Forecast brighter

April 16, 2014

Finance Minister Bill English delivered good news in a pre-Budget speech yesterday:

The Budget next month will show growing surpluses over the next four years, starting with a small surplus in 2014/15.

At the same time, we’ve set out on a longer-term path to repair the damage to our economy caused by excessive borrowing, consumption and spending under the previous Labour government.

So together with households and businesses, we’re rebuilding the economy’s capacity to deliver more jobs and higher incomes over the next decade.

And we’re starting to see positive results.

Employment is rising across the board, wages on average are increasing ahead of the cost of living and consumer and business confidence has lifted.

So the Government has shifted its focus from managing our way out of recession to managing a growing economy.

In particular, we’re aiming for sustainable growth – the kind of longer-term growth that can deliver consistently more jobs and higher incomes.  

A short, sharp uplift would lead only to disappointment if we did not work on the longer-term economic fundamentals of investment, skills and productivity.

The Government is taking a long-term view, because some of the factors driving the economy today will peak over the next few years.

Export prices are likely to return closer to normal levels, housing supply will eventually catch up and the Christchurch rebuild will peak and eventually slow.

And the New Zealand economy faces ongoing global risks, including uncertainty about the performance of our two largest and linked trading partners, China and Australia.

Against the background of a growing economy, we have the opportunity to lock in the gains New Zealand has earned over the last six years.

That will mean more investment, better skills and a growing export base – all flowing into higher incomes and more jobs.

But that depends on more of the policies which are delivering good results.

This year is likely to see a political debate between a determined Government and complacent opposition parties who already believe today’s good times are permanent.

And they think we can go on an immediate taxpayer-funded spend-up.

We paid the price of complacency in the years up to 2008.

Until the mid-2000s, New Zealand generally enjoyed a period of low inflation and relatively high growth.  

Complacency then led to a rapid pick-up in government spending, policy that undermined competitiveness, soaring house prices and an unprecedented increase in household debt.

By 2008, households faced mortgage rates of almost 11 per cent and business rates exceeded 9 per cent.

Inflation exceeded 5 per cent and, by 2008, the export sector had shrunk significantly since the early 2000s, smothering our earning capacity.

The high cost of capital brought an end to investment and job growth and by early 2008 – well before the global financial crisis – New Zealand was in recession.

We can avoid those problems this time round.

But not with a change in government.

Opposition policies show they haven’t learned the hard lessons from their mistaken belief that more taxes and higher spending will deliver a different result than they did in the noughties.

While some increase in interest rates is an inevitable consequence of a growing economy, we need to do everything we can to ensure they don’t rise too sharply in the next few years.

A lower interest rate cycle will mean less pressure on households with debt, more investment in productive businesses and less pressure on the exchange rate for our exporters.

It is in that context that we will present the Budget next month.

Budget 2014 will build on our success so far.

You will see the Government continuing to be careful with its spending. And we will lay out an ongoing programme to lock in the benefits of sustainable growth.

If governments make large cash injections into the economy when house prices are already high and economic growth is building, interest rates will rise sharply.

We won’t make that mistake.

National’s new spending over the last five and a half years has slowed considerably compared with new spending by the previous government – and public services have improved.

Opposition parties’ answer to every problem is more government spending, despite clear evidence that high rates of government spending have little or no impact.

This was noted by the Salvation Army in its State of the Nation report in 2008. They noted that large increases in spending over the previous five years seemed to have contributed very little to New Zealand’s social progress.

We don’t need large lumps of new spending to get better results for our communities.

There’s a significant difference between quality spending and quantity.

The Budget next month will be about thoughtful targeted spending, not a spend-up. It will invest in better healthcare, more effective education, safer communities and less welfare dependency.

This Government has taken time to improve the quality of government spending, rather than just cut costs.

We have invested significantly more in areas where we can make a positive difference.

Where possible, we’ve reprioritised spending out of areas that were not delivering results and we’ve used that money more effectively.

This has resulted in falling crime rates, fewer sole parents, reduced welfare dependency and higher levels of educational achievement.

In welfare alone, we are investing hundreds of millions of dollars up-front to support more people off welfare and into work, training or education.

We’re finding we can improve people’s lives and reduce spending pressure if we really understand who we are dealing with.

For example, there is a group of around 2,000 six- to nine-year olds who had the worst start in life. They will cost taxpayers $750 million if we do nothing to prevent them getting into trouble.

We’ve only recently been able to measure this figure.

The information creates a moral and financial imperative to act more effectively in the interests of these children and the wider community through the Children’s Action Plan.

In another example, the number of young mothers on a main benefit has fallen from more than 4,200 in December 2009 to fewer than 2,600 in December 2013.

The Government has invested in each of them to make sure they have access to a supervising adult who can provide some stability in their lives.

Because of that investment, they have better lives and it’s good for the Government’s books when they succeed.

That’s why we’re confident we can maintain responsible fiscal policy over the next three years and at the same time improve results from public services.

That will include debt repayment, resuming contributions to the New Zealand Super Fund, and replenishing the Crown’s balance sheet.

It will also allow us to invest a little more in priority public services – providing that doesn’t push up interest rates or restrict our ability to get debt down.

A little more is significantly different from a lot more funded by higher taxes which is what the opposition is threatening with us.

We will have more to say about the Government’s future framework for fiscal policy in the Budget.

But, as the Prime Minister confirmed two weeks ago, the Government will stick to its $1 billion Budget allowance for the 2014/15 financial year.

This is the responsible thing to do.

Imagine the effect on interest rates – and the rest of the economy – of a return to the $3 billion-plus annual Budget allowances we saw under the previous government from 2005 to 2008.

By containing government spending, we will help to restrict interest rate increases. This makes a significant and positive contribution to family budgets.

Every one percentage point movement in mortgage interest rates is worth around $40 a week – or $2,000 a year – for a family with a $200,000 mortgage.

So when you hear politicians promising to ramp up spending to pay for expensive election promises, you should remember that this would come at a significant cost to households and businesses.

We know from experience up to 2008 that runaway government spending was one driver of high interest rates.

That cost us twice – first through higher taxes then through higher interest rates.

The other driver was runaway house prices.

The Productivity Commission has noted that the biggest issue is the limited supply of new houses when demand is growing.

House prices doubled between 2001 and 2007, and prices have resumed their upwards march in most areas since the GFC.

There are a number of reasons for this, but there is little doubt that planning processes and rules are important drivers of land and housing costs.

It is now difficult to build some types of affordable housing in our least-affordable cities.

To take a couple of examples, planning rules in Auckland require apartments to be at least 40 square metres.

And balconies are now required to be 8 square metres.

These two rules alone add around $80 per week to the rent.

A range of other rules set minimum subdivision size, ceiling heights, bedroom size and even the width of your front door. All of these push up the cost of housing.

When planners get down to this level of detail they’ve well and truly overstepped the mark.

Local body planners and councillors are not aware of the wider social and economic effects of their complex rules and processes.

I see three major consequences.

First, higher house prices created by excessive planning rules put pressure on interest rates, reducing business investment, lowering productivity and hitting household budgets.

And housing supply that is unresponsive to demand causes price volatility and the risk of a severe correction.

Second, as the cost of housing consumes a greater proportion of income, pressure goes on councils and the Government for greater assistance.

Around 40 per cent of households that are renting receive accommodation support from the Government. This will increase if housing becomes less affordable.

The third consequence is that rising house prices drive inequality.

Inequality in New Zealand has been flat since 2004, but the situation could have been better had housing been more affordable.

That is why we’re working with councils to ensure New Zealanders have access to more affordable housing.

We have signed a Housing Accord with the Auckland Council, and this is already delivering results.

And we’re working to sign more accords with councils in Christchurch, Tauranga, Queenstown and the Wellington region.

We’re reforming the social housing system to bring in community housing groups, increase competition and get social houses where they are needed the most.

We’re reforming the Resource Management and Local Government Acts to cut red tape and reduce costs.

And we’re continuing to invest around $2 billion annually in accommodation support for Kiwi households.

So we’re making steady progress to deliver more affordable housing to more New Zealanders.

It takes time to change the way councils make decisions on housing and for developers to get more projects up and running.

That’s why it’s important that we continue to focus on every measure that can reduce the cost of housing over the next few years.

The biggest pressure on house prices is low supply and councils have a significant impact on that.

Before finishing today, I want to highlight the opportunity we have to lock in the benefits of sustainable and broad-based economic growth.

Despite our good progress, we still have much more to do to improve New Zealand’s economic growth and to support higher incomes across the board.

Containing government expenditure and improving housing supply are steps along the way.

The Budget will also set out the next stage of the Government’s wider programme to continue building on our competitiveness so we can lock in the gains for households and businesses.

As I said earlier, this is not the time to think about putting our feet up.

A third-term National-led Government will build on the momentum we’ve achieved across our programme.

Quarterly GDP or current account statistics are not, in themselves, what matter to families. Jobs, higher incomes and opportunities to get ahead are what really matter.

Everyone’s situation is different and many families are still finding times are challenging.

But the benefits of a sustainably growing economy are tangible and meaningful. Let me give you an example.

Over the past two years, as economic momentum has picked up, the average full-time wage has increased from $51,700 a year to $54,700 – an increase of $3,000.

Looking ahead, in the Budget next month Treasury will forecast annual GDP growth of between 2 per cent and 4 per cent a year out to 2018.

Based on that growth, Treasury’s preliminary Budget forecasts show the average wage will rise further to around $62,200 a year in four years’ time.

This would mean an increase of another $7,500 by 2018.

So, if you take that six-year period as a whole, the average wage will have gone up by $10,500, or around 20 per cent, compared to inflation of just over 12 per cent over the same period.

