget if he can’t afford to do it this year.
Owen: A month from now, finance minister Steven Joyce will
unveil his first budget. On many levels, the economy looks
in good heart with positive predictions for the surplus, GDP
and job growth. So is it time to start sharing that wealth
around? Steven Joyce joins me in the studio now. Good
Steven Joyce: Morning, Lisa. How are you?
You’ve got the guy who had the job before you looking over your shoulder.
Yes, that’s correct.
How are you feeling about it?
Overall, good. I, of course, was Bill’s wingman for eight years, so it’s one of the longest apprenticeships known to humankind, and it is actually refreshing. It’s exciting to have the opportunity, and the team’s really good, and I’ve discovered I have more friends than I used to have, as Bill noticed too — that he has a few less friends at this stage of the year.
As the money guy?
Yes, that’s right. Lots of people want to say hi.
Let’s look at the road ahead. This week, you assured businesses that the immigration changes that are coming in won’t stunt New Zealand’s strong economic growth. But doesn’t that mean that all the pressures that we have associated with that — infrastructure, housing, schools, transport — they’re all still going to be there too, so what are you going to do about that?
It’s very important that we keep investing in the infrastructure. I liken it to the fact that we used to grow like, say, Adelaide in Australia, and now we’re growing like South East Queensland. And that’s good, because we used to send all our kids over to South East Queensland to work, and now they’re all coming here. So it makes us a successful country. But then we also have to be mature about the way we invest in that infrastructure, as you point out, and do the other things — investing in the public services that is appropriate for a growing country, and you will see more about that in the budget.
Yes, so is there going to be a significant chunk of that to deal with those population pressures?
We have four priorities in the budget, and it’s hard to square them all away, because there’s always $5 for every dollar that’s available. But definitely continuing to invest in public services — not just throw money at it, be looking at productivity benefits from that. But we will be investing in the fact that the country’s growing. You’ve got to invest more in the health and education and so on.
So we can expect more investment in health, education?
There always is. It’ll be the way it’s invested. But it will reflect the fact that we’re a growing country and our population’s growing. Second thing is the infrastructure story, and you’re right. We’re actually investing a huge amount. The normal run rate for the New Zealand government in terms of capital spend prior to the last few years was about $1 billion, $1.5 billion a year. This year, it’s $7 billion in terms of both existing spend and new spend. So it’s very big.
And you’ve used that number a bit recently, and I just want to talk to you about one of those top priorities which you’ve identified there — infrastructure. Let’s talk about Auckland. They’ve got a shortfall of $4 billion for doing the minimum they require in transport infrastructure over the next decade. How do you think that city should pay for that?
As an Aucklander, I think the government and Auckland Council should prioritise transport investment. We’re certainly doing it, because we’re spending more than we have before and a greater proportion of our share. Unfortunately, at the moment anyway, the way the budget is set up for Auckland Council, they’re looking at actually reducing their expenditure on transport over the next few years. And I think it’s important that Aucklanders have that discussion, because you’ve got central government, which includes taxpayers everywhere else over the country putting more money in, and looks like, on the face of it, a bit of a lower contribution by Auckland Council. So it’s really important that Auckland Council — and I’m talking about all the councillors, not just the mayor — look really closely at that transport spend and ask themselves, ‘Is that a big enough part of their budget?’
So what exactly are you saying, then, if you’re asking them to examine that? The government said no to regional fuel tax, no to a bed tax, not keen on extending the interim levy. This is important, because Phil Goff has said that if they were to cover that, it’s a rate increase of about 16%. Do you want the council to increase rates? Do you see that as the solution?
No, not at all. So, Auckland Council’s— just so we know, their turnover two years ago was $3.5 billion a year. This year, it will be $4 billion a year. That’s how much extra they’re getting in terms of income from both ratepayers, from the growth in the city and from their other assets. So it’s gone up by half a billion a year. At the same time now, they’re proposing to reduce the amount they’re spending on transport. Now, just like any government, central or local, it’s all about how you prioritise your expenditure. I would argue that rather than trying to— Basically, what Phil said is that he actually wants to reduce his transport spend and replace that with a regional fuel tax. And we’ve said, ‘No. Actually, why don’t you maintain that transport spend?’ It’s not about increasing rates. It’s about how you spend the rates you’ve got.
So, to be clear, you think they can afford it? They’re just directing the money in areas that should be a lesser priority?
Ultimately, it’s their call.
No, but I’m asking you what you think.
What I think is that I would prioritise— If I were them and sitting in their seats and knowing how Aucklanders feel about transport— Central government is definitely putting a lot more in.
So can they afford the $4 billion?
Actually, the $4 billion is a little bit of a misnomer, because over the next three years, it’s a few hundred million, so it’s not $4 billion over the next few years. They can certainly afford that, and the question is — are they going to make that step in their budget?
Because the thing is, as part of the ATAP agreement — the Auckland Transport Alignment Project — you’re supposed to announce a funding solution by mid this year, so that’s two months away. How are you going with coming to an agreed arrangement on how to meet that shortfall?
