Just when you think it can’t get worse


Treasury allowing Budget information to be found from a simple search on its own website was bad enough.

Calling it hacking and involving the police without properly investigating first was worse.

And just when the organisation ought to be showing it’s learned a lesson and taking extra care it does the opposite:

. . . 10:30am – In a major blunder, Treasury staff mistakenly handed out copies of the budget to journalists and political commentators.

Newshub’s Political Editor Tova O’Brien tweeted that she was given one of the top secret documents. When the recipients questioned whether they were supposed to see them before going into the lock-up, she says an official asked “Are you not Treasury?” before hurriedly taking the copies back. . . 

It’s a simple human error but given the lead-up it shouldn’t have happened.

So will heads roll?

Treasury bungled badly and Finance Minister Grant Robertson and Winston Peters made baseless accusations against Simon Bridges.

Will there be resignations or even apologies?

Don’t hold your breath.

Rural round-up


Westland ups its payout prediction for the coming season:

New Zealand’s second biggest dairy co-operative Westland Milk Products has released a budget for the 2016-17 dairy season of $4.55 – $4.95 per kilo of milk solids (kgMS).

Payout for the current season will be in the range of $3.80 – $3.90 per kgMS.

Westland will also start its payout advance payments for the 2016-17 season at $3.80 per kgMS, payable 20 September 2016. . . 

Westland tops Fonterra – Hugh Stringleman:

Dairy farmers received cold comfort when Fonterra announced a low forecast milk price of $4.25/kg milksolids for the new season from June 1, with an advance rate beginning at $3.01.

Analysts’ expectations had been for an opening price of $4.60 or more, as well as some upside when world product prices steadily improved as expected towards the end of 2016.

They said Fonterra seemed to base its opening forecast on spot market prices and not the generally expected improving trend. . .

Farm profits help rural students get ahead – Kate Taylor:

A hill country farm east of Dannevirke has helped hundreds of young people with their tertiary studies. Kate Taylor visited to find out how.

Sheep and beef farmer Max Buckendahl has called the Weber district home for almost three decades but when his 30th anniversary rolls around next year he’s off to see the country.

Together with partner Lynn Moss and a fifth-wheeler artic truck caravan, he’s going to work (and fish) in the warmer climates of Northland for half the year and travel New Zealand for the other half.

“There’s no particular reason to go now but I wanted to stay here 30 years first,” he says. . . 

Silver Fern Farms:Details of Special Meeting:

• Special Meeting date set for Monday, 11 July 2016

Dunedin 27 May 2016: Silver Fern Farms has today settled the statement from two of the 80 requisitioners, in a form that Silver Fern Farms is willing to include in its Notice of Meeting, and has set a date of Monday 11 July to hold the Special Meeting.

The Board has received a statement from two of the 80 requisitioners and notes that the original 80 requisitioners sought a meeting of shareholders to consider: . . 

Silver Fern shareholders to vote again on Shanghai Maling deal in July – Paul McBeth:

 (BusinessDesk) – Shareholders of meat processor Silver Fern Farms will have a second vote on whether to approve its planned tie-up with China’s Shanghai Maling Aquarius in July, though the board intends to go ahead with the deal irrespective of the outcome.

The cooperative today set the meeting for July 11 in Dunedin where shareholders will vote on approving the proposed partnership and restructure, where the Chinese firm takes 50 percent ownership of the meat processor in return for $261 million of cash, a special dividend, and funds to bankroll the cooperative for seven years. Shareholders backed the deal in October, but John Shrimpton and Blair Gallagher, representing a group of 80 shareholders, have since sought a special meeting to effectively reconsider the transaction. . . 

Federated Farmers welcomes Freshwater Improvement Fund:

Federated Farmers is commending the Government on a new $100 million Freshwater Improvement Fund to aid communities investment in solutions for water quality in New Zealand’s rivers, lakes and groundwater supplies, announced in yesterday’s budget.

Federated Farmers water spokesperson Chris Allen says the fund will help communities achieve desired water quality outcomes sooner.

“It’s going to take innovative thinking, time and money to get to the level of water quality our communities aspire too,” he said. . . 

TB continues to be challenge for next decade:

Funding for TB control is less than it has been in the past but Federated Farmers is confident the new programme will continue to make progress with a more efficient spend of the money.

Federated Farmers OSPRI (TB Free NZ) spokesman Anders Crofoot said: “The amended TB Plan is a shift in approach from containing the disease to active eradication in livestock and wildlife. To date we’ve been successful at removing TB from large areas of New Zealand. This means with improved operational efficiencies and targeted work, enabled by advances in modelling we should see new TB Plan targets achieved.

The programme carried out by OSPRI will aim to eradicate bovine TB from cattle and deer by 2026, and from TB-infected wildlife in New Zealand by 2055. . . 

Government Support for Landcare:

Yesterday’s Budget marks a return to stable base-line funding for the work of NZ Landcare Trust.

The Minister for the Environment is responsible for financial appropriations for the 2016/17 financial year which include approximately $27 million for grants to third parties for water initiatives, environmental management and education programmes.

A specific appropriation identified within ‘Vote Environment’ has been established for the promotion of sustainable land management practice through a national network of coordinators. These funds are available due to the reprioritisation of $800,000 from the Community Environment Fund. This transfer reflects joint Ministers’ decision to fund the NZ Landcare Trust activities for 2016/17 and out years. No expiry date for this resourcing commitment has been set and it is identified as an on-going commitment. . . 

DairyNZ’s commitment to supporting dairy farmers:

Industry body DairyNZ is committed to supporting dairy farmers following the announcement by Fonterra of an opening forecast Farmgate Milk Price of $4.25 per kgMS for the 2016-17 season.

“The $4.25 per kgMS is not a surprise, although the particularly low opening advance rate of $2.50 per kgMS plus capacity adjustment is tough for farmers who will find the winter particularly difficult,” says DairyNZ chief executive, Tim Mackle. “This is the lowest opening advance rate in at least the last 14 years.

“The break-even milk income required for the average farmer is $5.25 per kgMS, yet under this forecast scenario they’ll only be receiving $4.45 per kgMS all up in terms of farm income, including retro payments from last season and dividends. . .

PwC supports NZ Milk Futures to manage milk price risk:

The NZX today launched a NZ Milk Futures contract that will eventually provide the opportunity for large and small dairy farmers to proactively risk manage milk price movements and volatility.

“The new futures contract essentially replaces, and considerably enhances, the Guaranteed Milk Price (GMP) contract previously offered by Fonterra,” says Roger Kerr, PwC Partner and Treasury Advisor.