National’s responsible economic management means wages will keep rising faster than inflation: http://bit.ly/1eCrJl1

The Budget forecasts will also show around 170,000 more people working by 2018. Together with a falling unemployment rate, this will build on the 66,000 jobs created in the past year alone.

That’s what a sustainably growing economy actually means for hard-working New Zealanders.

And that’s why it’s important that we remain focused on our programme of considered and consistent change over time.

Under John Key’s leadership, this Government, alongside households and businesses, has managed New Zealand through some of the most significant challenges we’ve seen in generations.

Providing we stay the course, we will have a faster-growing, more sustainable economy. Wages will continue to increase faster than the cost of living and tens of thousands more jobs will be created every year.

We will provide more elective operations, we will help more New Zealanders off welfare and into work, and the crime rate will continue to fall.

We’re on track to surplus next year and larger surpluses in subsequent years, which will give us choices. And we’ll soon be able to start reducing debt and investing a bit more in priority public services.

The alternative is to put all of this at risk at the election and radically change direction.

We’ve already had a taste of what that change of direction would involve: a combination of high government spending, economic experiments from the 1970s and a lack of focus on what really matters.

That is a backward-looking policy prescription, particularly when New Zealanders’ impressive resilience is starting to pay dividends.

We now have the opportunity to significantly improve New Zealand’s economic fortunes and provide a better future for New Zealand families.

We are making good progress, but there is a lot more to be done.

Providing we stick to our plan, I’m confident that we will build the brighter future New Zealanders deserve.

We’ve got a strong foundation but only a National-led government will deliver policies which build on it sustainably.


Seeking interest in social bond pilots

April 14, 2014

The Ministry of Health is seeking groups interested in social bond pilots:

A new and innovative alternative to the way social services are delivered has come a step closer, Minister of Finance Bill English and Health Minister Tony Ryall say.

The Government last year agreed to a social bonds pilot and people are now able to register their interest in becoming an intermediary in the pilot programme.

An intermediary is a person or group who brings investors and service providers together. The intermediary uses their skills in project management and finance to raise funds and drive performance to achieve agreed outcomes. 

“The Government does not have all the answers to our communities’ problems and social bonds are one new way to involve investors and private or not-for-profit organisations in improving social outcomes, while achieving value for taxpayers,” Mr English says. 

Mr Ryall says social bonds give service providers greater freedom and flexibility to use private capital and expertise to deliver services to their communities – with the Government paying a return depending on achievement of agreed outcomes.

“This shifts risk from the taxpayer and provides an incentive for our investment community to use its expertise for generating results in the social sector,” Mr Ryall says.

Social bonds trials are underway in the United Kingdom, United States, and Australia where examples of their use include targets of reducing reoffending, increasing employment, improving outcomes for children in care, and improving management of chronic health conditions.

In New Zealand, service providers have submitted their ideas and a shortlist is being compiled by the Ministry of Health, which is leading cross-agency work on the pilot.

“We’re still in the early stages here but progress from the overseas pilots is encouraging,” says Mr Ryall.

“We see potential for social bonds to deliver better results and attract investment to preventative services and we think the time is right to pilot this model here.”

Mr English says there is a strong alignment between the social bonds model and many of the other initiatives being put in place across government like Better Public Services where the focus is on achieving results for the investment New Zealanders make in public services through their taxes.

“If successful, the social bonds pilot might attract investment and offer lessons that could be used for contracting in future, including further social bonds,” Mr English says.

How refreshing, and encouraging, to have a government which admits it doesn’t have all the answers and is willing to try a different approach to solve problems.

Rewarding achievement puts the risk with the provider while giving them a strong incentive to succeed.

This isn’t just throwing money at problems, it’s aimed at getting solutions.

More information of Social Bond Pilots is here.


Property speculators pay CGT

April 13, 2014

Labour leader David Cunliffe says it’s ‘lunacy’ that property speculators get tax free capital gain.

But they don’t.

Buying and selling properties as a business, which is what speculators do, attracts a capital gains tax.

Hon BILL ENGLISH (Minister of Finance) : The Government already taxes capital gains on property speculation where property investment is for the purpose of trading. The member may not be aware of that. In addition to this, the Government’s 2010 tax changes on property disallowed deductions for building depreciation, and this raises around $700 million per year from property investors, a much larger number than any estimate we have seen for the foreseeable future for a further extension of the capital gains tax. Further extension of the current tax on capital gains is likely to have high compliance costs, and that is a conclusion that three tax inquiries and several Governments have come to over the last 20 years. If it excludes the family home, it will not raise much difference, it will not raise much revenue, and it becomes effectively a tax on successful businesses. In overseas jurisdictions, it has not improved housing affordability.

Hon David Parker: Why does he think the profits on the sale of investment property are of such critical importance to the economy that they should not be taxed but, instead, be cross-subsidised by every other taxpaying business and worker in New Zealand?

Hon BILL ENGLISH: I would point out two things, as I pointed out in the primary answer. First, where any property is bought for the purposes of selling, the gains on that are taxed at current income tax rates. It is called an income tax, but, actually, it is a capital gains tax on trading investment property. The member may have seen recent publicity about the scope of the Inland Revenue Department’s activities in ensuring that everyone who does trade in property pays full income tax rates, not the half-baked rate that he proposes in his proposition of 15c in the dollar. They are, actually, taxed at 33c currently. Secondly, the changes made in the 2010 tax package do collect $700 million per year from property investors, which is a much larger number than any revenue that he has posited as a result of his partial extension of the current capital gains tax.

Labour’s policy is built on the lie that we don’t have a CGT.

We do, at 33 cents in the dollar, more than twice the rate Labour is proposing – unless of course they’re going to tax it twice which is quite possible with them.

Jami-Lee Ross: In considering various tax options for New Zealand, what international evidence has the Minister seen on the effects of capital gains taxes on housing affordability?

Hon BILL ENGLISH: I have seen reports from Australia on the effects of a partial capital gains tax, limits on foreign investment, a so-called mansion tax, and compulsory savings. If these policies are meant to improve housing affordability, then they have not, because housing affordability is worse in Australia than in New Zealand. Just today there is a report being published showing that first-home buyers now make up the smallest proportion of the housing market ever in Australia. So the housing market in Australia now consists of fewer first-home buyers than ever, so we would be a bit careful about following that policy prescription.

Hon David Parker: What proportion of investment property sales pay tax as traders; is it closer to zero percent than 100 percent?

Hon BILL ENGLISH: I do not have that information to hand, but I can assure the member that the Inland Revenue Department is vigorously pursuing every investor who trades in property.

Jami-Lee Ross: What reports has the Minister received on the case for a new capital gains tax in New Zealand?

Hon BILL ENGLISH: I have received the report of a speech to the Wellington Property Investors Association in July 2005. It noted that the Government-appointed tax review in 2001 considered a new capital gains tax and concluded that the disadvantages of such a tax—its complexity and costs—outweighed the theoretical benefits, so it did not recommend such a tax. The speech also noted that the Government of the day agreed with that conclusion that the status quo was entirely adequate. The speech was delivered on behalf of the Minister of Finance Michael Cullen by his associate David Cunliffe. . . .

What’s changed since Cunliffe delivered that speech?

None of the facts, just the politics.


Sense not cents

April 13, 2014

Bill English on sense rather than dollars and cents:

. . . the focus of it [the Budget] is certainly to get us to surplus so we can start repaying debt but more importantly looking ahead, it’s about quality government spending. We’ve got some real issues out in the community, kids who don’t achieve enough at school, people who want to feel safer in their community and what we’re learning from a period of restraint is that more thoughtful approach to spending the money and high quality to get results. That it’s not really about the dollars – solving, having a safer community, better educational achievement is about getting alongside people and supporting them in a way that gets results and it’s not just about the headline dollars. . . .

He shows he understand what’s up to people themselves, not governments:

. . . we’re a government who believes that households are capable of making their own decisions without a whole lot of advice from politicians and actually over the last four or five years they’ve made good decisions. They’ve been careful with their spending, they’ve been a bit careful with their debt. In fact even now it’s surprising in an economy growing at 3 percent, retail spending has been relatively flat. And I think from what I hear, people are going to be careful about increasing their debt. . .

He reinforces that solutions aren’t always about the amount of money spent:

. . . cash hand-outs just aren’t possible on a large scale and they’re probably not a good idea if you’ve got other underlying problems like over-priced housing. . .

He also reinforces there’s no money for lolly scrambles:

In this Budget we will have a paper-thin surplus , I mean we’ll just have a surplus but that’s the beginning of a series of surpluses and that means we have choices. And there’s a lot of choices. We’ve got the New Zealand Super Fund to resume contributions, an auto-enrolment for KiwiSaver, paying off debt more quickly, something for households to help them along. Those are choices that New Zealand fortunately will have if we have a growing economy and we stick to being pretty careful about our spending. . .

And he explains what matters:

Yes we’ll get to surplus but it’s ah you know it’ll be good to get that in the bag so we can move on because in a way focusing on that artificial number gives the impression that’s what really matters. Actually what really matters is whether Government is solving problems in our communities so we’ve got better communities and strengthening the economy so that we can get higher wages and more jobs. . .

Whether you’re an individual, a household, a business, other organisation or government, surpluses give you choices.

Sensible choices are to repay debt, address problems and keep on with policies which ensure spending is sustainable and surpluses maintained.

Sensible choices aren’t to increase taxes and spending or any other of the policies which put New Zealand into recession before the global financial crisis hit.