We’re putting a huge amount in. One of the things you’ll see in the budget, of course, is the government’s expenditure on the central city rail link, which is very significant, and you’ll see one of those things in there. You’ll also see a bunch of other stuff that we’re doing over the next few years.
But that announcement is two months away, Mr Joyce. Have you agreed on something or are you still at the table talking about that?
Well, we’re still at the table. What we’re saying is, ‘Here’s the sort of money that we’ll be putting into it,’ and I’m asking the question of the council as to what their share will be. And, actually, there’ll be some numbers — quite clear numbers — for people to see in due course, not necessarily in the Budget because this is a different discussion, about what the relative proportions are of the central and local government. And you’ll see, as I said to you at the outset, central government spend is getting better, and currently local government spend is getting smaller. And I’m scratching my head about that.
So the onus is on them?
To some degree.
All right, well, you mentioned the Central Rail Link. You’ve got a heads of agreement, so you said that we could expect something. What are you going to tell us? A more detailed funding plan and a timetable?
Well, those sorts of things need to be in there soon, but we’re getting to the point where I’m not going to start talking about what’s in the Budget, but I can talk to you about the sorts of things we’re focusing on.
There’s obviously a Central Rail Link announcement in the Budget?
Oh, there’s bound to be a Central Rail Link announcement in the Budget.
Are you prepared to fund half no matter how high the bill goes?
Let’s just wait and see.
Because estimates are upwards of 3.4 billion.
It is a really significant item of expenditure. There’s no doubt about that. But we now have the structure in place, we have a company which has been set up specifically to run that, and that is coming together well. It’s a shared governance between—
Are we going to get a dollar figure in the Budget as to what you’ll go up to and the timetable?
We’ll have the expectation, but as always in this process, it’s still a range, because they haven’t even got the tenders in for the actual construction at this point, so it’ll be a range of the expected expenditure on that particular project, and within that range will be actually where it finally ends up.
Okay. Well, let’s talk broader here. We’ve been called a rock star economy. Are we still rocking it?
Well, I’ve never called us a rock star economy. I think New Zealand is performing well. We’ve performed better than most of the other countries in the OECD over the last few years. We actually have now had, barring one quarter in the last six years, six years of continuous economic growth, and Treasury and Reserve Bank are predicting another four years if we continue with our current settings. If that happens, that would make that decade a decade-long, continuous economic expansion, which would be one of the fastest— sorry, one of the longest since the Second World War. So that would be significant.
But let’s drill down into that, because some economists say that GDP per capita is the real measure of growth and success. And that was less than 1% last year. Are you happy with that?
Well, GDP per capita is one measure, with the greatest respect. And it’s a bit like people looking at the vase and saying, ‘Look, here’s a great economy. Now let’s see what I can pick at it.’
But are you happy with that number?
Well, that number goes up and down over time. I think it’s actually just over 1% at the moment, and it does vary according to a range of inputs.
Because if you look at those hourly figures for GDP, we’re basically just working longer hours to get higher productivity. That’s not the high-wage economy that you’re aiming for, is it?
That’s not quite true, because, actually, if you look at other figures, like real gross national disposable income, which is one that gets looked at, because it comes into the whole, sort of, earning power of New Zealanders, that’s gone up about 2.5% in the last year. So it all depends on how you cut the cake up. But what it does mean if you’re growing over time and significantly growing, and we’re growing at about 3%, 3.5%, you see that flow through into two really important things for New Zealanders. One is job growth, and we actually have the second highest rate of employment across the whole developed world right now — 66.9%.
So just— I’m sorry to interrupt you, but—
The other one is incomes, which is the one you raised, and that’s important.
You mentioned jobs — 328,000 new jobs, I think it was, since 2008. How many of those were full time?
Actually, at the moment, 75% of New Zealanders who are working are working full time. You compare that with Australia; Australia, it’s 64%. That’s one of the reasons why—
How many of the new jobs, though, were full time?
Well, I can’t tell you exactly which jobs, but I can tell you—
One hour’s paid work counts as a full-time job, doesn’t it, statistically in some measures.
No, no, no. That’s not right. No, full-time work, I think it’s 40 hours or 30-something hours a week.
But you don’t know how many of those new jobs are full time.
I know how many jobs are, but—
No, not the new jobs, because that’s critical.
No, it’s not. What’s important is the percentage of New Zealanders working and the percentage of New Zealanders working in full-time jobs. And the percentage of New Zealanders working is the highest it’s ever been. And the percentage of New Zealanders working full time is three-quarters of those numbers of people working, which is very high relative to, say, Australia, and that’s why we’re getting so many people wanting to live over here rather than in Australia.
I’m sorry to rush you, but I want to get through a few things and we’re running out of time. You talk about that cake; I want to talk about the cake too. You talk about growing the cake, but isn’t the fundamental problem that not everyone in this country is enjoying a fair slice of that cake?