“While the new futures contract has been expected, it will need support from the market to ensure its viability. This means that industry players with resources available to make this commitment, should be encouraged to participate,” says Mr Kerr. . .

Budget changes will benefit children – Dr Lance O’Sullivan


Northland GP and New Zealander of the Year says the Budget announcement of more money for beneficiary families and the requirement to seek work when the youngest child turns three is a good move:

Dr O’Sullivan says in the Northland communities he works in, the kids of beneficiaries are often better off out of the home because they’re less exposed to social dysfunction.

“Now that could be alcohol, drug abuse; that could be violence; that could be mental health problems; that could be problems with incarceration,” says Dr O’Sullivan.

He says putting those children into childcare during the day ensures they have some good role models early on.

“I think we should be able to expose them to positive environments, keep them warm, safe and dry and give them a learning opportunity that will prepare them for school. I don’t believe we should waiting until they’re five.” . . .

Home ought to be the safest place for children.

Parents ought to be the best teachers and role models but tragically for too many children they aren’t.

Dr O’Sullivan sees them and knows that these children will be better away from their homes, if only while their parents are at work.

More of what’s working not boring


Several commentators are criticising today’s Budget for being boring.

Boring in the sense of no surprises is good for Budgets.

We should be grateful the days when everyone stocked up on fuel and fags then sat round the radio listening to the Finance Minister add taxes here and give out subsidies and other taxpayer largesse there are long gone.

But a Budget that delivers more of what’s working for New Zealand shouldn’t be written off as boring and the programme being built on in successive Budgets is working.

NBR editor Nevil Gibson writes of a Budget success story we don’t hear about:

One of the biggest contributors to the reduction in the budget deficit is the money not being spent on welfare.

It’s a success story you won’t hear much about as opposition parties insist a rise in the welfare budget is a better measure.

But, like the ACC reforms and its lower fees, the savings in welfare benefits are like a tax cut for all other taxpayers. . .

The reduction of people on benefits pays dividends in financial and human terms.

The reduction in benefit numbers since the reforms began in 2012 and the projections are described as “startling” by an Australian commentator, Rick Morton. 

His column quotes figures that show the number of years people will spend on benefits has fallen 12%, worth 650,000 years of benefit receipt in the next five decades.

“Two-thirds of this is due to a reduction in the number of people who will gain benefits and one-third is a reduction in the time they will spend on those benefits,” Mr Morton writes.

“From $NZ86 billion, the future liability of the welfare recipients shrank to $76.5 billion in 2013 and to $69 billion last year, largely on the back of economic factors such as inflation.

“But $2.2 billion of the reduction was attributed, in a report released earlier this year, to the ‘effectiveness’ of the policy, which is measured by fewer people getting access to benefits and more people leaving them.” . .

Lindsay Mitchell notes the success in reducing the number of teen pregnancies:

. . . To be demonstrating prevention-success alongside support for the diminishing number who do become teenage parents is a political dream. 

Stopping people going on to welfare and getting beneficiaries from welfare to work are two of the best ways to alleviate poverty.

Whatever further measures to address the problem of poverty are announced in today’s Budget, the significant reduction in the long-term financial and social costs of welfare are anything but boring.

An email from the National Party yesterday made these points:

  1. 194,000 new jobs created since the start of 2011 under National – that equates to around 120 new jobs every day.
  2. We’ve turned the Government’s books around – the deficit peaked at $18.4 billion in 2011 and now we’re expected to be back in surplus next year, a year later than the target we set in 2011. We’ll still be one of the first developed countries to be back in surplus after the global financial crisis.
  3. This will be the type of Budget a responsible Government can deliver when it’s following a plan that’s working.
  4. Budget 2015 will contain $1 billion in new spending. It continues to support New Zealanders and help families while responsibly managing the growing economy and the Government’s finances.
  5. The Government will continue building on what we’ve put in place to address the drivers of hardship. This approach is working – there are now 42,000 fewer children in benefit-dependent families than three years ago. So our spending will make a difference to those who receive it, while at the same time we respect the taxpayers who pay for it.

There is no money for a lolly scramble budget and even if there was that would be wrong.

A business as usual budget might be boring to some but it’s working for New Zealand.


Why the numbers matter


Budget 2014 has the books back in black – but why do the numbers matter?

The numbers matter because only when they are positive can a government afford policies to help people that will be sustainable.

Budget day behind the scenes


Lower welfare costs fund surplus


A reduction in welfare spending is funding the surplus.

Economic growth has helped but a faster than expected drop in the cost of welfare is the bigger contributor:

English told an audience of business people that in 2010 the Government had expected to be spending $11.5b on welfare this year.

However in following Budgets it trimmed the forecasts and this coming year it would be spending about $10.5b.

“The welfare bill is going down and going down faster than we expected. . .

English said governments in the past had been passive on these costs but National had tightened up the system and the expectations of people on welfare.

It got experts to work out what the 290,000 people on welfare would cost in the long run.

Their total liability was $76b. Apart from superannuation it was one of the big costs that underpinned the tax bill.

That is a huge amount of money, and National has proven that with the right policies it is possible to reduce it.

Two thirds of the liability came from people who first got a benefit under the age of 20. “So it confirms what grandma told you. “Don’t let those young people get off the rails because when they do it’s very expensive.”

The experts told the Government that if a person got a benefit once it made them much more likely to get a benefit again. If a young woman under 20 with a child went on a benefit the average length of stay on the benefit was 20 years.

“That’s expensive, very expensive,” English said.

A couple of years ago the Government put a supervising adult with the 4600 mostly young women under 20 with a child who were on a benefit. They typically had little education and lived in old, cold houses and had been left to sink or swim on their own.

That number had now shrunk by 40 per cent to 2600.

“And that’s going to save us hundreds of millions.”

Kiwiblog has a budget slide that illustrates the savings:


The savings aren’t just in welfare spending.

Health and educational outcomes are better for children in families supported by work rather than welfare.

Those savings aren’t just financial either – there are significant social dividends from stopping people going on to welfare and helping those who can work to work.



Anti-irrigation, anti farming, anti-provinces


Thursday’s Budget included $40m of new funding for irrigation and the environment:

The Budget’s $40 million of new funding for irrigation projects will deliver economic and environmental benefits for New Zealand, Primary Industries Minister Nathan Guy says.

“This will help unlock the potential that water storage and irrigation can deliver, giving a real boost to jobs and exports in regional economies,” he says.

“This new capital funding of $40 million comes from the Future Investment Fund and will be used to purchase shares in Crown Irrigation, enabling it to make further investments. It is in addition to $80 million allocated in last year’s Budget.

“If current proposals are advanced there could be a further 420,000 hectares of irrigated land available for a variety of uses over time. Research from NZIER suggests that exports could be boosted by around $4 billion a year by 2026.