New Zealanders, in their households and their businesses, have adapted very well to what were quite difficult circumstances and the Government’s been there to support them doing it. The real issue is now whether we can sustain that growth so that people can see consistent wage increases year after year for instance  which they haven’t had for the last five or six years. So you know, we’ll be campaigning as much on delivering a sustainable economy in the future as on a record, which I think most people agree is reasonably good. The opposition doesn’t but this is, you know, we’re looking ahead on the basis of a record that is pretty good. . .

The opposition has fought every policy which has contributed to better financial management and their policies show they’re prepared to undo what’s working for purely ideological reasons.

The debt arises from the fact we had a recession and a major earthquake and we’ve said for the last three or four years the key issue here is to start paying it down when times get better and that’s pretty logical, people understand that and with interest rates, look, interest rates going up from the lowest in 50 years was inevitable. It’s our job to make sure they don’t go up any further than they need to. . .

High government spending was one of the pressures which gave us interest rates of around 11% by 2008.

Continued restraint is necessary to ensure any increases from the historic low stay below those double figures.


Remember the wreckage

April 11, 2014

The latest IMF report on New Zealand is by and large a positive one.

Finance Minister Bill English reminds us that it wasn’t nearly as positive a few years ago:

Louise Upston: What comments has the International Monetary Fund made previously about the New Zealand economy?

Hon BILL ENGLISH: In the light of recent discussion about the history of the New Zealand economy, I looked for the IMF reports from 1975. That seems to have been the focus of economic debate in the House, but actually I could not find any. Instead, I went to the 2008 IMF report, where the IMF talked about a number of issues facing New Zealand, including what it described in careful bureaucratic language as “rapidly appreciating house prices”. It noted that in response to rising inflation the official cash rate reached 8.25 percent and homeowners faced floating mortgage rates of 11 percent. The current account deficit was 8 percent. All of those numbers are about double what they are now, and they are measures of the wreckage that the previous Labour Government did to the New Zealand economy.

It’s important to remember that wreckage because anything Labour is threatening us with should it return to government in September is more of what caused the problems in the last term – higher taxes and higher spending.

That’s what put New Zealand into recession before the global financial crisis.

It’s careful management by National which has turned round the forecast decade of deficits and has got the economy growing again.

One result of that is more jobs:

. . . Nationwide job numbers have been rising for the last 18 months with more people seeking work and successfully finding jobs across the country.

 According to the recruiter’s latest Hays Quarterly Hotspots list of skills in demand for the April to June quarter, the jobs growth is being led by professional, technical and administration workers.

 Significantly, it’s not only the rebuild in Christchurch that is generating new employment opportunities in New Zealand; jobs growth is gathering pace across all regions of the country. . .

Employment has lagged other positive indicators but that too is changing for the better.


The right recipe for better times

April 10, 2014

Getting through the recession required careful management and disciplined spending.

Both those are needed when we get back into surplus:

Paul Goldsmith: Why will it remain important for the Government to maintain fiscal discipline, even after the Crown’s accounts return to surplus?

Hon BILL ENGLISH: The first reason is that we should not, of course, be wasting taxpayers’ money, and, given that this Government has developed much more thoughtful ways of spending Government money, we should stick to that. Secondly, we want to make sure we do not put extra pressure on interest rates. The Reserve Bank has already started to raise interest rates from 50-year lows towards more neutral levels. Keeping Government spending under control means that over the course of the interest rate cycle, interest rates will be lower than they would otherwise be. The Government wants to avoid the mistakes of the previous cycle, when a 50 percent jump in

Government spending under the previous Labour Government led to first mortgage rates of close to 11 percent. Households and businesses simply could not carry that burden this time.

Paul Goldsmith: What will be the Government’s approach to allocating new spending in the Budget next month and in future years?

Hon BILL ENGLISH: The Government’s approach is to examine critically each of its interventions and to ensure that any new spending shows a clear pay-off. A good example would be the fairly significant commitment to increasing the quality of teaching, with a view that we will gain a clear pay-off of more children reaching national standards and higher levels of achievement in our secondary schools. We have found that if we take that robust approach, many propositions that people have simply do not add up to a good use of taxpayers’ money.

Hon David Parker: Did he say in 2008 “This is the rainy day that Government has been saving up for.”, after Labour ran nine Budget surpluses and reduced net Government debt to zero, and can he confirm his Government has since borrowed over $50 billion?

Hon BILL ENGLISH: Yes, I did say that. What the member left out of his little story is that in the last Labour Budget of 2008 they forecast a surplus of $1.3 billion. What actually happened was a deficit of over $3 billion, plus forecasts of a decade of deficits and a blowout in Government debt. We are very pleased this Government has been able to get that financial wreckage under control.

Paul Goldsmith: As part of its wider economic programme, what progress has the Government made in reducing previous increases in Government spending?

Hon BILL ENGLISH: If I could use just one measure of progress, following the previous Government’s final Budget in 2008, since that seems to be where Labour members prefer to fight their political battles, core Crown expenses jumped $7 billion, just in that Budget—just in that Budget. This left a deficit of $3.9 billion in Labour’s last year. Since then, under the discipline of the current National-led Government, spending has increased by only 13 percent over five Budgets, compared with a 12 percent increase in just the one Budget in 2008. We are very pleased to be off that track.

The country faced a decade of deficits because Labour squandered the good times, doing far more taxing and spending than was good the economy and implementing too few policies that promote growth.

National rejected the temptation to slash and burn, protecting the most vulnerable through the recession.

It had to borrow to do that.

Now surpluses are in sight, we need a government that continues careful management and discipline to reduce debt and keep the economy growing sustainably.

Labour’s failed policies of the past combined with new tax and spend measures won’t do that.

 


Political clock turned back

April 9, 2014

Bill English thinks Labour turned its political clock back decades:


Choosing those to be chosen from

April 6, 2014

Nine of us spent yesterday doing pre-selection for the National Party’ candidate for Clutha Southland.

As per party rules, the committee comprises the electorate chair, who chairs the meeting, four other from the electorate, who were elected at the AGM, two people nominated by the party president and two nominated by the regional chair.

This gives the the electorate a majority.

The proceedings are confidential so I won’t be divulging what happened but I thought readers might be interested in the process.

All nominees who get to pre-selection have already had board approval.

It is the committee’s role to interview them and reduce the number to five, in effect choosing those from whom the voting delegates will choose the candidate.

That someone doesn’t make the final cut doesn’t necessarily mean s/he wouldn’t have been a suitable candidate. It means that in the committee’s view, the five who get through would be better.

Pre-selection is a rigorous process and it needs to be for the sake of the party and the public.

A candidate chosen in any electorate has a chance of making it to parliament under MMP if s/he is a list candidate too and the candidate chosen in a blue seat like Clutha Southland is almost certain to win it.

All those interviewed have been notified of the outcome and now the five chosen have the task of convincing the delegates  – all of whom must have been financial members in the electorate for at least six months – that s/he is the one to step into the very big shoes left vacant by Bill English’s decision to stand for a list-seat only.


IMF backs govt, warns against change

April 2, 2014

The International Monetary Fund is backing the government’s economic prescription.

Confirmation from the International Monetary Fund that New Zealand’s growth prospects have improved and that its macro-economic framework remains sound is a welcome further endorsement of the Government’s economic programme, Finance Minister Bill English says.

As the IMF notes in its concluding statement issued today, New Zealand’s economic expansion is becoming increasingly embedded and broad-based. It forecasts annual economic growth will increase to about 3.5 per cent this year.

“It’s encouraging that the IMF has again noted that our macro-economic framework remains sound and provides policy space to respond to adverse shocks,” Mr English says

“In particular, it concludes the Government’s focus on returning to surplus next year will help to preserve its favourable standing with external creditors against New Zealand’s background of relatively high net foreign liabilities.

“I also agree with the IMF that New Zealand faces some risks, including globally from any downturn in the fortunes of China and the rest of Asia, and on the domestic front from issues around housing affordability.

“As the IMF notes, the Government’s steps to help alleviate housing supply bottlenecks and the Reserve Bank’s measures to tighten mortgage lending and to raise interest rates should help to ease house price pressures.

“The Government’s fiscal deficit reduction programme is also expected to take some pressure off the exchange rate, as the IMF acknowledges.

“So this latest report on New Zealand confirms we remain on the right track to build a faster-growing economy and to manage the global and domestic risks that might come our way,” Mr English says. “That’s important if we are to support more jobs and higher incomes for New Zealand families.”

Support for the National-led government’s prescription is also a shot across the bows of the opposition parties which want to change it with higher taxes, higher spending and meddling with the Reserve Bank.

 


Front page news

March 21, 2014

It’s not unusual for Prime Minister John Key to be front page news in New Zealand.

It is something of an accomplishment, and an honour, to be front page news in China, a country with a population of 1.3 billion.
Making front page news in China – not bad in a country with 1.3 billion people

The Prime Minister also had a dinner with President Xi Jinping and the visit has helped strengthen links between our countries:

Prime Minister John Key says agreements entered into with China at his meeting with Premier Li Keqiang highlight the continuing strength of the relationship between our two countries.

Mr Key and Premier Li Keqiang met at the Great Hall of the People. Mr Key’s visit to China marks the third time the countries’ top leaders have met in less than 12 months.

The meeting emphasised the value both countries place on the political, trade and economic relationship which, has continued to grow rapidly.

New Zealand and China are well on track to achieve a shared goal, agreed by the Prime Minister and Premier Wen Jiabao in 2010, to double two-way trade to NZ$20 billion by 2015. Two-way trade is currently worth over $18 billion.

“My meeting highlighted the mutually beneficial nature of the bilateral trade, with China becoming our number one goods export market, and remaining the number one source of imports for New Zealand,” says Mr Key.

