The Nation: Is the rock star economy still rocking?

This weekend The Nation interviews Steven Joyce on the economy and the budget:

Is the rock star economy still rocking? Tomorrow we’ll talk to the newly-minted Finance Minister Steven Joyce ahead of next month’s Budget.

See also: Inflation up to 2.2%

Joyce says Auckland Council needs to look at how much it can spend on transport.

Expect to see the Govt’s expenditure on the CRL in the Budget, Joyce say.

Still a rock star economy? Joyce wouldn’t call it that but the new Zealand is still performing well, and better than most.

Joyce says he’s keen to see the tax system work more clearly for people. No decision yet on tax thresholds (for PAYE), everything is still “on the table” for the budget.

How to make climate change go away

Donald Trump and his administration has a novel way of making something they don’t like go away – stop funding any research on it.

They propose to slash funding of climate research. That will either make everyone forget there could be any problems, or it will put the US way out of the world scientific loop.

VOX: Trump’s budget would hammer climate programs at EPA, NASA, NOAA, and Energy

President Donald Trump’s budget proposal for fiscal year 2018 can be read as a political document, a statement of his administration’s policy priorities. Many of these proposed cuts won’t get passed by Congress, but it’s a look at what Trump values.

And what’s clear is that Trump wants the US government to pull back sharply from any effort to stop global warming, adapt to its impacts — or even study it further. Under the proposal, a wide variety of Obama-era climate programs across multiple agencies would be scaled back or slashed entirely.

That includes eliminating much of the work the Environmental Protection Agency is doing to research climate impacts and limit emissions. It includes scaling back the Department of Energy’s efforts to accelerate low-carbon energy. It includes cuts to NASA’s Earth-monitoring programs. The proposal would also eliminate the Sea Grant program at NOAA, which helps coastal communities adapt to a warmer world. The document dubs this a “lower priority.”

This anti-science approach will please some people, but it is likely to isolate the US even more from the rest of the world, which is moving away from high energy production and products.

1) Many of the EPA’s climate programs would be terminated. Trump is proposing a sweeping 31 percent cut to the EPA’s budget — from $8.2 billion down to $5.7 billion — shrinking funding to the lowest levels in 40 years. That includes zeroing out funding for many of the agency’s climate programs. Currently, the EPA is the main US entity working to monitor and reduce greenhouse gas emissions.

So there’s no more money for work on the Clean Power Plan, an Obama-era regulation to control CO2 emissions from power plants, which Trump aims to repeal.

2) The Department of Energy’s R&D programs would be reoriented and scaled back. Trump is proposing a 5.6 percent cut to the Department of Energy. And, to do that, he would impose a steep 17.9 percent cut — roughly $2 billion — from core energy/science programs intended to accelerate the transition to new (and cleaner) energy technologies.

Clean energy and emissions controls and limiting pollution will be good for the world regardless of the effect on the climate and any effect changing climate may have on the world, but the US seems to prefer to go back to greater disregard for the environment and bugger the consequences.

3) State Department funding for climate change is axed. As part of the Paris climate deal in 2015, the United States pledged not just to cut emissions, but also to offer $3 billion in aid to poorer countries to help them adapt to climate change and build clean energy. So far, the Obama administration has chipped in $1 billion. This was seen as crucial for bringing these countries into the deal.

Trump would end all that. In his budget, he’s proposing to “cease payments to the United Nations’ (UN) climate change programs by eliminating U.S. funding related to the Green Climate Fund and its two precursor Climate Investment Funds.”

4) NASA’s Earth-monitoring programs are cut. One reason we know so much about climate change is that NASA has deployed a fleet of Earth-observing satellites since 1999. They collect data on everything from temperature and precipitation to underground aquifers and ocean currents to wildfires, soil moisture, and storms.

But NASA’s Earth Science Division has come under attack from conservatives who don’t appreciate the agency’s forays into climate science and think NASA should focus on space exploration instead. As such, Trump’s budget would trim the agency’s Earth science budget to $1.8 billion — a $102 million cut. That’d include terminating “four Earth science missions (PACE, OCO-3, DSCOVR Earth-viewing instruments, and CLARREO Pathfinder) and reduc[ing] funding for Earth science research grants.”