“Irrigation often has real environmental benefits, with more consistent river flows in summer and reduced pressure on ground water sources.

“Only 2 per cent of rainfall in New Zealand is captured and used for irrigation. Clearly we need to do a better job of using this precious resource.

“After the extreme drought most of the country suffered last year, and the one earlier this year in Northland and Waikato, the need for better water storage is obvious,” Mr Guy says.

Crown Irrigation makes targeted bridging investments in irrigation schemes that would not be established with private finance alone. All decisions are made by an independent board.

Last month, Crown Irrigation announced its first investment, with $6.5 million going towards the Central Plains Water Scheme in Canterbury.

Bridging investment enables schemes to get off the ground and must be paid back.

The extra money shows the government recognises the importance of irrigation for both economic and environmental reasons.

That has always escaped the Green Party and now Labour too is turning its back on irrigation.

This has, not surprisingly, upset Federated Farmers president Bruce Wills:

. . .  A recent jaundiced attack upon irrigation has me questioning if the Party gets it.  This speech reads as an electoral game plan designed to demonise a minority of the population while amplifying prejudices and preconceptions about what we do.  Labour’s political calculus is cynical because ‘farming equals bad water’ is dog whistle politics.  Something, I honestly thought we’d moved beyond when Labour Leader David Cunliffe said, in more agricultural parlance, that farmers are good guys.

Labour’s anti-irrigation stance is a flip-flop from when Jim Anderton was Agriculture Minister.

Anderton talked a lot about irrigation but never delivered.

He used to come to North Otago, promise the earth, get positive media coverage for that but failed to do anything at all to support irrigation in the area.

It also contradicts Labour’s desire to enact the world’s most repressive Emissions Trading Scheme.   Winding up the Crown Irrigation Company not only flies in the face of regional economic development but regional climate adaption.  Are memories so short, we have forgotten adaption was a key criticism of the International Panel on Climate Change? 

According to the IPCC, the Hawke’s Bay can expect to double or even triple the time spent in drought by 2040.  Adaption means new pastures and technologies, but fundamentally, it means storing rainwater.  Residents in towns and cities do not wait for rain before taking a shower.

While water is vital to farming, without stored water, it means some of our rivers will increasingly run lower and warmer.  This is a consequence of less rainfall in a changing climate.  It will also impact farming and the environment equally.  The most distressing thing about dog whistle politics is that it denies that farmers live where we farm. It denies that we drink water and denies that our families swim and fish too.  It is a naked attempt to make farmers a breed apart.  It is unreconstructed class warfare.

One thing we agree with Mr Parker on is his speech title, because “you can have both.”  Farming and the environment are flipsides of the same coin so are we perfect?  Far from it.  Does intensive agriculture have an impact on the environment? Of course it does.  Do our growing cities impact the environment? Of course they do. 

Look, farming does need to do better and we are putting huge resource and effort into reducing the footprint of our most important export industry.  This takes money but it also takes time and yet we can point to marked improvements from Lake Rotorua to Otago’s Shag River.  Last year, the Ministry for the Environment’s river condition indicator, said that 90 percent of the sites tested were either stable or improving. You need a clean and healthy environment to farm successfully, so making innovations like water storage more difficult, simply isn’t going to help. 

A denial of water in concert with an ETS seems just the start.  If I can surmise Labour’s economic strategy from this speech, it seems to tax agriculture into the sunset hoping that something, anything, will take its place.   That’s an unprecedented gamble.

According to David Parker, we can also look forward to Resource Rentals targeting farms and a Capital Gains Tax too, which pretty much puts the Sword of Damocles over our head and the 138,000 jobs we support.  I have recently seen policies and politics akin to what’s being proposed.

Argentina may not have capital gains tax, but it does have taxes on property sales with stamp duty on rented accommodation.  It may not have resource rentals but it does have GST on utility leases like water of 27 percent.  It may not have a punitive emissions trading scheme, but it does have export taxes on primary exports of up to 35 percent.  Argentina has a tax for almost every occasion and it also has 30 percent inflation.

As some Argentinean farmers face 86 percent taxation, the only way to survive is to farm in wide but ever decreasing circles.  Its big export is soy where over 20 million hectares is in cultivation and that’s a lot more acreage in one crop than the entire South Island.  It is also overwhelmingly genetically modified and that I was told came at the behest of the Argentinean government.  All needed to fund a tax and spend Catch-22.

What is at stake here is a very large chunk of New Zealand’s $50 billion merchandise exports which pays for everyone’s daily bread. 

A calculated demonisation of farming is an attempt to drive a wedge between a farming minority and the urban majority. It plays on every cliché and every negative perception about farming and it was telling there was no mention of the Land and Water Forum’s success.  It is a worry when many positives seen in the Ballance Farm Environment Awards, the Dairy Industry Awards, QEII National Trust and the NZ Landcare Trust are blithely ignored.

While Labour certainly took one small step forward with its Monetary Policy, this tone represents one giant leap backwards, which is why Federated Farmers has the backs of farmers.

Labour’s not just anti-irrigation, its for more taxes and Feds’ Dairy chair Willy Leferink says Labour is gunning for farmers:

Let me put my cards on the table I am a swing voter so Labour’s recent economic policy release from Finance spokesperson, David Parker, pricked my interest.  If a week is a time in politics a few days must be like years, because another speech from him had me shaking my head in disbelief.

According to Parker, National is allowing “public rivers and estuaries to be spoiled by nutrient and faecal contaminants from agriculture.”  Funny I didn’t think we had private ones.  We also got this, “In the absence of effective environmental standards, this will also mean more dairy effluent and nutrient run-off into our rivers and lakes, and into our estuaries and inshore fisheries.”  It reads like something from Fish and Game’s head office.

Labour’s big idea is to tax farming.  I wonder what that will do to supermarket prices let alone our international competiveness.  Labour also keen to impose the world’s most extreme Emissions Trading Scheme incorporating all biological emissions.  That will see our costs explode and consumers will ultimately foot the bill.  That’s not all.  Instead of giving more money to DoC to save Kiwi, they’re going to save lawyers by toughening up the RMA and DoC’s advocacy role.

But wait there’s more.  In a bizarre contradiction, given the UN’s climate boffins say New Zealand isn’t doing enough to adapt to climate change, Labour is going to scrap all public support of irrigation. 

This gets even surreal since Labour will introduce a Resource Rental Tax on water but only that used by agriculture.  I can only surmise Mr Parker believes there is zero pollution whenever he enters the littlest room.  There’s got to be a Tui billboard in that.

When you put this together with a Capital Gains Tax (yep, targeting farms) you’ve the impression Labour doesn’t like us and wants to tax us into the sunset. 