The Prime Minister said that he was pleased to see the particularly strong growth in dairy exports to China, which reached nearly NZ$5 billion in 2013, an increase of 75 percent.

“My meeting provided the opportunity to brief Premier Li on the outcomes of the Whey Protein Concentrate Contamination Incident Government Inquiries, emphasising that they underline that New Zealand is a producer of high quality food, with world class regulatory systems,” says Mr Key.

The Prime Minister and Premier Li discussed New Zealand and China’s shared interest in strengthening financial sector cooperation, as well as cooperation in the areas of agriculture and food safety.

Six new initiatives have been agreed at the meeting, including:

  • The launch of direct trading of the New Zealand dollar against the Chinese Renminbi.
  • Agreement to renegotiate the 1986 Double Tax Agreement.
  • Implementation of an electronic equipment Mutual Recognition Agreement that will enable New Zealand to become the first country in the world to test, inspect and certify electrical products outside of China.
  • Enhanced agricultural cooperation in dairy herd improvement, agricultural management, veterinary training scholarships and professional development exchanges.
  • Improved food safety cooperation including the launch of a scholarship programme in food safety and risk management.

“The financial sector offers great potential for further cooperation between New Zealand and China. Today’s announcements will make doing business with China easier by reducing compliance costs and contribute to the wider expansion of the economic and financial cooperation between the two countries,” says Mr Key. . .

This visit and a stronger relationship will bring benefits to New Zealand:

China is important to New Zealand. We are on track to achieve the goal of doubling two-way trade to $20 billion by 2015. This week President Xi Jinping and I set an ambitious new goal for trade to reach $30 billion by 2020.

Our growing trade with China is a shot in the arm for New Zealand exporters and industry. It is one of several reasons the New Zealand economy continues to grow strongly.

Figures released today showed GDP increasing by more than 3 per cent in the past year – making New Zealand one of the fastest growing economies in the world.

This is great news for families.

A stronger economy means more jobs, higher incomes, and more opportunities for young people. It means we can invest more in important public services like schools and hospitals.

If we continue with National’s successful programme, New Zealanders can lock in the economic gains we’re starting to see.

That if depends on another National-led government because as  Bill English said during Question Time yesterday, the job isn’t finished:

. . . New Zealand’s growth rate is better than that of quite a few developed countries, but, of course, the real measure of its success is whether it is providing more jobs for New Zealanders and higher incomes for New Zealanders. The good news is that forecasters are generally expecting that New Zealand’s growth rate will be maintained through 2014. This, however, is no cause for complacency or for a fiscal lolly scramble. This country has a lot of work to do yet to ensure that every New Zealander who can work can get a job, and that all those New Zealanders who have a job are paid in a manner that they regard as appropriate. . .

The economy is growing and the free trade agreement with China, has played an important role in that.

With growth improvements in other indicators which depend on that including education, employment and health  are following.

But there is more to do.

The government has laid a strong foundation and it needs another term to build on that.


Enemy of affordability

March 20, 2014

Greens like to think they’re friends of the earth.

They aren’t so keen on earthlings, and in their eyes some earthlings are even less equal than others as this exchange during question time yesterday shows:

4. Dr RUSSEL NORMAN (Co-Leader—Green) to the Minister of Finance: Will the Government propose any measures to restrict the sale of New Zealand farmland or residential land to foreign companies or persons?

Hon BILL ENGLISH (Minister of Finance): We are certainly not going to restrict Australians from buying homes after they migrate to New Zealand. The Government has already restricted overseas investment in sensitive land and residential land. We made changes to the regulations in 2010, which were reflected in a directive letter to the Overseas Investment Office. We believe these changes struck the appropriate balance between ministerial flexibility to consider a wider range of issues when assessing overseas investment and, at the same time, providing clarity and certainty for potential investors. I would note that under this Government the amount of sensitive land approved for sale to overseas buyers has been less than half what it was in the last 5 years of the previous Labour-Greens Government. I would also note that the OECD assesses our overseas investment regime as now one of the more restrictive in the developed world.

Dr Russel Norman: Does he consider that China has any lessons to teach New Zealand regarding foreign ownership, given that China protects its economic interests through restricting land sales to foreign buyers?

Hon BILL ENGLISH: The member may be more familiar than I am with the tenets of communism, but in China private individuals did not own land until recently, only the Government did, so even the Chinese could not buy land in China. But I am a bit surprised to find that the Greens only ever get this excited about foreign ownership when it involves the Chinese, who happen to have a much lower number of consents than Australia, the UK, Germany, Switzerland, and, I think, Sweden.

Dr Russel Norman: Does he have any concern that more than one in 10 homes in Auckland is purchased offshore and that, according to BNZ economist Tony Alexander, this figure is set to only increase?

Hon BILL ENGLISH: I know that the member has been conducting his own investigation into these issues by visiting the home of Kim Dotcom, a well-known foreign investor in Auckland real estate. I cannot confirm the member’s one in 10 number. The BNZ survey that I saw said that about six houses in every 100 are foreign-purchased and about a quarter of those are being purchased by the Chinese, which means that 1.5 houses in every 100 might be being purchased by people whom real estate agents think are residents of China.

Might is the operative word.

If the property isn’t big enough to require Overseas Investment Office approval, the nationality of the purchaser isn’t recorded.

And the fact that some people doesn’t look either Maori or Pakeha doesn’t mean they aren’t New Zealanders.

Dr Russel Norman: When will he and his Government consider there is a problem—will it be when one in five homes is purchased by offshore buyers, or will it be when one in four homes is purchased by offshore buyers? At what point will he acknowledge that there is a problem?

Hon BILL ENGLISH: We do not have the same problem about buyers being foreign as the Greens do. What we have a problem with is the very high cost of housing in New Zealand for New Zealanders. And all the analysis shows that the fundamental driver of the high cost of housing is not the Greens’ friends from China; it is the Greens’ friends in the planning departments of our city councils who insist on blocking new development of new housing. So the Greens are a much bigger enemy of the affordability of housing in New Zealand than the Chinese have ever been.

Restrictions on the supply of housing is a far bigger enemy of affordability than foreign buyers.

Dr Russel Norman: Does he consider that an increase in interest from offshore buyers in purchasing residential property in Auckland is increasing the price of housing for New Zealand homebuyers, or does he think that this big increase in demand from offshore is having no effect— that it is a special kind of market where a big increase in demand has no effect on prices?

Hon BILL ENGLISH: It is not obvious that there is a big increase in demand from offshore buyers. There is some anecdotal evidence that that is the case, and I know that that is certainly believed by some people, but it is yet to be established. The fundamental driver of the increase in housing is restrictive planning policy, which means that when there is more demand—whether it is foreign or, in this case, New Zealanders who have stopped migrating and are staying home and more people who are arriving in New Zealand as migrants—and those factors of demand are rising, the supply cannot react to it. All around the world restrictive planning laws mean higher prices and more volatile prices, and the Greens back that kind of policy. They should be backing the Government on getting rid of that sort of policy if they are really concerned about locking low and middle income New Zealanders out of the housing market.

Dr Russel Norman: Does he agree with Auckland house auctioneer Adam Wang that our ambiguous laws around capital gains tax are assisting the boom in the foreign buy-up of our

housing stock, and does he have any plans to deal with the fact that the capital gains tax exemption in New Zealand is part of the problem driving up house prices?

Hon BILL ENGLISH: All of those issues have been looked at by various inquiries, by the Productivity Commission, and by policy advisers, and it is possible that any one of them has some influence on the price. This Government, though, has focused on the biggest influence, and the most pervasive one, and that is restriction of supply. It is hard to understand why the Greens support housing planning policies that have the effect of driving up the wealth of the leafy suburbs at the expense of middle-income and low-income New Zealanders. I think that if the Greens were really concerned about equity in New Zealand and affordability of housing, they would be supporting the Government’s policies, not the Labour Party’s policies.

Restrictions on supply help those already on the housing ladder.

Labour and Green policies for higher taxes, will not fix that and their policies which will lead to higher inflation and interest rates would reinforce them as enemies of affordability.


Back to failed policies of the 70s

March 20, 2014

Labour leader David Cunliffe made an announcement of forestry yesterday which would take us back to the failed policies of the 70s:

The Labour Party’s desire to turn the clock back to the 1970s is once again highlighted with their grab-bag of ideas for the forestry industry, says Economic Development Minister Steven Joyce.

“Subsidised loans, expensive tax concessions, preferential treatment, and make-work schemes for young people are all a flashback to a time when governments decided which industries succeeded based solely on political whim rather than competitiveness,” Mr Joyce says.

“This is classic 70s ‘government knows best’ interventionism and we all know how badly that ended.  What next, supplementary minimum prices for wood?

“Why should the forestry industry receive preferential treatment over the high tech manufacturing industry, ICT, the services industries, the construction industry or the farming industry? Or is it Labour’s plan to provide subsidies for everyone so we can subsidise our way to success?

“About the only thing they have got right is suggesting a focus on innovation. However it’s like they have been asleep since 2008 and now woken up ‘Rip van Winkle’ like to say we should do some innovation.
 
“While Labour has been asleep this Government has massively lifted its investment in innovation and helped grow private sector R & D across the economy by 23 per cent in just two years. Total government funding since 2010 for forestry-related science, research and product development alone amounts to over $160 million.

“The only sensible way to run a modern successful economy is to provide a strong macroeconomic base, supported by polices that lift the competitiveness of all firms. Our comprehensive Business Growth Agenda, which Labour has still not bothered itself to read, systematically improves access to markets, innovation, natural resources, capital, skills, and infrastructure.