Well, the only way you can ensure that occurs is you keep growing the cake and then also look at your income spots, your tax policies and your transfers policy, and I’ve indicated that’s something that I think is important for us to look at. Obviously, I’m constrained about the size of the budget in terms of what I can and can’t do in this particular budget, but for me it’s really important that people see the benefit of their work. That if somebody moves up from part-time to full-time, they're not hit with, say, a marginal tax rate from the reduction in their family tax credits or something which takes their tax rate so high it's hardly worth—
Owen: So that's what we can expect in the budget?
You can see us looking at starting on that. Frankly, I can't tell you finally what's in it yet because we're still getting the final economic inputs and estimates, but soon, and certainly this year or next year or the year after, I'm very keen to see us make the tax system work more clearly for people that when they add another hour's work, they can see that they're actually getting significant benefit back in their own pocket.
You also raise the issue of the threshold. You said, 'I'm worried about some of the thresholds — the 48K-level people.' That's a quote from you. So are you going to change that threshold?
Well, I'd like to one day. Can I do it this time? Still don't finally know. Maybe.
But it's not off the table yet for this time?
Well, nothing's off the table yet cos I'm not going to rule anything in or out in the budget today. But if you look at that 48K rate, it's interesting, cos the median wage has been growing in New Zealand, and the median wage is now 48. The average wage is now 55. So somebody who hits the median wage is on 36c in the dollar at that point. If they've been paying a student loan off, that's another 12, so that's 42c in the dollar, and we rightly worry about whether young people can save for a house, so we do have to worry about those—
So it's not off the table, but if you can't manage it this time, is it something you'd be committed to if you're still finance minister next time round?
Absolutely, because it is something that's really important. Over the next few years, as we can afford it, and you've mentioned some of the other pressures that we're under in infrastructure and public services and so on, that as we can afford it, we've got to look at those taxes cos wages are rising and people are being moved into higher tax brackets.
Yes, but around that wages thing, and again we come back to the cake, your words, some of the regions are really hurting, and as National's campaign manager, you must appreciate that elections can be won and lost on what happens in the regions.
Well, I've been there.
Only two of the regions in the December quarter were cracking that national average wage of $58,000. Unemployment in Northland 7.2%, Gisborne 8.1%, Taranaki 6.8%.
Well, let's have a look at that cos I spent a lot of time in regional New Zealand.
Would you accept that some areas of the country are hurting?
Certainly at the moment, my old home province of Taranaki is struggling because of the dairy industry and the oil and gas industry, which are its two big industries. The good news is we're helping them invest in things like the tourism sector and attracting additional investment, and—
It's not happening fast enough, though, some people would argue, in terms of spreading around the fruits of our growing economy.
Well, you've picked on Taranaki, but last week I was in Rotorua—
Well, that was a list, but, yeah...
Last week I was in Rotorua. It's growing well. Taupo growing well. Northland, you raise, is actually an economy that's now doing well. It had unemployment—
So, what? Are you telling people in Northland it's all good up there?
No, not yet. I'm telling you, though, that we've seen a big recovery. And Northlanders will tell you that. As I say, I spend the time there. We have got some long-term deep-seated issues in terms of employment in Northland. I was up in a programme that we've been working on called Kaikohe Grow, which is about getting young people into work and keeping them there.
I suppose that comes back to that fundamental question, do you actually feel that there is a freer spread of our economic spoils? Do you feel that it's getting to everybody?
I think it's steadily getting further with everybody, and that's good. Everybody wants more. But Otago's doing well. Canterbury's doing well. You know, Otago struggled for quite a while with some of their transitions, but now they've— Dunedin, in particular, a strong IT sector, strong creative industry sector which is growing well. Wellington's come back strongly. Your other regions that I've been visiting, in terms of your Christchurchs, Rotoruas, Taupos. I'm off to Palmerston North next week. And keeping very close links with them. Tauranga, of course, recovered very strongly over the last three years. And that was actually with the help of the government investment in the recovery from Psa. So we're working with all those regions. We've got ongoing work—
OK, we're almost out of time, and I want to get to two things before we have to move on. You mentioned tax thresholds. What about accommodation supplement? Anything on the table this time round?
Well, I can't go into all the different, possible mechanisms—
Hasn't changed since 2010.
Yes, I'm well aware of that. But there is a combination of income, if you like, maintenance and income improvements that we're looking at as a potential for this year's budget. But I'm literally not in the situation yet where I could make any judgements on that, and, anyway, I would really want to tell you in the budget.
OK, so looking at everything that you've got to spend; all the draws on priorities, the carer's wage increase, all the rest of it, are you going to increase the cap on spending?
Am I going to increase the cap on spending? Well, actually, we'll already be over the cap cos TerraNova, the big settlement this week, will be outside—
Are you going to push it out further?
No, that will be outside... I've got four priorities. Very quickly. 1) Infrastructure. 2) Better public services. 3) Family incomes and—
So you're going to fund those priorities with the money that's on the table?
You missed the fourth one. Still getting the debt down to 40% of GDP. That's very important because that's all about the resilience of New Zealand's economy.
Final answer. Are you going to push that cap out further?
Am I going to push...?
Are you going to spend more?
Well, on budget day I'll tell you exactly what I'm going to do.
All right. Nice to have you with us this morning. I appreciate your time.