The Nation: Lisa Owen interviews Grant Robertson
On The Nation: Lisa Owen interviews Grant Robertson
Minister Grant Robertson says he’s never denied the
numbers are tight in Labour’s Fiscal Plan. He says the
government is being ambitious and he’s optimistic about
what they can
Robertson says while he’s committed to a continued surplus, he could forgo it if economic conditions change. “There are certain areas of spending that we must do to be a decent society, to care for other people. I would never compromise on that. But we’ll cross that bridge when we come to it.”
Robertson say it’s possible Deputy Prime Minister Winston Peters could be wrong when he says there are difficult economic times ahead.
More details have emerged about the regional development fund. Robertson says there will be a rigorous process to decide which projects get money. He says it will be distributed to the best projects and one criteria will be creation of sustainable jobs.
There are also more details on the tax working group. Robertson says “we’ve committed to making our announcements about the membership of the group and its final terms of reference before the end of the year and within our 100-day plan.” He also says the business community will be represented on the group.
Owen: So, this week saw the Labour-New Zealand First
government sworn in along with their support partners, the
Greens. After nine long years in opposition, some senior
Labour MPs now have their dream jobs. One of them, with one
of the biggest dream jobs of all, is the new finance
minister, Grant Robertson. He joins me now. Good
Grant Robertson: Morning, Lisa.
The previous government brought us back into surplus, and they presided over pretty strong economic growth. You’re an unknown in this job, so what can you tell those people who might be a little bit nervous? What assurances can you give them that you’re up for it?
Oh, I’m definitely up for it, and I think that they can look at the record of the previous Labour government. We actually delivered nine surpluses in a row, had unemployment near the lowest in the OECD with very strong and solid surpluses, so we are comfortable that, as a party, we’ve done the work. We’ve now got alongside our coalition partners. We understand the importance of fiscal responsibility. But that can’t be the end in itself, Lisa. And that’s going to be the big difference here – is that we want the economy to have a purpose, and that purpose is improving people’s living standards, making sure we include everyone in New Zealand in what’s a great country where there’s enormous opportunity for prosperity.
So you’re talking about pairing social justice with capitalism. And the prime minister has said recently that capitalism is a blatant failure. So, as the money guy, how are you going to fix capitalism?
What Jacinda Ardern has said is that if you’ve got the world’s worst homelessness, then the form of capitalism that we’ve seen in New Zealand isn’t working for those people. And I’d agree with that. And, in fact, that’s the foundation principles of the Labour Party – is actually that we’re a social democratic party; we believe in the fact that there is an obligation on government to help ensure fairness to make sure that everybody gets a chance to achieve their potential. So we’ll do that by being an active government, by being there alongside businesses and alongside workers to help grow those higher-wage jobs. Everywhere I went in New Zealand during the election campaign, I had the business community saying to me, “We want to be in a partnership with you. I absolutely endorse that.”
But you know that some people will read the word ‘active’ as meddling.
Yeah. Well, no. I think you’ve already seen in the agreements that we’ve signed with both New Zealand First and the Greens that that’s about helping to stimulate opportunity. The days of a hands-off laissez-faire government hoping for the best for New Zealand are over. But what we want to replace that with is an active government that partners in the regions with local government, with business, with iwi. That’s a different thing entirely from meddling and telling people what to do. We actually want to listen to the regions of New Zealand, as an example, and say, “What do you need to make sure you can create those decent jobs?”
I want to talk about the regions a little later. But you’ve based your budget on projections of strong economic growth, relatively strong immigration, and Winston Peters has warned that he thinks that there are bad economic times on the way. Now, some economists that we’ve spoken to think that the budget growth projections are too strong, they’re too optimistic, and that we’ve peaked out in some areas, like tourism and construction. So what do you know that all of those people don’t?
Well, look, there are mixed views on that, as there often are among economists, it would be fair to say. Certainly if we continued an economy that was just based on increasing population and speculation in the housing market, then I think there would be problems for New Zealand, but I’m extremely optimistic about the future of the New Zealand economy when we invest in skills and training, research and development, improving our regions, getting capital into the infrastructure that we need. If we do those things, I’m absolutely convinced that we can grow sustainably. But you’ve had me on this show before, Lisa, talking about the fact that if you measure growth on a per-person basis, we have been struggling along over recent years. We’ve got to be an active government to change that, and I’m sure we will.
So is Winston Peters wrong when he’s predicting a downturn in the economic rock star economy?
Look, there’s a range of views on that, and there are certainly headwinds–
No, I’m asking about his, because he stated it very clearly on the day you guys were announced as the winners, per say. He said bad times around the corner. So is he wrong?
That is possible. But what we’ve got to do as a country is ensure that we are in a position to deal with whatever headwinds are out there. And, as I say, I think we’ve got the policy prescription to do that. If we sat back and let that happen–
So enough fat in the system. Enough fat in the system to sustain any fluctuations?