“The results of our policies so far are reflected in strong growth, lowering unemployment, a much improved trade balance, stronger productivity growth, and real wages rising faster than the cost of living. Turning the clock back to the 70s is an amazingly out-of-touch response to some of the strongest economic data New Zealand has produced in many years.

“New Zealanders know they are just starting to see the positive results of five years of sensible modern economic policies and hard work by New Zealand companies. Turning the clock back 40 years would send New Zealand back to the bad old days of sluggish performance, high current account deficits, low productivity, and high inflation that the Labour Party knows so well.”

Acting Prime Minister Bill English highlighted the flaws in the policy too:

Hon David Cunliffe: In relation to the economics of forestry, is he comfortable that the rate of unprocessed log exports has grown at 10 times the rate of processed logs, given that the export of raw logs is really exporting jobs?

Hon BILL ENGLISH: I would need to check the member’s figures, but he may also be interested to know that around 60 percent of all forestry production is currently value-added. It may well be that in the light of a rise in prices for export logs there are more logs being exported, but anyone who has been in the industry knows that those prices can drop as fast as they rise. I am sure that there are many people in the forestry industry taking a longer view and keeping that in mind. . .

Hon Dr Nick Smith: My question is to the Prime Minister and it asks what reports has he received on the recent developments in forest processing in Tasmania, where its Labour-Green Government has fallen apart over the very issues of forest processing and where there has been a huge loss of jobs and confidence in that sector because the—

Mr SPEAKER: Order! You have made the point with your question.

Hon BILL ENGLISH: I have received the same—[Interruption]

Mr SPEAKER: The question was what reports has he received.

Hon BILL ENGLISH: The Deputy Prime Minister and the Prime Minister have received the same reports, obviously, which have been to the effect that the Government in Tasmania has overseen the destruction of the forestry industry by trying to get involved in it.

Hon David Cunliffe: Would the Prime Minister support an accelerated depreciation tax including for forestry processing?

Hon BILL ENGLISH: No, we are not entertaining that. Those kinds of policies were tried consistently, I think, from the 1970s when they were a bright idea, and they lead to unsustainable industries and unsustainable jobs as a whole lot of Australian workers are now finding out, where industries that were subsidised by the Government there are now closing down. . .

Hon David Cunliffe: Does the Prime Minister support a pro-wood Government procurement strategy to assist jobs and value added in New Zealand, including in those South Otago sawmills; if not, why not?

Hon BILL ENGLISH: No. The member should have more confidence in the forestry industry. It has evolved from the time in the late 1980s when sawmillers used to be able to get very cheap logs from Government-owned forests through to a modern processing industry that is internationally competitive and makes very sophisticated decisions about the balance of financial risk, different types of product, and exchange rate and price risk in export markets. The idea that Labour would do a better job of that is wrong, and it would end up destroying the forestry industry if it gets that involved in it. . . 

Criticism of the policy isn’t confined to parliament:

Labour’s “pro-wood” government procurement strategy will create an inappropriate commercial advantage for one construction sector over another, according to the New Zealand cement and concrete industries.

Announced today by David Cunliffe at the ForestWood conference in Wellington, the policy would mandate that “all government-funded project proposals for new buildings up to four storeys high shall require a build-in-wood option at the initial concept / request-for-proposals stage (with indicative sketches and price estimates).”

Rob Gaimster, CEO of the Cement & Concrete Association of New Zealand (CCANZ), believes that policies which appear to be giving preferential treatment to one construction material are misguided.

“It is inappropriate to mandate that those designing new government buildings consider wood as a structural option, and then require an explanation if an alternative material is chosen,” says Mr Gaimster.

“Government should not be picking winners when it comes to the selection of construction materials, which should stand or fall on their own technical, cost, aesthetic and sustainability credentials.

“In addition, the policy does a huge dis-service to the hardworking men and women in the cement and concrete industries. Favouring a single construction material during the design phase of a new government building could seriously impact on their livelihoods and jobs.

“This policy does not create a level playing field for the use of construction materials in government buildings. In fact, materials other than wood will be considerably disadvantaged.

“We are concerned about the wide-reaching implications of this policy and believe it should in no circumstances be adopted.”

Labour’s policy is designed to help one sector but would hurt another.

Gravedodger illustrates other shortcomings in the policy.


Family Farming road show

March 17, 2014

Rural Women NZ is running a series of events to celebrate the International Year of Family Farming:

“We are excited to be leading events around the country, with a series of road shows beginning at North Otago’s A&P showgrounds in Oamaru on 27 March,” says Rural Women NZ national president, Wendy McGowan.

Similar events will be held at the A&P showgrounds in Rangiora (28 March), Ashburton (29 March), Helensville (5 April), Carterton (6 April), Rai Valley (7 April) and Stratford (9 April). 

Marlborough dry lands farmer, Doug Avery, a passionate advocate for family farming and Landcorp Communicator of the Year in 2013, will co-host the events, giving an inspirational talk on the transformation of his drought-stricken farm into a sustainable venture through visionary changes to his farming system.

Avery predicts farming families will continue to excel in New Zealand.  

“There is one reason they will do that, which is because you can’t replace passion in anything, and people that are working for themselves with their own vision have that element that is called passion, which will lead and beat pretty much anything else that corporate structures will throw at us.”

But farmers can’t operate in isolation.

“Every family needs a farmer, and every farmer needs a community,” says Wendy McGowan. “Our organisation is focused on growing dynamic communities, so celebrating the UN International Year of Family Farming is the perfect fit for us.”

Each of the road shows will have its own local flavour, including seminars on topics such as succession planning, safety on the farm, investing in your farming future and sustainability.

There’ll also be market stalls, crafts and displays by local businesses.  

And we’ll be ending the celebrations on a fun note, with a hilarious romp around the dog kennels courtesy of Kiwi performers The Bitches Box and Mel Parsons, hot from their stellar season at the Edinburgh Film Festival.

Worldwide, the UN International Year of Family Farming is focused on sustainability, food security, the eradication of hunger and malnutrition, and helping people step up out of poverty.

These events are open to the public.
There’s more on the year at the International Year of Family Farming website.

The 2014 International Year of Family Farming (IYFF) aims to raise the profile of family farming and smallholder farming by focusing world attention on its significant role in eradicating hunger and poverty, providing food security and nutrition, improving livelihoods, managing natural resources, protecting the environment, and achieving sustainable development, in particular in rural areas.

The goal of the 2014 IYFF is to reposition family farming at the centre of agricultural, environmental and social policies in the national agendas by identifying gaps and opportunities to promote a shift towards a more equal and balanced development.  The 2014 IYFF will promote broad discussion and cooperation at the national, regional and global levels to increase awareness and understanding of the challenges faced by smallholders and help identify efficient ways to support family farmers. . .

There’s growing concern here about a takeover by corporate farming and foreign owenrs but the vast majority of farms are still family farms.

Finance Minister Bill English explains why the owner operator model works:

“Often farms that are purchased by foreigners end up reverting to local ownership, as the owners realise you have to live it and love it to make any money out of it,” he said.

Living it and loving it, that explains why a lot of families keep farming and farming successfully.

 


Left’s jiggery pokery won’t work

March 17, 2014

I find it difficult to understand the headless chookery that’s going on about the very small increase in the official cash rate from a historically low level.

People with income from interest-bearing investments will be pleased and while the rest of us who are paying more for loans might not like it, we knew it was coming.

It was well signalled and anyone with the slightest bit of financial acumen would have known the odds of a rise were far greater than a fall or keeping the rate at its historic low of 2.5%.

In spite of this the opposition and some commentators are playing at Chicken Little, acting like the sky is falling and inevitably calling on the government to do something.

Well, the government is doing something.

Finance Minister Bill English told TVNZ’s Q+A programme that the Government is doing all it can to help households affected by interest rate rises:

“There isn’t some kind of magic solution her like jiggery-pokery with the Reserve Bank Act, or pretending prices are lower than they are, which is what the Greens and Labour are promising. It’s about the kind of diligent hard work we’ve all been doing, not just this government but households and businesses, becoming more productive, more careful with our spending, getting debt down, a bit less consumption, and good control of inflation. So we have the opportunity here for a sustained economic recovery, and if we work on keeping our costs down, increasing our productivity, we could have four or five years where there are more jobs and higher incomes, and that’s what helps households get on top of increases in interest rates.”

The government’s careful management and strict control on its spending are two reasons interest rates have been so low for so long.

The need to keep on that path is just as great now the economy is growing because a government splashing cash around would fuel inflation which in turn would put pressure on interest rates.

He said this week’s OCR increase is due to the relative strength of our economy

“The small increase in interest rates that was announced the other day is an indication of the relative strength of our economy. There’s a lot of economies around the world would like to see some signs that interest rates were reflecting the fact that the economy’s growing. The other job we have is to support households and businesses by doing everything a government can to reduce pressure on what are inevitably rising interest rates and we’re pretty clear about that where we can influence that pressure, it’s around the housing market where we spent two or three years working on improving supply to the housing market. It’s around the labour market where we’re doing our best to align our training systems and migration with the skills that are needed in a tight labour market. . . 

If there was a magic solution every country in the world would have employed it.

There isn’t – there’s the jiggery pokery the opposition are threatening us with which won’t work, or the careful management and restrained spending which the National-led government is doing that is working.


No room to splash cash

March 12, 2014

Parties on the left like to think the government is the answer to most problems.

By contrast, National recognises the importance of individuals, households and businesses, and careful management of government resources.

Hon KATE WILKINSON (National—Waimakariri) to the Minister of Finance: What will be the focus of the Government’s economic programme going into the election on 20 September?