The sting in the tale means the price of food will skyrocket but I bet Labour has a KiwiFarm policy up its sleeve.  It will have collectivised state farms producing cheap bountiful food for the masses to be sold in nationalised KiwiSupermarkets.  I think the Soviets once tried that.

Yet we shouldn’t worry because clean energy is apparently the new dairy.  Despite the fact you cannot export electricity, Parker says we have great opportunities in clean energy like hydro and geothermal yadda yadda yadda.  He talks about LanzaTech but misses the point they left New Zealand because of stultifying regulations and that’s under National!  Hydro must also be an in-joke given the last aborted attempt to build one failed and under Labour, the RMA will be tightened.  Meanwhile, any industry capable of using this bountiful energy won’t be able to emit a puff of greenhouse gas without being walloped by the ETS.

The most distressing thing to me is Labour’s clichéd view of farming.

It was a real shame the only MP at the recent New Zealand Dairy Industry Awards in Auckland was Nathan Guy.  The lack of an opposition MP surprised and disappointed me in equal measure.  One person volunteered, ‘because the tickets weren’t free’ and perhaps that is sadly true.  As a farming leader and as farmers, we get a few raspberries chucked at us but this makes you look in the mirror. 

While my farm gate is open to Mr Parker, can I suggest visiting the inspirational entrants of the 2014 New Zealand Dairy Industry Awards.  Being close to this competition, which Federated Farmers started 25 years ago, I know the winners are really first among equals.

Charlie and Jody McCaig have gone from being Taranaki farm management winners in 2011 to become 2014 New Zealand Sharemilker/Equity farmer of the Year.  How about Ruth Hone, who was named Dairy Trainee of the Year and the first ever women to lift that title.  She is smart, capable and adaptable and those words sum up the dairy industry in 2014.  Then you’ve got a 27 year old Nick Bertram, who came into dairy with a background in accounting thanks to his teacher dad, but no farming experience.  He was named Farm Manager of the Year for 2014. 

These awards showcased others who’d joined dairying from fields as diverse as professional rugby, hospitality, engineering and the police.  As one in the eye for Kim DotCom’s party, it included an IT professional too.

Then again I suppose it shows why politicians are far less trusted than us farmers.  While they may subscribe to ‘don’t let the facts get in the way’ we don’t.

Labour has given up any pretence it’s supportive of farming and in doing so shows it has also given up on the provinces which depend so much on farming success.

The Waitaki District’s population has been going backwards for decades.

Last year’s census showed that it is beginning to grow again. The biggest influence on that must be irrigation.

There were four houses on our farm and the two nearest neighbours before irrigation, now there are 14.

We’re building a 15th and another neighbour is building two more.

That is happening everywhere that’s been irrigated bringing economic and social benefits to the district and it’s being done with due regard for the environment.

All shareholders in the North Otago Irrigation Company must have independently audited environmental farm plans which ensure that soil and water quality aren’t compromised.

Farmers used to have some faint hopes that Labour would counter the anti-irrigation, anti-farming policies of the Green Party.

Those hopes have been dashed and should they get into power, the provinces will be the first to pay the price.


Aus -NZ Budget comparison


Pricewaterhouse Coopers calls it a Ready to Rise Budget:

Despite carefully managed pre-Budget expectations, Budget 2014 has delivered two surprises: a surplus of $372m in 2015, significantly higher than the wafer thin surplus expected; and when taken over a four year period, higher planned new spending in health, education and welfare than was expected.

The higher surplus, despite extra spending, comes as a result of a forecast of strong economic growth of 3% in 2015 rising to 4% in 2016.

On the back of the strong economy, the
Government has announced it will increase new spending in future budgets by around $1.5 billion a year, half a billion dollars a year more than the 2014 budget allowance of $1 billion.

Budget 2014 forecasts rising surpluses over the next four years reaching $3.5 billion in 2018. These surpluses are committed to future capital and infrastructure expenditure.

Net debt peaks at $65 billion and then is held there while the economy grows. As a result, net debt is forecast to have reduced to the Government’s target of 20% of GDP by 2020. . .

Overall, Budget 2014 tries to strike a balance between returning to sustainable surpluses, allowing some more spending on key areas of need, and providing the fiscal backdrop to support economic growth. We think it largely achieves that. . . .

 It ehn compares our Budget with Autsralia’s:

Budget 2014 – New Zealand v Australia

Editorial approval for Budget


From south to north:

The Southland Times writes of felines and finances:

As the budget debate was winding down in Parliament yesterday the most popular story on the Stuff website was still “Cat saves boy from dog”.

Bill English will hardly be distraught. He knows this is not an election-losing Budget.

It’s the first since 2008 to project a surplus. Technically, it is perfectly possible for a Government to be rolled in an election year while economic figures are doing OK. Jenny Shipley managed it while running budget surpluses and with economic growth knocking around 3.5 to 4 per cent.

But the public had emphatically soured on the politics of her administration whereas the Key Government, for all that it has had a wretched couple of weeks, would still need to subside spectacularly to find itself in such straits.

English has found himself in the fairly happy situation of not needing a budget that would quicken any pulses . . . merely keep them steady. This one will surely manage that.  . .

Australia has done English the very considerate favour of delivering a gasper of a hard-times Budget just days before his. So if it was a test, we’d be the winners, right? And who doesn’t like beating the Aussies? Big tick for the Nats, then?

Truth to tell those contrasting fortunes are indeed likely to accelerate the net immigration inflow of more than 38,000 this year. That’s assuming people have been paying attention, what with that fabulous cat footage.


The ODT calls it a clever document:

This was the Budget that National – right from the time of its re-election in 2011 – would have hoped it could produce leading into this year’s election.

Mr English has not swayed from his path of fiscal restraint. Sure, he has had to borrow heavily during the past six years, but not to the extent the country plunged into recession.

Now, the return to surplus gives options such as paying down debt.

The careful management of the country’s finances by Mr English, and his team of ministers, has helped ensure New Zealand has been mainly immune from the worst of the global decline affecting Europe, parts of Asia, the United States and, latterly, Australia.

Economic growth has been one of the highest in the OECD and, for once, all Treasury indicators are pointing in a positive direction.

This was a Budget of few surprises, but with enough good news to count for something. . .

It will enable Prime Minister John Key to go into the election campaign confident his 2008 promises of fiscal restraint, providing the best care for families, and delivering a better public service have not been compromised.

Opposition parties will have to promise big to counter National, and if they do, the onus will be on them to say exactly how they will fund those promises. . .

If he is looking for a document to define his legacy as Finance Minister, Budget 2014 is a good place to start.