We’ve got to be able to prepare ourselves, and we’ve been very clear in our budget responsibility rules that we need to pay down debt to make sure that we are in a position, should there be further economic strains and shocks, that we can deal with those. It’s part of being a responsible government, but not one that just sees that as the end, but also looks to invest in our future and our people.
Okay, because, obviously the budget I’m looking at is the one that you had before you entered into this agreement and agreed to a few other things. So do you expect to unveil a mini budget that lays out your spending plan, that includes these new things that you’ve signed up for?
Well, I’m obliged by law to produce a half-year economic fiscal update before the end of the year, and we’ll certainly do that, and that obviously has to reflect the fact that the new government has different priorities than the previous government. There are some things that we want to do immediately that have a fiscal impact. An example of that is we’ve committed to restarting contributions to the New Zealand Super Fund immediately. So there’s a series of things that we’ve got to do. Whether we end up calling that a mini budget, we’re working on that right now. We’ve only had a couple of days as sworn-in ministers.
But when will we see it? You say before the end of the year.
We’ve obviously got to do that before the end of the year.
So, well, let’s look at the numbers, and I know this is a contentious issue. You’ve got $10 billion of unallocated spending in the budget that you—
Yeah, it’s capital spending. Yeah, very important. But you’ve also got a long list of things that are potentially going to cost you money. So the billion dollars a year for the regions, extra police — 800 extra police — forestry service, mental health commission, criminal case review, tax breaks maybe to offset the growth in the minimum wage, the green investment fund. I could keep going. So have you costed all of those, and how much are they going to cost?
In the process of the negotiations, we looked very carefully at each of the commitments that we were putting in there and made our best estimate of the costs. Obviously, when you’re in opposition, you have only a certain amount of resources to do that. We are absolutely confident that we can meet the expenditure that is in there and actually still meet our budget responsibilities.
Can you give us a number? How much do all the things that you’ve signed up for cost?
Well, look, we’ve got estimates, but that’s—
Oh, come on, what’s the estimate?
Well, no, because I don’t want to do that until we actually—
It’s the public purse.
That’s the very point, Lisa, is that it is the public purse, and we now have the ability to work with the public service to refine the estimates that we’ve made. But I can give you my assurance that it fits within the confines of our budget responsibility rules. But I think this is the time to—
No, just before we move on, Mr Robertson. The 10 billion of unallocated capital spending, is that all used up with all of this?
Eventually it will all be used up with projects, not necessarily the ones that are just on the table here, because there are some existing pressures out there. But, look, let’s take—
No, no. It’s a four-year budget looking out, forecast, so how much gets sucked up in the first year, second year, third year, fourth year?
That’s exactly what you’ll find when we produce our detailed budget. What we know is that we have the funding to do this. But, Lisa, I think—
Are you not confident of the estimates that you’ve already done?
As an opposition party, you’ve only got so many resources, and we’re confident that with the information we had, they’re correct. The beauty of now being in government is that we now actually get to test those estimates. But I am completely confident. But I do want to make this point, Lisa, which is that we can spend a lot of time talking about the cost of this and the cost of that. We’re a government that wants to invest for the long term. The pay-off of spending a billion dollars’ worth in the region on infrastructure will be huge for New Zealand and for those regions. And I think it’s time when we talk about the economy not just to make the numbers on the sheet but the outcomes for people who live in places like Kaitaia or Gisborne, that their living standards will improve. And when we come to do a budget—
And I’m sure people appreciate that.
Well, I don’t know if they do, necessarily, Lisa, because the questioning is important about the fact that it adds up, and we have to be able to show that. But we equally have to be able to show how New Zealanders’ lives are going to improve, and that will be a difference in terms of how we present budgets over time.
You’ve made promises, though, about financial parameters, your fiscal responsibility rules. So I’m just asking how sure you are that this fits. So can you tell me—? You say it’s pretty much all used up by the four years.
It’s unallocated capital. It’s there to be used.
Yes, it’s there to be used, but the thing is when you look at your numbers, and I know Steven Joyce has talked a lot about this, and there’s, you know, discrepancies — appreciate that. But when you look at it overall, your unallocated spending as a percentage of your overall expenditure is, like, about, what, 2%, less than 2%.
Yeah, look, we’ve got about—
Hang on. Can I just finish? If someone were to build a house and have a 2% contingency budget, people would think they were crazy.
But it’s, again, I don’t want to get back into the election campaign, because there was a lot of forward expenditure that we had already allocated. So, for instance, health and education, which can take up to 60% or 70% of new funding in most budgets, we had already allocated that. So by using the 2% figure, you’re actually not accurately reflecting what we had already put aside.