Hon BILL ENGLISH (Minister of Finance): The Government will focus on building on the recovery that is now under way to support New Zealand households and businesses, to create more jobs, and to earn higher incomes. Now that we have been able to manage through a very significant recession and the impact of the earthquake, and clean up some of the damage done by the last Labour Government, we will look forward to helping New Zealanders organise the capital and the skills required to take advantage of the very substantial opportunities offered by a growing Asia- Pacific region.

Hon Kate Wilkinson: What progress is the Government making with its economic programme and how is this helping households and businesses?

Hon BILL ENGLISH: First of all, the recovery in the economy is principally the work of New Zealand’s households and businesses, supported by Government. Government policy that has helped to support that has been to get the Government finances under control and get back to surplus; and to focus on all those areas across the economy that support growth, such as better infrastructure investment, a tidier, more effective, and more efficient system for giving young New Zealanders skills, reducing welfare dependency, re-regulating the use of our natural resources so that we can be a prosperous economy as well as a clean, green economy, and, of course, there are many other ways we have been supporting New Zealand households and businesses.

Reducing the burden of government is one of the bests ways to help people and businesses.

Hon David Parker: Why is he claiming that everything is going swimmingly when the $1 billion deficit to 31 January in his Government’s accounts is $637 million worse than he forecast in just December?

Hon BILL ENGLISH: As I have pointed out regularly in this House, we can control expenditure to a significant extent but revenue can fluctuate. In this case—

Hon Members: Ha, ha!

Hon BILL ENGLISH: Well, bear in mind that in the previous financial year we finished about $3 billion ahead of budget. On the most recent figures in this year tax revenue is about $800 million

behind budget. The people who should take the most notice of that are the Opposition parties, because it makes it pretty clear there is not room to splash cash everywhere in election year.

Hon Kate Wilkinson: What are some of the ongoing economic challenges the economy faces, and how will the Government work to overcome them?

Hon BILL ENGLISH: Probably the main economic challenge is to manage our way through the next growth cycle, avoiding the excessive damage created during the last growth cycle under the last Labour Government. For instance, it is inevitable that interest rates will rise some time this year, according to decisions of the Reserve Bank. We want to make sure that interest rates are not driven to 10.5 to 11 percent by bad Government policy and excessive Government spending. That is probably one of the best things we can do to support New Zealand households.

Government spending has a significant influence on interest rates.

Labour’s profligacy was a major cause of high interest rates, National’s Presbyterian approach to other people’s money has helped to keep them low.

Hon David Parker: Is it correct that having inherited close to zero net Government debt he is soon to clock over $60 billion of borrowings; and is this more than any other Minister of Finance in New Zealand’s history in nominal terms and the worst in real terms since Muldoon?

Hon BILL ENGLISH: No, but it is another symptom of “Planet Labour”, a place where the global financial crisis and the Christchurch earthquakes never happened. Voters will increasingly see a party marooned on “Planet Labour”—1970s Fabianism at its worst.

Hon Kate Wilkinson: Going into the election on 20 September, what economic policies will this Government reject because they would impose costs on households and cost jobs?

Hon BILL ENGLISH: It is pretty clear from lessons learnt from the last cycle through the early 2000s up to 2008 what policies to avoid. One of those is a sharp increase in Government spending, because that will push interest rates up much faster than they need to go. The second one would be imposing a costly emissions trading system, which is guaranteed to put power bills up by around $500 per year and, in combination with a single-buyer electricity authority, would make household electricity bills significantly more expensive, not cheaper, as the Opposition claims.

Labour and Greens both plan to tax us more, directly and indirectly, and then splash the cash around.

Not only will that leave us with less of our own money, it will fuel interest rates and inflation.


Labour on sinking sand

March 12, 2014

Labour MPs trying to criticise National for price rises have very short memories:

Hon David Cunliffe: How does the Prime Minister expect everyday New Zealanders to keep up with the cost of living when many of them will be paying 7 or 8 percent more for their power and some face increases of up to 24 percent in this year alone?

Rt Hon JOHN KEY: One of the hallmarks of this National-led Government that is in contrast to the previous Labour Government is that, in fact, wages have been going up faster than the price of inflation. It is worth remembering that in terms of electricity prices, they make up less than 4 percent of the CPI. So in overall terms, when one looks at the CPI, some things go up and some things go down. For example, car prices went down, clothing and footwear prices went down, and household contents went down. So in many categories lots of things went down; the odd things went up. Overall, most consumers have not actually faced power increases of that level.

When wages increase faster than inflation, as they have recently under National, people have more purchasing power.

When, as happened under Labour, inflation beats wages, people have less purchasing power and end up worse off,

Hon David Cunliffe: If that is all so rosy, why did the Prime Minister try to blame Transpower when Transpower’s charges make up less than 10 percent of electricity prices and Transpower stated that its increases are likely to be less than $1 a month on average; and is the truth of it not that the power price increases are going to the privatised companies and enriching the foreign buyers that he is in league with?

Hon Bill English: What a load of nonsense.

Rt Hon JOHN KEY: To quote the Deputy Prime Minister, what a load of nonsense. If you look at what has been driving up power prices insomuch as there have been rises at all for consumers, it has been a combination of Transpower increases and lines companies, if one looks at those two together. Interestingly enough, though, if we look at, say, for instance, the last 5 years of power price increases—

Dr David Clark: Out of touch—5 long years.

Rt Hon JOHN KEY: Well, 5 long years with half the power increases, because they have been 19.7 percent as opposed to 39.1 percent for the 5 years under Labour.

Increases of 19.7% might seem high but they’re about half the 39.1% increases that happened during Labour’s last term.

There’s no hope that they will be lower should Labour return to government when they’re ETS policy will add hundreds of dollars to power bills.

Louise Upston: Do official measures of the cost of living include electricity prices, and what does this tell us?

Rt Hon JOHN KEY: Yes, a very good question. The electricity prices in the CPI differ slightly from those that the Ministry of Business, Innovation and Employment, but they tell the same story. Over the last 5 years, going back to December 2008, electricity prices in the CPI rose 19.7 percent, and in the 5 years before that they rose 39.1 percent. So it is no wonder people think that power prices are high—in 5 years under Labour, electricity prices went up by 40 percent. That is why you cannot trust Labour when it comes to power prices. . .

The only thing you can trust Labour with is that their policies will be costly for us all.

Hon David Cunliffe: When will the Prime Minister listen to New Zealanders who are facing median house prices that are up by 8.6 percent on last year, when first-home buyers are now being shut out of the market, which he has made safe for speculators?

Rt Hon JOHN KEY: One of the things that the Government has been doing is working hard to ensure, actually, that first-home buyers can get into the market. There are a few ways of doing that. Firstly, the release of land will have a substantial impact. But let us just ask any first-home buyer we like what they would prefer to pay for their floating mortgage rate. Would they prefer to pay around 5 percent at the moment under a National-led Government, or 11 percent under Labour, which is what it was when we came into office?

Hon David Cunliffe: Speaking of interest rate rises, given that wholesale rates appear to be on their way from 5.75 percent to 8 percent, can he confirm that a household currently paying $500 a week in mortgage costs will face another $136 a week by the time that mortgage hits 8 percent?

Rt Hon JOHN KEY: For a start off, it is likely—I think the interest rates will make a gradual return towards a slightly more normalised level, but it is worth understanding that we have interest rates that are on a 50-year low. Secondly, if we want to talk about individual consumers, I am surprised that the Leader of the Opposition is worried about them at the moment, because he showed absolutely no worry about them when interest rates were at 11 percent. When the Government was putting so much pressure on spending, it was forcing up inflation and forcing the Reserve Bank to raise rates. In fact, let us just take that household that has a $200,000 mortgage. That household, in comparison, is paying $200 a week less today than when Labour left office. You see, when we go to the polls on 20 September and the voters ask themselves who they can trust with the economy, it certainly will not be Labour that will be the answer coming from their TV sets.

We can’t trust Labour to run themselves, they’re certainly not ready to be trusted with running the country.

Hon David Cunliffe: When the Prime Minister said in 2008 that New Zealanders should “not be fearful of their next bill”, why are so many people now fearful of their housing, power, and other bills, under this uncaring National Government?

Rt Hon JOHN KEY: For a start off, the member is wrong. I did not make that statement, and he will never actually be able to demonstrate that I did. I was asked about the definition of poverty, and I said that the definition, at least of being well off, is that you are not fearful of a bill. But if it comes to bills, then I say this to New Zealanders. What would they rather have: a 19.7 percent increase in power prices under National, or a 40 percent increase under Labour over 5 years, and 72 percent? Would they rather have interest rates at about 5 and a bit percent, or would they rather have them at 11 percent? Would they rather have an economy under a National-led Government that is growing in excess of 3.5 to 4 percent, with 1,500 people a week coming off welfare and going to work?

Would they rather have an economy that most people around the world have envied? And would they rather have an economy that is actually going to be back into surplus?

Labour are standing on the sinking sand of their poor record in government compounded by expensive and impractical policies should they be returned.

That contrasts with National which can stand firm on its record for restrained spending, lower taxes and economic growth in spite of the financial and natural disasters it’s had to face.


No money for big spending promises

March 11, 2014

Despite stronger economic growth, government revenue continued to track below forecast in the seven months to 31 January, Finance Minister Bill English says.

“This makes it even more important for the Government to continue carefully managing its spending as we target a return to surplus next year,” he says.

The Government’s financial statements for the seven months show the operating deficit before gains and losses at $1.06 billion, or almost $640 million larger than forecast in the Half-Year Update in December.

This was due mainly to core Crown revenue at $38.3 billion coming in $830 million below forecast. It was offset partly by lower core Crown expenses and higher returns from crown entities.