The proposal derides these programs as too “Earth-centric.”

The aim seems to be to make America great again – on a different planet to the rest of the world.

5) A key NOAA program to help coastal communities adapt to climate change would be gone. The National Oceanic and Atmospheric Administration’s Sea Grant program provides grants for research efforts intended to help coastal communities deal with a wide variety of challenges. Lately, that has included climate change

The rest of the world will carry ion doing what research it can. Perhaps Trump will order wiretaps of scientists in other countries to keep in touch with what research is finding out.

Alternately he could just turn his back on science and rely on Breitbart for all his guidance.

There will be a few scientists and bureaucrats out of jobs (3,200 from EPA alone) but they could be retrained into digging and shovelling coal.

If Congress plays ball with White House budget proposals it will mean massive changes, which will end up being a massive experiment. If they get it wrong it could be an expensive mistake.

Larger surplus

A larger than forecast surplus has been announced by the Government.

This will help National with their budget in a couple of months, and shouldn’t do their election chances any harm, but do they usually announce 7 month results? Or are they just want to get a bit of good news out there?


BREAKING: Seven month surplus better than expected

Even the Government misuses ‘Breaking’.

The Government’s books are better than expected, with a $1.1 billion OBEGAL surplus for the seven months to January, Finance Minister Steven Joyce says.

“Stronger tax revenues as a result of a healthier economy are flowing through to the Government’s financial performance,” Mr Joyce says.

Tax revenues year-to-date are 3.8 per cent more than they were predicted to be in Budget 2016.

“Company tax in particular is higher than expected, and that reflects the good performance of New Zealand companies in what is still an uncertain world,” Mr Joyce says.

The $1.1 billion OBEGAL surplus compares to Treasury’s forecast of a $517 million surplus at the start of the fiscal year.

Core Crown expenses for the seven months to January were $234 million lower than the Budget forecast, reflecting the Government’s ongoing commitment to prudent spending.

Mr Joyce says that a number of variables made the final out-turn for the full financial year hard to predict.

“The biggest variable at this stage is the cost of the Kaikoura earthquake and how those are allocated between this year and next year,” Mr Joyce says.

“The good news is that this Government’s strong economic management means we can afford to step in to help these communities and support them when they are most in need.”

 

Trump concedes miscues and complexities

Reality may be starting to make an impression on Donald Trump. He admits “communications miscues” and admits he had not been aware of the complexities of health care policy-making – but miscues on that.

Fox News: Trump previews joint address to Congress, takes blame for communication issues

Trump, in an interview with “Fox & Friends,” specifically cited his immigration policy, and said that perhaps the rollout of his plan to keep out and remove criminal illegals hadn’t been communicated effectively.

“And maybe that’s my fault,” Trump said.

He later awarded himself a grade of a “C” or “C-plus” on communicating, straightforwardly saying, “My messaging isn’t good.” He clarified that he would give himself an “A” for achievement and “A-plus” for effort.

Admitting  faults is something Trump has tended not to do before.

Trump also ramped up his war with the press, questioning whether many journalists are simply making up the stories he’s infamously derided as “fake news.”

“I believe that sometimes they don’t have sources,” Trump said. “I believe that a lot of the sources are made up. I believe a lot of the sources are pure fiction. They just pull it out of thin air.”

But then he blames the media again. They are far from perfect but I call bullshit on his claims here – he is pulling this fiction out of thin air. A common ‘Breitbart’ tactic is to transference of blame to others for one’s own actions.

Though he pledged to give the U.S. “the greatest military we’ve ever had by the time I finish,” Trump spoke somberly about the Jan. 29 special operations mission in Yemen that resulted in the death of a Navy SEAL. Sen. John McCain – a frequent Trump foil – had criticized the daring raid, saying he would “not describe any operation that results in the loss of American life as a success.” Trump said McCain’s remarks were “inappropriate.”

“I feel badly when a young man dies and John McCain says, ‘That was a failed mission,’” he said.

It’s good to see that he recognises consequences of making military decisions.

As the president plans to boost the military, Trump’s proposed $54 billion increase in defense spending is coming largely from cuts to the State Department and Environmental Protection Agency. He suggested Tuesday that foreign aid would be a target of the cuts.