There is some criticism the Budget is too conservative, but that personifies Mr English, who learnt the trade from former finance minister Sir William Birch. And would most New Zealanders rather have a gambler as a finance minister, or a safe pair of hands?

The ”Boy from Dipton” has lived up to his reputation as a ”conservative” politician in every way.

The Timaru Herald opines on the Budget highlight:

The contrast was telling, helped by the fact Australia’s Budget and ours came just two days apart.

Theirs: there will be pain for everyone.

Ours: we’re operating with a surplus and tax cuts may even be on the way.

But hey, we’re heading into an election, so there’s bound to be some gloss. They aren’t.

The National Government has worked long and hard on being able to say it is spending less than it is collecting, and right on cue it has achieved that.

Selling off a few state assets and spending most of the proceeds has helped, of course, and as Labour’s David Cunliffe rightly points out, National has borrowed a massive $56 billion in its tenure, which costs $10 million a day in interest.

He says that’s a lot of money that could be spent on lifting kids out of poverty, which indeed it is.

But because National is the Government it sets the agenda, and the agenda yesterday was for enough lollies to keep sugar levels up without creating a free-for-all. . .

It’s a steady Budget without attempting to buy votes.

The best thing about it?

It’s not Australia’s.



The Press writes of seeking the recipe for growth:

When he delivered his first Budget six years ago, Finance Minister Bill English faced a grim prospect. Even though the global financial crisis had not yet hit, the economy had gone into recession some time beforehand.

Government debt was at a reasonable level, but spending in Labour’s last years in office had ballooned and, according to Treasury projections, the Government faced deficits for a decade or more ahead.

National had been elected promising responsible Government finances and a stronger economy, but without changes those looked unlikely.

English smiled yesterday as he took delivery of the bound Budget document and well he might. By delivering a surplus, albeit a tiny one, several years ahead of what he had forecast several years ago, today’s Budget will be brighter than even he expected it to be by now.

Since it came to office six years ago, the Government’s core promises have been that it would deliver a stronger economy, responsible public finances and a better public service.

In 2011, after the earthquakes, it added a promise to rebuild Christchurch. Those pledges have become a mantra and can be expected to be repeated today.

Without engaging in a wholesale slash and burn, it has kept public spending under control while maintaining services.

So far as it is possible for a government to claim credit for the performance of the economy generally, National can be pleased with the prospect of growth possibly hitting more than 4 per cent this year. The trick will be to make that growth enduring. . .

In spite of the benign aggregate position it should not be forgotten that, as an Otago University survey reiterated last week, New Zealand still has significant pockets of deprivation.

There are likely to be numberless reasons for them but a growing economy delivering opportunity and jobs offers part of the solution for sustainably dealing with them.

The Marlborough Express writes the jobs challenge continues:

. . . Finance Minister Bill English told Parliament the realisation of job growth forecasts depends on the confidence of businesses to invest more capital and employ more people.

“That is where new jobs come from. They do not come from the Easter bunny.”

The Easter bunny didn’t get a mention when English unveiled his sixth Budget yesterday.

The test will be how much his programme can lift confidence and stimulate growth to create the environment that will put priority on employment growth.

The Dominion Post notes the crowd goes mild:

This is a deliberately bland and even boring Budget. The Government has clearly decided that grey and safe is its best hope in election year. The only surprise was free doctors’ visits for under-13-year-olds. Middle New Zealand will welcome it, as it will many of the other, carefully telegraphed, handouts. More paid parental leave: who could object? A bit more help with childcare costs: why not?

National has made a virtue of small gifts: it shows that the party is “responsible” and not spending money it doesn’t have. And that is why the $372m surplus is intended to have such political heft. The amount is piffling within a $70b budget, and would make no economic difference if it was an equally mouse-sized deficit.

But the surplus is the signal that a caring government has brought us home safely after a nasty trip through recession. And if we carry on being careful and good, the Government says, life will carry on improving. Finance Minister Bill English gave a hint of tax cuts to come, but waffled when pressed. So that means National is keeping its tax promises till closer to the election.

The real question is: is this all the voters want – thrift, mild rewards, steady-as-she-goes? The dissenters have pointed to National’s noticeable lack of flair and imagination. No big new policies, no bold new directions, no surprises.

But that is what the John Key Government is, and so far it has won elections. In tough times, the Government has spent freely to keep the ship afloat, and then it has slowly brought it to the fiscal shore. Now it welcomes us to dry land. . .

Much bolder moves will be needed, including a capital gains tax. But National’s caution here is a drawback, not an advantage. Sometimes problems are serious and need action. National seems to believe it will be enough to cut red tape and remove some of the planning obstacles in the way of housing. It won’t.

At present there is little rage about poverty, inequality and the housing crisis. These problems are raw and real but voters are patient and only a minority of voters now seem to actually hate National. It will probably take another term before a majority is truly fed up with Key and his band. In the meantime, this bland document may be a document for the times.

The Manawatu Standards call it a Budget comfortable fit for many Kiwis

There may be little bling to Finance Minister Bill English’s sixth Budget but, like a pair of sensible shoes, it will make for a comfortable fit for many New Zealanders.

It was a budget light on ambition, heavy on prudence, in its commitment towards a modest $372 million surplus, but with a few policies bearing a distinctive Labour hue to them.

Its “steady as she goes” tenor does shrewdly mine the Kiwi ethos. Yes, a tax cut would have been nice, but they’ve balanced the books and haven’t forgotten the children. So she’ll be right.

It is a budget good enough to serve its purpose, whether that is pragmatic progress towards further surpluses and the lure of an eventual tax cut or simply placating middle New Zealand until after the general election in September is a matter of perspective. . .

The NZ Herald says the Budget steers safe course in rough waters:

The Treasury gave the show away in the Budget’s supporting documents, mentioning that while tax revenue is running at a lower level than expected, some of the Government’s intended spending has been “rephased” to produce the surplus it has promised.

Opponents can call it a trick of “smoke and mirrors” but the verdict that matters comes from credit agencies. They are unlikely to be concerned. Spending rephased is spending we might never see unless surpluses can be maintained. . . .

The Budget’s best feature is the value Bill English seems to be getting for little extra spending on public services. Departments know the results he wants and seem to be delivering them without complaint from providers or the public.

They have stopped demanding endless increases in funds and he shared the credit with them yesterday for his surplus.

Doctored it may be, but it will get better.

The Herald’s last point is a pertinent one and one of the National governments successes – getting better pubic services for less money.