“While we have spending under control, government revenue can move around and is therefore more difficult to forecast,” Mr English says. “We remain on track to surplus in 2014/15 but, as we’ve said, this is a challenging goal and we need to remain disciplined.

“The extent to which tax revenue is likely to remain below forecast will become clearer as officials work through forecasts for the Budget. Timing issues appear likely to see some of the current variation narrow by the end of the financial year.

“The lower revenue is at odds with other macro-economic indicators that have been broadly in line with the Half-Year Update forecasts and, if anything, point to even stronger economic growth in the second half of the 2014 fiscal year.”

Continuing strength in sharemarkets generated gains on financial instruments of $2.8 billion, which was $1.4 billion ahead of forecast. As a result, the Government’s operating surplus at $3.4 billion was $690 million larger than forecast.

This reinforces the need for continued care over public spending and policies which promote growth.

It also shows there is no money for big spending promises and any party with expensive policies will be taking us in the wrong direction.


Why business confidence matters

March 7, 2014

First the good news:

Finance Minister Bill English talked up NZ’s economic progress this week, telling Parliament Treasury’s Monthly Economic Indicators for February show the positive momentum in the economy in the September 2013 quarter continued into the December quarter. The number of people employed increased by 66,600 in 2013, unemployment fell to 6%, and total weekly gross earnings were 5.2% higher than a year earlier, reflecting the combined effect of wage and job growth. Labour force participation, the proportion of the adult population available for work, is close to a 28-year high. The rate of building consents is at the highest level since 2008 and has doubled since 2011. Consumer and business confidence are relatively high.

And why it matters:

English says the Govt is focused on a more productive and competitive economy, and that means working to rebalance the economy so more of it is exposed to world trade. “In the long term we need to see less Govt spending and less domestic consumption, and more focus on profitable export sectors that earn a living for NZ from the rest of the world. The importance of business confidence is it tends to drive investment decisions. So when business is confident about the future, it is more likely to borrow the money or raise it from other sources and invest in the plant and equipment and the opportunities for more higher-paying jobs. Without that confidence, we will not get the investment and the better-paying jobs.”

And for those who think the minimum wage is too low:

The ANZ Business Outlook survey shows 71% of firms are optimistic, the highest level since 1994. English says the Govt is focused on locking in gains from this positive outlook where it has a direct role in doing so. The increase in the adult minimum wage to $14.25 an hour, from $13.75 an hour, takes it to a level 19% higher than in 2008. The Govt has sought to balance the needs of workers and businesses to keep the minimum wage at around 50% of the average wage, and this relationship of the minimum wage at 50% of the average wage is the highest in the OECD. . .

Those who complain the minimum wage is still too low forget too things – imposing a minimum wage costs jobs and it’s a floor not a ceiling.

Apropos of which, does anyone know how many people receive the minimum wage, how many of those are full time, permanent employees and what ages they are?


The measuring class

March 5, 2014

Finance Minister Bill English points out the difference between National and Labour in yesterday’s finance review debate:

Hon BILL ENGLISH (Minister of Finance): Mr Chairman—

Hon Damien O’Connor: What can we trust?

Hon BILL ENGLISH: Well, it is interesting to hear the interjection from the Labour side asking the question: “What can we trust?”, because I can tell you whom those members cannot trust, and that is their leader with his trust. That is the answer to the question. Damien O’Connor asked, today of all days: “What can you trust?” The answer, if you are a Labour member who voted against David Cunliffe, as most of them did, is that they cannot trust their leader with his trust. This is the leader who says: “I’m going to pay back the money to the people, whom I cannot identify, who gave it to me.” So that is what is going to happen.

David Cunliffe’s contribution to the economic debate today is: “People gave me money confidentially to a trust so I could avoid declaring it on the pecuniary interests register. And now that I’ve said I’m going to pay it back, I’m going to pay it back to people whose names I don’t know.” His own members of his own caucus do not believe that. Of course, the real shame of all this is that many New Zealanders who used to rely on the Labour Party to protect and advance their interests, including those who show they are on below 60 percent of the median wage, now find that the Labour Party is enmeshed in a tangle of its own making over whether its own leader is trying to get around the pecuniary interests of MPs. And who is left? Who is left to advance the interests of the lowest-paid New Zealanders? The John Key – led, National-led Government. That is who. We spend more time talking about the most vulnerable and those on the lowest incomes, because we are the Government, which last week, working with aspirational, low-income New Zealanders, got 1,200 of them off a welfare benefit and into a job. And if there is one thing Labour does not like, it is people getting off welfare and into work, because they might become ungrateful. They might become more interested in lower taxes than in higher benefits. Is that not a risk? Those people might start saying: “We want decent education for our kids because we understand the power of work.”, whereas Labour would rather they stayed on welfare and accepted mediocre education, because if you are disadvantaged, you cannot expect to learn. And that is another big difference. The National Party believes that the point of a public education system is precisely to overcome disadvantage. The Labour Party believes that the point of a public education system is to make sure that those who are disadvantaged do not learn. Because you cannot teach them. They are beyond hope. They do not deserve aspiration. They cannot learn. And then you can rely on them voting Labour, if that is their situation. Well, the evidence is that more and more of the people who used to vote Labour when Labour was a working-class party now do not believe that Labour can advance their interests. In the old days Labour was a working-class party; now it represents the measuring class.

Hon John Banks: Who?

Hon BILL ENGLISH: The measuring class—people with tertiary education who spend all their time telling us how much misery there is in our community. Labour knows even less than ever about what to do about it. Who is doing something about it? The National Party. We are not sitting around spending for ever arguing over measuring the misery; we are trying to break the patterns that locked it in. That is what is behind the whole-of-Government approach to this financial review. It is a National Government focused on getting results and working with people who have got hope and aspiration, and this year we are going to get to argue with a party that believes that none of those things can be achieved because people are too disadvantaged to be able to get ahead. We do not write them off; we work with their aspirations and their hope.

Labour and its potential coalition partners on the left – the Green and Mana Parties, want to throw money at problems without trying to solve them.

National has put a lot of effort into understanding the causes of the problems and directing money where it will do most good.

The left want people to stay dependent, National is helping people become independent.

The left would make work for the measuring class but keep the poor in need.  National is helping people get real work to enable them to help themselves, give them choices and prosper.

Labour and its friends favour the soft options which entrench dependency and poverty.

National understands the importance of education and the power of work to break the patterns that lock in poverty and all the social and economic problem which go with it.


Mustn’t put feet up

February 27, 2014

Quote of the day:

We must avoid complacency that might flow from believing today’s good times are permanent.

We don’t want to make a habit of doing the hard work under pressure, then putting our feet up just when the serious long-term gains are within our reach. . . Bill English.

He was speaking to Auckland Chamber of Commerce and Massey University:

 . . . This is the fifth time I’ve spoken at this forum since becoming Minister of Finance.

With your support later this year, I look forward to returning in 2015.

Today I’d like to update you on the Government’s economic programme and summarise the opportunities we have to lock in the benefits of our improving economy.

And I want to talk about what you can expect from another National-led Government, should we have the privilege of a third term.

Our approach will remain clear and predictable.

In the shorter term, we’ve worked to protect New Zealanders from the sharpest edges of the recession, and to help the people of Christchurch through the devastating earthquakes.

We have incurred significant extra debt by spending in excess of our revenue to protect the most vulnerable families, to maintain living standards and to support the renewal of our second-largest city.

As the economy improves, we will begin repaying that debt until it is down to prudent levels.

At the same time, we have set out on a longer-term path to repair the damage to our economy from several years of excessive borrowing, consumption and government spending, and the global financial crisis.

Reducing debt and repairing the damage of the failed policies of the noughties must be priorities once we’re back in surplus.

So together with households and businesses, we are rebuilding the economy’s capacity to deliver more jobs and higher incomes over the next decade. We are starting to see positive results.

More recently, the Government’s focus has moved from managing our way out of recession to managing a growing economy.

Initially, growth in the economy has been driven by high prices for our export markets, a catch-up in housing supply and the Christchurch rebuild.

This momentum is turning into a broader-based recovery where consumer and business confidence has lifted, employment is rising across the board and wages on average are increasing ahead of the cost of living.

However, the Government is taking a long-term view about the health of our economy. Each of the initial drivers of growth will peak over the next few years.

Export prices are likely to come back closer to normal levels, housing supply will eventually catch up and the Christchurch rebuild will peak and eventually slow.

We are setting out to manage this growing economy with a five to 10-year view in mind.

The Government will continue to focus on lifting New Zealand’s underlying growth rate so that beyond the peak of this economic cycle, incomes continue to rise and new jobs continue to be created.

And it’s critical we maintain a long-term focus. The rest of the world will not stand still.

By 2017, Australia, the US, the UK and Europe will have spent a decade since the global financial crisis becoming more innovative and more competitive.

And while emerging economies face uncertainty in the short term, they will continue their march up the value chain in the long term, adding to competitive pressure.

So later in the decade, we will be challenged again on our ability to improve the standard of living for all New Zealanders.

Our task is to take the opportunity of a reasonable growth outlook to deepen investment, upgrade skills, intensify and diversify our export base and rethink the next stage of gaining competitiveness.

We must avoid complacency that might flow from believing today’s good times are permanent.

We don’t want to make a habit of doing the hard work under pressure, then putting our feet up just when the serious long-term gains are within our reach.

We’ve seen that happen in the last decade.

Until the mid-2000s, New Zealand enjoyed a period of low inflation and high growth.

Complacency then led to a rapid pick-up in government spending, policy that undermined competitiveness, soaring house prices and an unprecedented increase in household debt.

By 2008, households faced mortgage rates of almost 11 per cent and business rates exceeded 9 per cent.