“We’re going to do things having to do with other countries because we’re treated very, very unfairly,” Trump said. “…We’re taking care of their military and we’re not being reimbursed. They’re wealthy countries.”

Trump pledged to use his “Art of the Deal” expertise to drive down costs, as well.

“I am going to get involved in negotiating,” Trump said. “We have many planes and boats and ships … we’re spending too much money individually on.” He said the U.S. would “get a lot more product for our buck.”

Having the president getting involved in contract negotiations will raise a few eyebrows for various reasons. As does his escalation of military spending at the expense of overseas aid and diplomacy, things that experts have warned are at least as important as military might.

NY Times: Trump Concedes Health Law Overhaul Is ‘Unbelievably Complex’

President Trump, meeting with the nation’s governors, conceded Monday that he had not been aware of the complexities of health care policy-making: “I have to tell you, it’s an unbelievably complex subject. Nobody knew that health care could be so complicated.”

I’m sure many people knew how complex it was.

The president also suggested that the struggle to replace the Affordable Care Act was creating a legislative logjam that could delay other parts of his political agenda.

Many policy makers had anticipated the intricacies of changing the health care law, and Mr. Trump’s demands in the opening days of his administration to simultaneously repeal and replace President Barack Obama’s signature domestic achievement made the political calculations far more complicated.

Running a government and a country the size of the US is very complex. Simple healthcare decisions can affect the lives of many people.

Perhaps Trump is starting to realise that being President involves more than waving a rhetorical wand.

And Trump’s first budget is a major test for him and the White House.

Fox News: Not fake news: Trump’s budget cuts are first big test of his presidency

In the last few days, President Trump has made news by excoriating the “fake news” media as the “enemy of the people,” attacking the use of anonymous sources, and blowing off the White House Correspondents Dinner.

Trump also declared the election of Tom Perez as DNC chair to be “rigged” and tweeted this: “Russia talk is FAKE NEWS put out by the Dems, and played up by the media, in order to make the big election defeat and the illegal leaks!”

These are all ways of stirring the pot, and the self-absorbed media relish reporting on the president attacking them and then firing back, creating a seemingly endless loop.

But with the president delivering his first speech to Congress tonight, he faces a very different challenge—shaping a budget and pushing through his priorities—that will do more to determine his success than all the skirmishing with the press.

I was on a press call with a senior OMB official—a couple of reporters complained that the White House was putting out an “anonymous source”—who described the magnitude of what he dubbed a “security budget.”

The sort of anonymous sources he has criticised media for useing.

In pushing for a $54-billion boost in defense spending, Trump will demand offsetting cuts in the rest of the budget. That is huge, and reminiscent of what Ronald Reagan did in 1981.

And like Reagan, Trump also plans to push through a major tax cut that would undoubtedly drain revenue from the Treasury.

Plus, as he told me during the campaign and recently reemphasized, the president doesn’t plan to touch the big-ticket entitlement programs, Medicare and Social Security—despite the adamant stance of House conservatives that without reform they are headed toward bankruptcy.

So that raises real questions about whether the Trumpian budget will blow a big hole in the deficit. Trump’s never been a major balanced-budget guy, and the issue hasn’t resonated in American politics since Ross Perot, but it does add to borrowing costs and impact the economy.

But what will become a massive story in media and politics is the attempt to slice more than $50 billion from what budget wonks call non-defense discretionary spending. That means the money will come from schools, housing, health, agriculture, environment—just about everything else the government does. And also foreign aid, according to the OMB official.

Every program is in that budget because it has a constituency, creates jobs in certain communities, and lobbyists who are prepared to defend it.

There will be a flood of stories about people who would lose their benefits, about the impact on food stamp recipients and farmers, clean air or clean water.

Some of the people affected by budget cuts will be people who voted for Trump, hoping for something better.

These are the realities of governing – it’s impossible to please all of the people all of the time. It’s hard enough pleasing half of the people half of the time.

It will take much more than eliminating communications miscues (that he is still making) to reform Washington and fix the country and the world.