PM’s Budget speech


Or if you prefer reading to listening:


15:04:24~Rt Hon JOHN KEY (Prime Minister)

Rt Hon JOHN KEY (Prime Minister): Well, that was a bit of a woeful speech from David Cunliffe, was it not. The only half-decent line was one written by John Armstrong; it is a shame he did not write the rest of the speech, because it might have been vaguely interesting. As for the label that he put on the Budget, I hate to tell David Cunliffe the bad news, but that was actually the label that Rodney Hide put on the 2002 Budget, so if he had stolen a few of the decent ideas from the ACT Party, he might have been able to give a half-decent speech, but he could not. Let us be honest—it is David Cunliffe. He is doing about as well for the Labour Party as Benji Marshall did for the Blues . He is the man who has about as many supporters in his caucus as Brendan Horan has in his—one. That is it. And here is the winner, because he is shaking his head over there: Grant Robertson. Good news, Grant! Good news, son, you are 127 days, 3 hours, and 55 minutes away from being the leader of the Labour Party. Fantastic—fantastic! It is no doubt that Grant assisted David in the writing of that speech. You see, this is what is vaguely interesting at the moment. The Labour Party—and I kid you not; this is an absolutely true story—is out there polling. It is not polling on its policies; it does not have any, and you could see that from the speech. It is truthfully out there asking this question: is Shane Jones going to be missed from the Labour Party? Well, here is a tip: yes, actually! He is the only guy who believes in economic development, and to quote Shane, why would he want to “hang around” and be economic development Minister in a Government that does not believe in economic development? This was a very, very good Budget by Bill English—a very good Budget. It reflects 6 years of hard work by the Government but by businesses and New Zealanders from one end of the country to the other. It was a confident Budget for a confident nation. It is a nation where, overwhelmingly across New Zealand, the majority of New Zealanders believe this country is heading in the right direction. It is a Budget that sees the books back in surplus, growth at 4 percent, wages rising faster than inflation, and more money in this Budget for families, for businesses, and for the most vulnerable.

It is a Budget focused on growth, jobs, and prosperity. It is a Budget that looks to restore the core finances of New Zealand. It is a Budget, like this Government, focused on the issues that matter. It is a Budget that New Zealanders will recognise—that this is a great country, a great place to raise a family, and a Government that is committed to doing everything it can to make that situation even better. This was Bill English’s sixth Budget. As he pointed out yesterday, he has had as many Budgets as he has had children, which is living proof, I think—and I am sure you will agree with me, Mr Speaker—of why you should have a Catholic Minister of Finance . What should we contrast this Budget with? I know: let us contrast it with Labour’s alternative, because David Cunliffe read out Labour’s alternative on Monday. In fairness, it was not really a Budget; it was a wish list . It was mercifully brief, but it went a little bit like this—

Hon Annette King: Cameron Slater’s line, eh?

Rt Hon JOHN KEY: Nope. “Dear Santa, please, please, Santa, could you bring me 4 percent unemployment and whopping big future surpluses. I have been a good boy, Santa, even if I won’t tell Mummy and Daddy who the two secret donors to my trust were. Santa, I’ve tried really hard. Even if I did muck up the baby bonus and Shane Jones’ departure and a few other things, I’ve been a really, really good boy. Love, David. P.S. Don’t worry, I will let the reindeer sleighs go in the fast lane even though I’ve banned the trucks.” That was a summary of Labour’s alternative budget. Actually—let us be honest—that was actually slightly longer than Labour’s alternative budget, and more thoughtful. And I wrote it myself, unlike the Leader of the Opposition—always a positive. But, you see, this is the difference between a wish list and a Budget, because here are some interesting questions we might all like to answer. You see, did Labour support any of the savings that this Government has made to ensure that this country came back to surplus in any of the previous five Budgets? The answer to that is no, it did not. Did Labour support welfare reform that has seen so many New Zealanders get back to work? No, it did not. Did Labour support tax changes to reduce tax rates paid by every single New Zealander across the country? No, it did not. Did Labour support a 90-day probationary period so that small businesses could have the confidence to take on a worker? No, it did not. Did Labour support Resource Management Act reform so that people can build houses faster and support the growth of businesses? No, it did not. Did Labour support housing accords so that we could have special housing areas? No, it did not. Of course—my favourite—did Labour support the making of The Hobbit movies in New Zealand so that 5,000 jobs could be created here? No, it did not. Did Labour support saving 3,000 jobs in Southland when it came to Tīwai Point? No, it did not. Did Labour support, and does it support, irrigation for our farms so that we can see a significant increase in GDP? Does it support oil and gas exploration? Does it support foreign investment or skilled migrants? Will it even support a free-trade agreement with the largest economy in the world, the United States? No, it will not. Just before Labour members get a bit starry eyed about how it all was under Labour, let us just run through a bit of a checklist, because here are the facts of when it left office and what we inherited. In 2008 this country was in recession; now it is going to grow this year at 4 percent. In the last 5 years of the Labour Government there was a 50 percent increase in Government expenditure; we have got it under control. Mortgage rates for those homeowners that David Cunliffe was talking about—10.9 percent under Labour; under National, about 6 percent. Food prices—the thing that New Zealanders worry about—up 10.9 percent in the last year under Labour; 1.5 percent under this Government. House prices up 96 percent over the 9 years of Labour and up 28 percent under this Government. Electricity prices up 72 percent under Labour and 20 percent under this Government. The current account deficit was 7.9 percent; it is 3.4 percent under this Government. And maybe the most telling sign of all—under the Labour Government 3,000 New Zealanders a month got up and packed their bags for Australia. Under this Government it is 350—the lowest since records began in 1986. On Tuesday Australia delivered a Budget. If you ever want to see what an experiment of a Labour – Greens Government looks like, it is called Australia. It is called Australia, and Tony Abbott is having to pick up the pieces. Here is what the pieces look like. It means less support for families. It means billions and billions less for education and health. It means a pension age of 70. It means higher tuition fees, higher fuel costs, increased doctors’ charges, and thousands less employed in the State sector. Despite all of that, Australia over the next forecast period will rack up $100 billion of debt at the same time that this National Government will bank for New Zealanders $7.5 billion of surpluses. If we want to talk about the facts, I look forward to the debate about the facts, because this is a very, very good Budget. Its first focus is families—its $500 million, its free doctors visits for under-13s, and its free prescriptions for under-13s. We are talking about 400,000 New Zealand children and their families having complete confidence to take their young ones to the doctor any time for free. National delivered that for New Zealand families.