Interest rates are likely to rise soon, but they will still be well below the 11% in the dying days of the last Labour-led government.

The high cost of capital dampened business and investment growth.

It’s likely that relatively low productivity growth recently is a result of that drop in investment.

So while some increase in interest rates is an inevitable consequence of a growing economy, we need to do everything we can to ensure they don’t rise too sharply in the next few years.

We must create the conditions where higher levels of skills and better conditions for investment lay the foundation for more innovation, more diversification and more capital intensity.

Two areas where the Government can act to dampen the interest rate cycle are through housing market regulation and through government spending control.

Demand for housing is rising, and a sharp turnaround in migration flows will push demand even higher.

Planning rules and attitudes have restricted the supply of new houses that can be built in response to this demand.

We are working to significantly increase the supply of housing, particularly in Auckland and Christchurch.

The Government remains determined to free up supply so more low- and middle-income families can benefit from home ownership and so we can protect the wider economy from unnecessarily high interest rates.

Careful government spending will also help to keep interest rates lower, as the Reserve Bank regularly points out.

Politicians should not splash cash everywhere just because we are within sight of a paper-thin budget surplus next year.

If governments make large cash injections into the economy when house prices are already high, interest rates will be pushed up further.

That’s the danger a Labour-Green government would pose.

Our strong focus on better public services demonstrates that a system organised around getting results community by community can achieve so much.

In fact, the possibility of more spending can be a distraction from a growing focus in the public sector on solving complex problems rather than throwing money at them.

The National-led Government intends to avoid repeating the mistakes of the previous economic cycle.

And we believe we have the support of New Zealanders who can remember the dashed hopes of debt-fuelled growth and floating mortgage rates above 10 per cent.

They will benefit most from a stronger, more stable, economy that can again weather global storms and deliver higher incomes and more jobs.

But to take advantage of the opportunities we have, we must continue our relentless focus on doing hundreds of things better.

New Zealand’s productivity growth can be improved.

We know it will lift if all our efforts focus on higher skill levels for all New Zealanders and excellent conditions for more business investment.

As I mentioned to you last year, we’ve pulled all of this together in the Business Growth Agenda work programme.

This has six focus areas:

Export markets

Capital markets

Innovation

Skilled and safe workplaces

Natural resources

And infrastructure

The programme will be refreshed this year. I want to thank the business community for its participation in open and constructive discussions and helping to develop the Agenda.

Improving New Zealand’s capital markets is one of the focus areas within that work programme.

The Government’s share offer programme is contributing to deepening capital markets so more businesses can source the capital they need for new investment.

Our sale of minority shareholdings in three energy companies and Air New Zealand is delivering several benefits – including reducing the need to run up more debt to pay for new public assets.

It is also reducing risk for taxpayers.

The public sector is not well-equipped to manage the risks of commercial businesses operating in competitive markets.

Sadly and expensively for taxpayers, Solid Energy proves this point.

Full government ownership of most electricity generation was likely to become more problematic as market competition intensified – as illustrated by the fact that 20 per cent of all consumers changed suppliers last year.

The energy companies in the share offer programme will benefit from extra market scrutiny in the same way Air New Zealand has since it was set up as a mixed ownership company by the previous government.

A 100 per cent government-owned Air New Zealand would certainly not be the nimble, world-beating airline it has become.

As you will know, last year we successfully floated minority shareholdings in Mighty River Power and Meridian Energy, and we sold down 20 per cent of the Crown’s shareholding in Air New Zealand.

We met every one of the tests we set for the share offer programme.

New Zealanders were at the front of the queue for shares.

Including the Government’s majority stakes, at least 85 per cent of the shares were held by New Zealanders after each float.

We’ve so far raised around $4 billion, which is being invested in new public assets such as schools, hospitals and ultra-fast broadband.

That’s $4 billion we don’t have to borrow from overseas lenders.

And the share programme has been a shot in the arm for New Zealand’s capital markets.

As the NZX has noted, 2013 was a tremendous year for the sharemarket on all fronts.

Around $7.3 billion of new capital was listed on the NZX in 2013.

The total number of trades jumped by more than 30 per cent last year.

Driving this increased activity was a renewed interest in the markets by New Zealand investors.

More than 115,000 new common shareholder numbers were issued to investors last year, taking the total number of active accounts on the NZX to 585,000.

The sharemarket is now a more attractive option for sourcing the investment required to boost productivity.

The Government’s share offer programme has no doubt contributed significantly to this extra interest by New Zealanders in the sharemarket.

Today I can confirm that ministers have agreed to proceed with the last of the Government’s share offers – a minority stake in Genesis Energy, subject to market conditions.

We expect to open the offer in March and complete it in time for Genesis to list on the sharemarket around the middle of April.

We will set out all of the details in the next few weeks.

As with the other share offers, New Zealanders will be at the front of the queue for Genesis shares and we remain committed to at least 85 per cent Kiwi ownership.

Each of the previous share offers was structured to meet our balanced objectives of achieving good value for taxpayers and providing opportunities for New Zealand investors.

We will be doing that again through some new features for the Genesis offer.

First, the shares will be priced at the start of the offer period – rather than at the end as we have for the previous IPOs. This process is known as a front-end book build.

It will provide more certainty for Kiwi retail investors, because they will know the price when they apply for shares.

For the first time in the Government’s share offer programme, it means that New Zealand sharebrokers will bid for shares at the same time as institutions.

This will create stronger competition for shares.

We also expect that a range of independent reports from sharebrokers and other analysts will be available to New Zealand retail investors – as was the case during the Meridian IPO.

A front-end book build was used successfully last year during the Synlait, SLI Systems and Wynyard IPOs.

Second, the Government expects to sell between 30 per cent and 49 per cent of Genesis.

When we announced the share offer programme almost three years ago, we said that we would sell up to 49 per cent of these companies, subject to market conditions.

Our initial advice is that a smaller Genesis offer could increase price tension in the front-end book build by offering fewer shares to more bidders.

But we will not know that until we further test demand in the market, where investors now have a wider choice of several energy companies.

Our aim is to set a fair market price that works for both taxpayers and investors.

We will announce a final decision on how much of the company we intend to sell before the offer opens.

Third, I can confirm we will offer loyalty bonus shares to eligible New Zealand retail investors in Genesis – as we did with the Mighty River Power offer.

The quantity of bonus shares and the loyalty term will be announced at the start of the share offer.

In addition to the front-end book build and loyalty bonus scheme, we are taking another step to make the process more user-friendly for New Zealand investors.

Genesis Energy directors and the Treasury have been consulting closely with the Financial Markets Authority to produce a separate Investment Statement for the Genesis offer.

The more succinct Investment Statement will be the primary investment document for retail investors.

We will have more to say about the details and exact timing of the Genesis share offer in the next couple of weeks.

I also want to reiterate the Prime Minister’s announcement earlier this week that Genesis will be the last state owned enterprise or mixed ownership company to be floated by the National-led Government.

The Government won’t be selling any more shares in SOEs or mixed ownership companies – either this term or after the election.

We’ve achieved what we wanted to with the share offers in energy companies and Air New Zealand.

We’re now returning to a business-as-usual approach to SOEs.

That obviously doesn’t preclude SOEs buying and selling assets themselves, which they do all the time, or entering joint ventures or other arrangements.

The remaining SOEs are a combination of small entities, natural monopolies or companies in sectors that are unsuitable for future share offers.

What people don’t realise is that the value of the share sales programme is just 2 per cent of around $250 billion of total assets owned by taxpayers.

And while the share offer programme has been going on, the Government has invested heavily in other parts of its portfolio of assets.

Our focus will remain on improving the management of this significant stock of assets, on behalf of New Zealand taxpayers who rely on them to deliver high-quality public services.

So we need to make sure they are getting the best value for this considerable investment.

I’ll give you a good example. Taxpayers own $17 billion of state houses.

Around one-third of these houses are in the wrong place or are the wrong size.

The state has not kept up with the impact of changing demand in terms of the size or location of state housing.

So assistance for vulnerable New Zealanders in need is not as effective as it should be.

Yet the opposition will kick and scream at any proposal to sell houses which aren’t fit for purpose or in the right place.

The Government will continue working with other housing providers who can better meet demand.

In housing and in other areas, we will continue recycling taxpayer assets to free-up money for reinvestment in areas where there is genuine demand.

This is just one example of how we will better manage existing and new capital on the Crown’s balance sheet.

Conclusion

So in conclusion, later this year New Zealanders will have a clear choice as we head into the election campaign.

11
Under John Key’s leadership, the Government, alongside households and businesses, has managed New Zealand through some of the most significant challenges we’ve seen in generations.

We have a faster-growing, more sustainable economy. Wages are increasing faster than the cost of living and tens of thousands more jobs are being created every year.

We are providing more elective operations, more New Zealanders are getting off welfare and into work, and the crime rate is falling.

We’re on track to surplus next year, and we’ll soon be able to start repaying debt and investing a bit more in priority public services.

The alternative is to put all of this at risk at the election and radically change direction.

We’ve already had a taste of what that change of direction would involve: a combination of high government spending, anti-market economic experiments and a lack of focus on what really matters.

That is a backward-looking policy prescription, particularly when the Government’s existing programme is starting to pay dividends.

I believe New Zealand now has the opportunity to significantly improve its economic fortunes and provide a better future for New Zealand families.

We are making good progress, but there is a lot more to be done.

Providing we stick to our plan, I’m confident that we will build the brighter future New Zealanders deserve.

The difference between the two major parties and the governments they would lead after the election are stark.

National is offering policies which are working. Labour is promising policies that won’t.

Labour and its coalition partners will offer to throw money at problems, National is offering policies to solve them.


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