One of the first things he could do to improve communications is to cut his contradictions on ‘fake news’, or gradually more and more people will wake up and become disillusioned, especially if he cuts their jobs.

Even Rasmussen doesn’t have him ahead on job approval now:

presidentapproval20170301

http://www.realclearpolitics.com/epolls/other/president_trump_job_approval-6179.html

President Trump will address a joint session of Congress Tuesday 9:10 pm Eastern Time – that should be 3:10 PM Wednesday New Zealand time and will be on all the major US networks.

National emergency housing problems

There is an escalating emergency housing problem, and escalating risks for the Government as embarrassing details emerge.

Newshub: Government blows the budget on emergency housing

The Government has had a massive blowout in emergency housing grants, spending almost four times its annual budget in just three months.

As part of an overall $345m investment in emergency housing, the Government only budgeted $2m per year for an estimated 1400 emergency housing grants – which pay for urgent motel stays for families in need.

But in the December quarter alone, the Ministry of Social Development spent $7.7m on emergency housing grants.

There were 8860 grants in the final three months of 2016 – which is more than six times the Government’s expectations.

Social Housing Minister Amy Adams says funding will be topped up from Crown funds in the same way benefits are.

“We’re not going to run out of money, nor will people miss out,” she said. “While demand has been higher, which we’ve been very upfront about, the grant will be available to anyone who is eligible.”

The December quarter was the first to be properly recorded by the Ministry of Social Development.

“The $2 million was what officials predicted might be needed – remembering that this was the first time we’d established the grant, so it was always going to be a forecast,” Ms Adams said.

In a briefing to the Incoming Minister of Social Development, MSD warns the additional demand is “creating pressures”.

“The high level of demand for emergency housing has seen higher than expected numbers of households being supported to stay in motels and other forms of commercial accommodation,” it said.

This is embarrassing for the Government. They didn’t do enough soon enough.

The pressures on housing are also creating funding pressures plus pressures on National in an election year.

Newshub: Government counts homeless in tourism stats

The Government has been counting homeless people living in motels in its tourism statistics.

Statistics Minister Mark Mitchell has confirmed official tourism numbers include people who are being put into hostels or motels through emergency housing special needs grants.

The Statistics New Zealand Accommodation Survey is used as a measure of tourism levels, with the definition used to define the domestic tourists “one New Zealander spending one night at an establishment”.

However when Newshub asked tourism minister Paula Bennett if homeless were included, she said no.

“No, because they’re not tourists. Sorry, I’m not sure what you’re asking.

“No they’re not included in the tourism stats for accommodation.”

The Government are looking increasingly out of touch and too slow to respond to housing issues, especially emergency housing.

RNZ: PM responds to criticism over housing crisis

English can’t easily talk down the severity of the problems or the embarrassment.

Labour’s health petition whopper

This week’s petition from Labour is aimed at fixing our tax system. Perhaps Labour should aim at on fixing their honesty, or their research or maths.

Sign this petition

To the New Zealand Government

Fund our health system properly so New Zealanders can get the treatment they need.

That’s hopelessly vague. More detail:

Sign the petition to fix our health system

In just six years, National has cut a whopping $1.7 billion from our healthcare system.

Every day we hear stories of how these cuts are impacting Kiwis’ lives. Stories of struggling to pay for the GP; missing out on the medicines they need; and health professionals who are exhausted and overstretched. It’s not right and we have to fix it.

To fix our system, we need to make sure Kiwis know this is a vital issue and they need to vote to change the Government at the election next year.

To make sure health is an election issue, we need to build a massive campaign calling on the Government to ensure the health system can provide the services Kiwis need. A huge petition can’t be ignored and together we can make sure health gets the attention it needs.

A petition this vague, huge or otherwise, will be easily ignored. Health funding is a big issue but this won’t do anything to help our health system.

Plus there is nothing from Labour about how they might ‘fix’ our health system.

Has the Government cut a whopping $1.7 billion from our healthcare system?

The Budget Economic and Fiscal Update 2016 (BEFU) published on 26 May 2016, health spending from Treasury’s Core Crown Expense Table (billions):

  • 2011 – $13.753
  • 2012 – $14.160
  • 2013 – $14.498
  • 2014 – $14.898
  • 2015 – $15.058
  • 2016 – $15.635
  • Forecast for 2017 – $16.214

That’s an increase of $2.461 billion, not a decrease of $1.7 billion as claimed in the petition.