[Continuation line: There is $117 million]

There is $171 million dollars for paid parental leave—an affordable scheme extended from 14 weeks to 18 weeks, and far more flexible than the stuff Sue Moroney was talking about. For the many—and there are many—who miss out, there is an extension of the parental tax credit from $150 a week to $220 a week, lasting 10 weeks, not 8 weeks. It is an affordable package, recognising that mothers want to stay home in those formative times with their youngsters, and they will be supported by this Government. There is $155 million extra for early childhood education, $33 million for vulnerable children, and eight new children’s teams around the country. The No. 1 issue that New Zealanders worry about is health. Well, in this Budget, on the back of the very fine work that Tony Ryall has done as Minister of Health—and will he not be missed as one of the great Ministers of Health of this country—there is $15.6 billion. There is $112 million for disability support services, and $110 million for elective surgery. The difference between National and Labour—and we heard it from David Cunliffe—is that Labour knows how to borrow, and it knows how to spend, but it does not know how to run things very well. Under this Government, there will be 40,000 extra elective surgical operations, $20 million for rheumatic fever, and $6.3 million for cochlear implants. Twenty thousand New Zealanders a year are diagnosed with cancer. Under Labour, they go to Australia, where the other 3,000 a month are leaving. Under National, they get the gold standard of 4 weeks or less. There is more money in this Budget for cancer care. Education—what is more important than education? There is $10 billion in this Budget and $359 million to improve the professional standards of our principals and teachers. This is a Government that is not afraid to measure, monitor, and report on the progress of a child. This is a Government that is not afraid to put $359 million into making sure that every teacher that stands in front of every student in a class is of excellence. That is something to be celebrated and proud of. In welfare reform, what a tremendous job Paula Bennett has done. What a tremendous job she has done. There are 1,500 people a week leaving from welfare to work in the last 12 months. There are 30,000 fewer children living in benefit-dependent homes. It was pretty predictable that David Cunliffe would get up and talk about income inequality. It suits his argument, but like the truth, it is not real. You see—

Hon Annette King: Doesn’t suit yours.

Hon David Parker: It is—it is.

Rt Hon JOHN KEY: Well, you do not like it. You liked Bryan Perry from the Ministry of Social Development, who runs the most comprehensive study, when you were in Government, but when you are in Opposition you do not like it. What Bryan Perry’s study shows is that income has not become more unequal in the last decade. In fact, what it also shows is that when we compare ourselves to our peers—Australia, the United Kingdom, Canada, the United Sates—all of those countries are more unequal. Let us also have a look at this situation. This Budget also continues to support the most vulnerable in New Zealand, with Working for Families, accommodation supplements, and income-related rents. But this is also what it shows—and this is an interesting point for New Zealanders. It shows this—that the top 2 percent of taxpayers in New Zealand pay 22 percent of all personal tax in this country. The top 12 percent of households in this country pay 76 percent of all net income tax before you even account for New Zealand superannuation. Well, here is a question for Labour: if that 12 percent of households paying 76 percent of tax is not enough, how much is enough? How much is enough? The Budget does more for Christchurch, more for science and innovation, more for apprenticeships, more for transport, and more for housing. It does a lot more in those very important areas. Let me make this final point: this is a Government—

Hon Trevor Mallard: Tell us about Judith Collins. Tell us about Judith.

Rt Hon JOHN KEY: That is right—that is exactly what you would say. You are an Opposition that is worried about muckraking and trivia, and you have not got a decent thing to say about the economy. Well, guess what? I am proud to lead a Government that is focused on the issues that matter to New Zealanders—the economy, law and order, health, and education. That is what we do on this side of the House. We get the job done. On that side of the House, they are worried about all sorts of things, but they are not the things that New Zealanders at home are worried about, and how do we know that? Because the poll that was taken over the last 10 weeks saw Labour fall under 30 percent. Why? Because people are sick of hearing about trivia and muckraking, and you know what? David Cunliffe might have promoted Trevor Mallard back in the shop, and that will lead them all the way to where it took Phil Goff—to 27 percent or less, and he knows it. David Shearer knows it too. He knows that it is the wrong way to go. This Government is going to keep talking about the issues that matter. This Government is going to say to New Zealanders that there is a way forward that is progressive and positive. It is about a future where we back New Zealanders to succeed. We back this country to go well. We back this country to be able to sell more to the world than we buy from the world. We are not threatened by being a multicultural society. We welcome foreign investment. There was a time when Labour used to welcome migrants. Now they stand on a farm with a New Zealand flag. This is a Government that is focused on a New Zealand that is winning on the world stage. That is why we are becoming wealthier. That is why so many people want to come and live here. If David Cunliffe wants to keep talking, as the Opposition does, about trivia and muckraking, we will keep talking about the economy, law and order, health, and education. We are a very lucky Government to have Bill English delivering six magnificent Budgets. It does not say it all today. We are in surplus; Australia is $50 billion in debt. More people want to live here than ever want to go and live in Australia. This is a Government that is getting it right on behalf of New Zealanders.


Let's keep it that way. #3moreyears

Surplus albeit small


It might be small, but Finance Minister Bill English has delivered on his promise to return the government accounts to surplus:

. . . It’s a privilege to deliver the National-led Government’s sixth Budget.

It’s a particular privilege because this is the first Budget in six years to focus on managing a growing economy rather than recovering from a domestic recession and then the global financial crisis.

A growing economy supports employment and higher wages. It provides opportunities for families. And it pays for public services that New Zealanders rely on.

Budget 2014 looks ahead to build on the hard work done by every New Zealand household and business over the past five years.

New Zealand is in a good position.

We’ve made significant progress in recent years to deliver more jobs and higher incomes.

New Zealand is one of the first developed countries to return to normal economic conditions, with a recovery led by the private sector.

Businesses are investing, wages are rising faster than inflation and our export sector is posting record results despite the headwinds of disruption in international markets and a high exchange rate.

Public agencies are working better for New Zealanders and getting better results.

On most indicators that matter, we’re moving forward as a country.

If we lock in the hard-won gains we’ve made, there’ll be many opportunities over the next decade to improve our economic fortunes and secure a brighter future for New Zealand families.

Each year, millions more consumers in the Asia-Pacific region are becoming affluent enough to want, and afford, the goods and services New Zealand produces.

Mr Speaker,

Our challenge is to muster the capital, the people and the skills to take advantage of this historic change in our prospects and lift the aspirations and prospects of every New Zealander.

That requires sticking to our course, with careful stewardship of public money, with sound, proven economic policies and with a determined focus on results from public services.

Budget 2014 shows a return to fiscal surpluses.

There will be a small surplus next year, and increasing surpluses are forecast over time. The Budget also shows the economy continuing to build momentum, with employment continuing to grow and wages continuing to rise.

But these are just forecasts and there is a lot of work to do to make them a reality.

What matters to people and families across New Zealand are the opportunities created by a sustainable economic recovery.

So an important part of this Budget is lifting New Zealand’s capacity to sustain higher levels of economic growth for longer, grow incomes and support jobs.