Okay, would you agree that it’s an accurate reflection to say that your budget is, hmm, tight? Really tight.
Look, I’ve never denied the fact that we’re ambitious about what we want to do, and we want to make investments, but, Lisa, if we just look at this in a—
So it’s tight.
I’ve never denied that. I’ve never denied that. But—
But if the economic premise that you’ve based it on, for example, if growth doesn’t peak out at 3.7%, if we have the 10-year downward slump, which some predict for 2018, then you’re in trouble, aren’t you, with your money?
No, I don’t think we are, because I believe that we’ll see new projections out of Treasury before the end of the year, and people will be able to make their own mind up about that. But I have a very positive view of the New Zealand economy and what will happen when there’s a government that’s prepared to invest in our people and our regions and growing decent jobs. So I remain very optimistic about what we can do. But we’re ambitious because we need to make these investments now. And if we continue just to think of it as spending, then we miss out on the fact that there’s a huge pay-off if we’re investing in regional development, if we’re investing in education and skills and training, then we’re actually going to grow a much stronger economy for the future. That’s the focus I’ve got.
Let’s talk about the regional development fund, then. A billion dollars. Will it be contestable? Who gets to vie for the money and how are you going to decide who’s worthy of it?
Yeah, and that’s the exact work that’s going on now. It certainly will be contestable. We’re not just going to be throwing money out there. It has to be about projects that are going to deliver for the regions decent jobs, sustainable employment and sustainable economic development.
So will the regions that currently exist, will you be considering them as they are? They can bid as a region. You know, we have 16 regions defined.
I mean, that’s the exact work that’s going on now. David Parker is the Economic Development Minister and Shane Jones as the Regional Economic Development Minister will be developing and shaping up the criteria for that programme.
But you write the cheques, so you’d be interested in what happens.
I most certainly am, and what I was about to say was I look forward to seeing the criteria that they put together. My view is that, you know, we all know about regions like Northland or the east coast of the North Island where there has been severe underinvestment. This is the opportunity to correct that and to make sure that people see a future there. And this flows right through. The pressure on Auckland, the congestion in Auckland, we can help ease that if we’ve got regions that are better connected, that offer a better base for businesses.
So will you ring-fence money for particular regions, or is it conceivable that if a couple of regions keeps putting in good proposals, they could get all the money?
No, it will be a rigorous process, and, of course, it has to be—
So you’re saying it’s going to be fairly distributed around all the regions?
It will be distributed on the basis of the best possible projects that are there that will grow sustainable jobs right throughout New Zealand. Lisa, I take this job incredibly seriously. I know where this money comes from, and I know that we need to use it well to make sure that it actually benefits all New Zealanders.
A billion dollars seems like a lot of money, but, actually, a few projects could suck that up in a year. I mean, the Opotiki wharf proposal — 25 million in one year is kind of what they’re looking for from the government. 30 million estimated to get about 12 regional airports up to scratch. Is it enough?
Look, it’s the amount of money that we’ve got available to do it, and it’s a significant increase in terms of prioritisation for the regions. If we invest properly in regional rail, we can create a network that allows people to get their goods to the ports, to the markets, connect up, have a better port strategy. I’m prepared, as the Minister of Finance, to make those investments because they’ll pay off in the future.
Okay. There’s a few things I want to get through quite quickly because we’ve got a lot to cover. Northport — you’ve already done a study on moving Auckland’s port. Why are you spending more money on doing another one?
No, there’s a lot more work to do there to understand where the Ports of Auckland would best operate. Northport is a potential for that. We want to look deeply into that. We certainly want to do the rail line work there anyway, because we think that can improve other economic opportunities in the region. But there’s still more to understand.
Okay. You don’t own that port, so when you decide where it should go, what are you going to do? Are you just going to start seizing assets or what? Or are you going to give them an offer they can’t refuse?
Look, obviously, any decision about the Ports of Auckland requires a strong partnership with Auckland City. I’ll be meeting the mayor of Auckland very soon to start discussing some of the economic opportunities with Auckland.
So are you expecting them to give it up, then?
Oh, look, that’s well down the track, Lisa, before we have that discussion.
And the money that it might cost to move it, is that in your figures?
We’ve got to do the feasibility study.
Okay. Minimum wage — you’re going to raise it to 20 bucks an hour by the end of your first term. Are you worried that that’s going to put a handbrake on job creation?
No, not at all. When Labour was last in government, we were raising the minimum wage by about a dollar a year during that period. In fact, we had some of the best economic growth and the lowest unemployment that we’ve seen. Bear in mind, the people who will be getting these minimum wage increases will then be spending that money in the economy. It actually stimulates growth.
But I’m wondering, if it was such a good idea, why wasn’t it your policy? Why did you need New Zealand First to force your hand on it?