Perhaps Labour is using some different numbers, but with no details it’s impossible to tell how they have come up with a whopping reduction.

It looks more like a whopper of a lie.

No surplus?

Stephanie Rodgers claims that the surplus announced yesterday is not actually a surplus – because, she says, the Government should have spent more so there wouldn’t be a surplus.

There is no surplus

In Year Eight of this National government, the idea of a budget surplus is a joke (and not just because it’s been completely engineered by the catastrophic Auckland housing bubble). They’ve promised it for nearly a decade. They’ve fiddled the books to make the numbers come out OK. They even declared a surplus in the middle of the financial year – that’s how desperate Bill English has been to pretend that everything’s going along just fine in New Zealand.

That shows an alarming lack of understanding of how how a Government budget works, and why the surplus was announced now.

“Finance Minister Bill English has today presented the Crown accounts for the year to June”.

It’s normal to announce financial results a while after the end of the financial year, like about now.

The Government is required to announce crown accounts, even when the timing isn’t too Rodgers’ liking.

The truth is, there is no surplus.

This surplus isn’t a success for our government. It is a sign of their failure. It shows they do not understand what their job is: to look after the people of this country. To govern us – not bean-count.

There is no surplus – not if you care about people more than money.

So Rodgers doesn’t want a surplus because she wants more money spent, probably a lot more money than Crown revenue, which means a deficit. She would probably complain if a deficit was announced at this time of year too.

Grant Robertson interview

Lisa Own interviewed Labour finance spokesperson Grant Robertson on The Nation yesterday. It will be repeated at 10:00 am Sunday but here is the interview online.

Interview: Grant Robertson

Is it time to invest or to borrow to pay for infrastructure? Lisa Owen asks Labour’s Finance Spokesperson Grant Robertson what he’d do in Bill English’s place.

Transcript (provided via Newshub by able.co.nz):

Lisa Owen: Labour’s finance spokesperson, Grant Robertson, reckons economic success should include social as well as fiscal surpluses, but with Bill English promising a growth to 2018 of 3 percent, unemployment to 4 percent and surplus peaking at 6.7 billion, those fiscals are looking pretty good. Let’s find out what Grant Robertson makes of that. Good morning.

Grant Robertson: Good morning, Lisa.

You might not like how they’re sharing out the pie, but, come on, the pie looks pretty good, doesn’t it?

Oh, look, we have to be a bit careful with some of those numbers. When you look at the growth numbers, if you do them on a per-person basis, it’s flat. The economy is actually not growing on a per-person basis. Unemployment has gone up. We’ve got 144,000 people out of work at the moment. A place you’re familiar with in Gisborne — one in 10 people out of work there. So you can look at the top-line numbers and say, ‘Yep, sure, the economy’s growing,’ but in the end if people aren’t getting a share in that prosperity, what’s the point in it?

Well, let’s look at some numbers more closely. The government brought forward spending from 2017 to keep pace with immigration. So Labour’s crunched the numbers. Are we keeping up with health and education spending per person?

No, we’re not. If we look at education, for instance, in the 2016-17 year, per pupil, there’s actually going to be an $85 reduction in funding in our education system, and that will mean parents pay, because parents are already meeting a greater cost of their children’s education — 10 times the rate of inflation; that’s how much the so-called voluntary donations have gone up. So, no, we’re not. In health, we’re looking at a shortfall this year of maybe around $50B— $50M, sorry. That’s part of a $1.7B cut effectively in health.

But the thing is Bill English would say, ‘So what?’ to that. He would say, as he just said, you’re just wanting to shovel more money at a problem to show you care, and that doesn’t work. Results are what matter, not the amount that you spend.

Well, I certainly wouldn’t be saying, ‘So what?’ to the elderly constituent in my electorate who’s been waiting for a hip operation for about three years now in constant pain. And University of Otago did a study recently that said that someone who was on a level of pain six years ago and would’ve got an operation doesn’t get an operation today. So these results are not there.