And what also matters to people and families is that the Government will support them when they need assistance. . . .

Other Budget highlights include:

Photo: Investing almost $500 million more in the well-being of New Zealand's children and families is at the heart of new spending in the Budget. http://ntnl.org.nz/1sPTNUX
Details of that are here and more Budget details are here

Bill’s sixth Budget


Today Finance Minister Bill English will deliver his sixth Budget.

When National wont he 2008 election the government inherited the mess left behind after nine years of Labour-led high spending, high taxing, including a forecast decade of deficits and the country in recession before the rest of the world.

Today’s Budget is expected to forecast a return to surplus, albeit a small one.

That is a significant achievement given the expensive dead rats it had to swallow before it was elected and the financial and natural disasters which have happened since.

It has been achieved by careful management, a focus on the quality of spending rather than the quantity spent, while maintaining assistance for the vulnerable and without the slash and burn policies with which previous government have reacted to bad books.
Photo: Finance Minister Hon Bill English with the Government’s sixth Budget hot off the press. http://ntnl.org.nz/1sCYDoh

Reaching surplus is cause for celebration but not an excuse for profligacy.

Just as it does for individual or household budgets, a government surplus allows choices.

One of the highest priorities among the choices the government now has is repaying debt.

Another is the focus on spending that makes a positive difference, even if it means paying more now to spend less in the future.


Photo: Bill's got this. #nzbudget

Someone has to pay the bill


I tuned to talkback on my way home from Dunedin on Monday night and heard a man explaining to Kerre McIvor that everything went wrong in New Zealand when Roger Douglas was Finance Minister.

He was wrongly criticising the cure rather than the cause.

Roger Douglas’s recipe wasn’t perfect but radical change was necessary because of the parlous state our economy was in owing to too many years of living beyond our means.

No doubt Australian Treasurer Joe Hockey will be similarly criticised for the tough medicine he delivered in his first Budget last night.

Critics will forget he was handed a sick economy and it was the high spending and high taxing prescription of the Labor governments before him which did the damage.

Now Hockey’s had to present the bill which all Australia has to pay just as we’ve been paying the bill for the over taxing and over spending that Labour-led governments indulged in through the noughties here.

Forecast brighter


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.

Blue Budget


Today’s Budget is a blue one, literally and figuratively.

It’s got a bright blue cover and it will be one which is written with the understanding of the importance of sound financial management.

Finance Minister Bill English was looking cheerful in his pre-Budget interviews yesterday and he deserves to.

In spite of the woeful state in which Labour left the economy, and the natural and financial crisis with which the government has had to deal, National has done what it said it would.

It took the rough edges of the worst effects of the recession, reduced the cost of government while maintaining services and has on back on track to surplus in the next financial year.

Only the blinkered would believe that this would have been possible with a red or a red/green budget.

The government is launching an update of its Budget app for smartphones and tablets with interactive features that allow users to see how much tax they pay and how their tax dollars are spent.

It went live at 2pm as the Budget delivery began.

You can find it here.

Getting past the WIIFM factor


People sell papers. That’s what the first editor I worked for kept telling me in an effort to reinforce the importance of getting the human angle in stories I was writing.

That rule still applies, which is why reporters writing Budget stories sought people who would say what was, or wasn’t in it for them.

It’s human nature to think of ourselves first and want to know what’s in it for me (WIIFM) but wouldn’t it be good if someone looked beyond the immediate and personal to the longer term greater good?

We need to get past the WIIFM factor and concentrate on what’s best for the whole country rather than the short-term winners or losers.

We’ll all be better off with a return to surplus, less debt and a faster growing economy that isn’t weighed down by the burden of government.

Budget passes talkback test


Driving home from Christchurch last night I tuned into talkback, expecting to hear the usual suspects ranting against the government.

But the Budget was hardly mentioned.

A couple of smokers wanted higher taxes on tobacco to force them to stop smoking, a woman said prescription charge increases weren’t too bad and a recent graduate was pleased with the increase in the repayment rate for student loans because it would mean she’d clear her debt sooner.

However, most callers ignored the Budget and talked about the sentencing of Tame Iti and Rangi Kemara .

As Budgets go boring is best and the lack of interest from callers show it passed the talkback test.

It was a steady-as-she goes Budget, keeping costs down and directing most money to the areas of greatest need – health, education and welfare.

It was a responsible Budget, keeping on track for a return to surplus.

It didn’t excite talkback callers, but it did reassure ratings agency Standards and Poors.

S&P, which cut New Zealand’s rating last year, said Finance Minister’s Bill English’s budget is the “latest incremental step toward consolidating the government’s fiscal settings after four years  of deficits” from the country’s recession and costs relating to the Canterbury earthquakes.

“The fiscal outlook faces a number of challenges, including renewed uncertainties surrounding trading partner growth and the outlook for agricultural commodity prices, which may further pressure revenues and hamper the government’s efforts to stabilise its fiscal position,” credit analyst Kyran Curry said in a statement.

English today charted the way back to an operating surplus in 2015 by hiking the excise tax on tobacco, giving Inland Revenue more scope to chase tax dodgers and holding off auto-enrolments in KiwiSaver. The budget will introduce just $26.5 million of new spending this financial year, and will look to make $4.49 billion of cuts over the next four years.

S&P retained the stable outlook on New Zealand’s rating, reflecting the expectation of more fiscal consolidation, against the backdrop of high private sector external debt.

The rating agency has ignored mutterings from Opposition parties about introducing exchange rate controls and tinkering with monetary policy target agreements, saying it believes the current fiscal strategy will remain “supported by strong bipartisan and policy and community backing for conservative public finances.”

 Mutter Opposition parties may, but if the talkback test is any indication, the public understand that debt-fuelled spending made the economy sick and the medicine the government is delivering is needed to make it better.

Word of the day


Budget – an estimate of expected income and expenditure for a set period of time; a plan of operations based on such an estimate; an estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals; an itemized allotment of funds, time, etc., for a given period; the total sum of money set aside or needed for a purpose; a limited stock or supply of something.

Those weren’t the good old days


Those of us old enough to remember Budgets long past will recall the great secrecy surrounding them and the attempts to second guess tax increases by stocking up on fuel, alcohol and cigarettes before prices went up.

Budgets nowadays are no less important but hold few surprises.

Finance Minister Bill English had given plenty of warning this will be a “zero” budget.

Major announcements on health, education, prisoner rehabilitation and welfare have already been made.

Any increases in spending will come not from “new” money but “old” money saved or reprioritised.

It might not be as exciting as it used to be, but at least in respect of Budgets, those weren’t the good old days and the modern no-surprises way is better.



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