Well, what we’d promised and what we are actually going to do is increase the minimum wage to $16.50 on the 1st of April 2018, and then we had commit—
Yeah, but that’s a big gap, though. 16.50 to 20 bucks.
No, let me finish the answer. And then what we also said in our policy was that we would continue to increase it after the 1st of April 2018 to get ourselves up to around two-thirds of the average wage. That’s close to $20 an hour. So we were heading in the same direction. By having this agreement, we’ve now put that into our commitment. But isn’t that great, Lisa? We’ve now got a government that actually believes that New Zealanders, when they go to work, should be paid a wage that allows them to be fully included in society. We said we wanted to get on that path. We’ve now got a firm goal. I think that is a fantastic outcome for working New Zealanders.
So in terms of paying for that, the Prime Minister’s indicated that there could be some breaks for small businesses, perhaps, to offset the cost of rising wages. But the thing with that is that will lower your tax take, and don’t you need that money?
Look, obviously, as Minister of Finance, I’m always keen to see the money that comes in that we can use, but we do have to make sure we’re being fair on small businesses. Australia has this — the idea of potentially a progressive tax rate for small businesses with low turnover. We want to take a look at that and see whether that could work in New Zealand.
Well, the other place that you could lose tax take is the bright line test, because you’re predicting in your budget predictions more money from the bright line test. You’re raising it up to five years. But the ultimate goal is to cut speculators. So if that works, you’ll get less money from the bright line test. Have you planned for that?
As I was going to say, the calculations on the bright line test are based on the behavioural assumptions that the Treasury, when they first proposed this idea, came up with. They’re the numbers we’ve used.
Okay, so this tax working group that’s going to decide on these things or make recommendations, the Prime Minister said earlier that you were going to set it up, so who’s going to be on that?
Still working my way through that. We’ve committed to making our announcements about the membership of the group and its final terms of reference before the end of the year within our 100-day plan, and I’ll commit to doing that.
So give us the general idea, then, if you can’t name names. What kind of people, and are they a broad spectrum?
Yeah, exactly. And what we’re looking for are people who, obviously, understand the tax system, people who understand how the tax system impacts on those in our society. So it won’t just be pointy-headed accountants; we need some of them. But it will also be people who understand how the tax system works in practice.
So representation from the business community?
All right. So, what if that committee makes recommendations that you do not like?
Well, we’ll have a look at those and consider those. And bear in mind this is not the first ever tax working group. Tax working groups have come up with recommendations before that governments haven’t agreed with.
I’m wondering how you will handle it, though.
Well, we’ve been very clear, and in writing the terms of reference, we will spell this out exactly – that our focus has been on the housing market, on how we shift from a speculative economy to a productive economy. We’ll make it clear to the tax working group that that’s what we want them working on. And I would believe that if we do that, they will be looking at the issues we want. But we need to have views put in front of us. We may not agree with all of those. But if we give them a clear direction of travel–
What if they do nothing?
I don’t think they’ll do that.
OK. You’ve guaranteed that you’re going to run surpluses. So if economic conditions change, will you cut spending to keep the surplus or will you forgo the surplus to spend on the things that you believe we need?
Look, I came into politics to make sure that we provided better opportunities for New Zealanders, that we protected our most vulnerable. I will never compromise on that. We saw when John Key and the National Party faced the global financial crisis, which I don’t believe we’re heading in that direction, but when they did, they made sure that those core areas of spending carried on. That’s what responsible governments would do, and I certainly wouldn’t back away from that.
So you’re telling us now that you would forgo the surplus in order to keep spending if it came to it?
There are certain areas of spending that we must do to be a decent society, to care for other people. I would never compromise on that. But we’ll cross that bridge when we come to it, Lisa. And I don’t think we’re going to need to have that conversation. But what I’m telling you is I’m a Labour Party Minister of Finance; I will always make sure that the most vulnerable in our communities are protected and that we make sure that we have the services, like health and education, that we need.
And as a result of that, you’re flexible on surplus?
We have a set of budget responsibility rules that I’m committed to.
But sometimes you won’t be able to have both those things; you won’t necessarily be able to have surplus and spend on what you want.
And when we wrote the budget responsibility rules, we wrote into them the fact that if there was an economic shock, we would look to have surplus across an economic cycle. It wouldn’t necessarily be in every year if there was an economic shock.
All right. We are out of time, but something close to my heart – sports minister.
Should the Black Ferns get paid the same as the All Blacks?
I will be looking forward to a conversation with New Zealand Rugby about how they will achieve the government’s goal of pay equity.
So you would support that?
I certainly believe that the Black Ferns should be paid better. They’re a world champion team. Women’s rugby is now one of the most competitive parts of rugby in the world, and I’d love to see the Black Ferns–
Got to go, but thanks for joining us this morning.