Okay. He also sent a very clear message there about Auckland’s housing challenge. It’s the Council’s fault. Don’t expect concessions to help raise money for infrastructure. So I’m wondering, where should the money come from, do you think?

I think the Auckland Council and Aucklanders generally would be quite surprised to learn today they’re an independent country, because that’s what it sounded like when Bill English was talking today. There’s a joint responsibility to sort this out, and it’s not as if this problem emerged this week or last week. This is something the Auckland Council and the government should have been working on together for a very long period of time, and I think Bill English shoving away constantly every problem to the Auckland Council is unacceptable.

So would you undertake right now then, to Labour if they were in government, to pay for Auckland’s infrastructure?

I think we’ve got to work together with Auckland to pay for the infrastructure. There’s no point throwing around a blame game and elbowing each other in the ribs to say who is responsible. Clearly, the government has a share responsibility here. We have already said that we want to do a massive state-led affordable-house-building programme. That’s KiwiBuild. We think that’s essential. That’s where central government can come on board. We can borrow money more cheaply than the central government level.

But can you even do KiwiBuild, because the one thing that people don’t seem to be addressing is that we don’t have enough builders and plumbers and tradies. So is it even possible?

Absolutely, it’s possible. Certainly, we’ve got people who’ve been employed in the Christchurch rebuild who will now be available, but we should be training more people, and we can do that right now. It’s one of the reasons why we’re proposing the three years free post-secondary school training and education is to keep that momentum going. We want to make sure there’s more apprentices. We’re prepared to take the money that people get for being on the dole and pay that as a subsidy towards employers to take on more apprentices.

Yeah, but apprentices don’t come online for years.

In the building sector, you can get them in there and get them helping out right away, but, yeah, look, we will have to work hard to find that labour, but we have to do it. Fundamentally, getting affordable housing is the core of getting our communities strong. You’ve got— You’ve been running stories about all the people who are moving around from school to school to school; that’s because they don’t have a home to live in. If we actually put housing first, we can build strong communities, and from that we can get better economic growth, we get better society.

The Prime Minister hinted at the fact that Auckland Council should sell off assets — should they?

Well, in my own view, no. Auckland Council have to make its own decisions about that, but that to me is an incredibly short-sighted way of solving a much bigger problem than that — that is solved as a partnership between Auckland City and the government. I have to say, the way Bill English was talking and behaving in that interview with you is a sign of failure. If he’s at war with the Auckland Council, then Aucklanders are being failed by the government.

Well, Bill English has chosen to pay down debt, rather than spend more on infrastructure in the Budget, but I’m a little bit confused about your stance, because in your speech, in your pre-Budget speech, you said, ‘It was concerning that National hadn’t put much of a debt in New Zealand’s debt,’ then on the other hand you said, ‘It’s also time to invest.’ So which is it?

Well, the concerning bit is the fact that they haven’t managed to grow their economy in real terms over the last eight years, so that’s why. We’re not— We’ve got a massive problem with productivity in New Zealand. We are still creaking along in that regard. But what I’m saying, and it’s not just me — it’s also the Reserve Bank Governor, Graeme Wheeler, is saying — is we do need more infrastructure spending. That is a way of helping kick-start a sluggish economy.

So would you borrow to do that?

You’d have to borrow some of that initially, yes, absolutely, but that’s the problem right now today is that we need the economy to get going. It’s flat. GDP is flat. Graeme Wheeler, other economists are saying, ‘Let’s get a bit more infrastructure spending,’ and we’ve got to be very careful about the government’s numbers on infrastructure in the Budget as well. They were claiming $2.1B’s worth of spending. That includes nearly $1B on the IRD’s computer system. I don’t think that’s what most New Zealanders would call infrastructure.

Right.

And Bill English’s comments to you — he needs to be very careful about what he was saying there, because the actual new spend on infrastructure is going down at a time where we need more.

All right, there’s a few things I want to get through before we run out of time. You want to restart the Tax Working Group. That’s a Trojan Horse for more taxes, isn’t it?

No, it’s a vehicle for making sure we get a tax system that deals with the fundamental challenge in our economy, and that— No, no, let me finish.

It’s a vehicle for Labour to get new taxes without being honest with the constituency, and saying, ‘You’re going to get more taxes under Labour.’

Absolutely not. It’s a way of making sure that we balance up our tax system. So we’re going to be very specific for that working group about what its mandate is. Its mandate is to get a better balance in the system between incentives to invest in a productive economy and speculation. We have far too much speculation in our economy.

So when it tells you we need a capital gains tax, what are you going to do then?

Well, we’ll look very seriously at that, and that’s why we’re doing it. One of the things about being in opposition—

So there will be, either way you do it, there will be more new taxes under Labour?

We don’t know that until we see what happens, but what we do want is a better balance in the tax system. At the moment, when workers go to work, every day they pay their taxes. When people are speculating, for instance in the housing market, they can get away with it. We need to look at what the best way to deal with that is. We’ll bring the experts in, but they will have a specific mandate to make sure that we start addressing some of the fundamental structural problems in our economy.

Okay, last election you promised not to go beyond National’s spending limits. Is that still your commitment?

We have to wait until we see what they’ve got, but we will run a disciplined budget, but we’ve got priorities, Lisa, and our priorities are health, housing and education, and every New Zealander today can see the problems there. And I think it’s irresponsible of Bill English not to address them.

But the thing is when you look at the things you want to invest in, you already committed KiwiBuild $1.5B up front as an investment, tertiary ed. $1.2B by 2025. You’ve pledged to catch up healthcare and education. Man, that adds up.

It adds up, but it adds up to making sure that New Zealanders get a decent start in life and the opportunity to make the choices that they want. These are investments, Lisa. We’ve got to stop seeing people getting a tertiary education as a cost; it’s an investment.

John Key’s saying that we can afford $3B in tax cuts. Is that the red light for you to have more wiggle room in your spending to spend more— to say you’ll spend more?

What I’m interested in doing is investing to make sure that people get good housing, an education system and a health system that works for them, and that we’ve got the infrastructure to build the decent jobs all over New Zealand. That will be my focus.

All right, before we go, Andrew Little is on single digits when it comes to the preferred Prime Minister stakes — 8.9 percent. Are you happy with that?

Andrew’s not happy with that. The point is he’s doing a good job. He’s brought our team together incredibly well over the last year. We’ve got a focus now on education, health and housing—

8.9 percent is a good job? New Zealanders aren’t seeing a good job.

Look, I can’t take responsibility for the polls. What I know is the guy that I work with every day is working hard. He’s got the vision to say, ‘We need to focus on health, education, housing, building up jobs around New Zealand,’ and I think he’s doing a good job.

8.9 percent is not going to make him Prime Minister, though, so could you challenge him before the next election?

Absolutely not.

Categorical no?

Categorically not. Andrew’s doing a good job.

Bill English interview

Lisa Own interviewed Finance Minister Bill English about the budget on The Nation yesterday.

English will also be interviewed on Q & A this morning at 9 am.

The Nation interview will be repeated after Q & A at 10:00 am Sunday but here is the interview online:

Interview: Bill English

Lisa Owen talks to Finance Minister Bill English about whether this week’s Budget keeps up with demographics in health and education, why there was nothing for housing, and if there’ll be tax cuts in 2017.

On Twitter they described it:

‘s feisty interview with  

Transcript (provided via Newshub by able.co.nz):

Lisa Owen: Well, Bill English’s eighth budget has delivered the government books back into black, and confident projections for more surpluses and growth. ‘Steady as she goes,’ he says. But the sceptics called it the buffet budget — morsels here and there ahead of the full spread in election year. And Winston Peters bluntly labelled it the ‘get stuffed’ budget. Notably, there was little for infrastructure, Auckland’s housing woes or those people living in cars and garages. So when I spoke to the finance minister earlier, I asked if his emphasis on prudence and stability wasn’t a little tone-deaf.

Bill English: No, I disagree with that. Look, the budget was never going to be the vehicle for fixing every housing problem, because you can’t buy your way through the Auckland housing pressures. We’ve been through all this in Christchurch, where the problem has now been largely solved. It takes time. And so the important work that’s related to housing is about getting the national policy statement out in the next few weeks, getting the Auckland Unitary Plan right, because the people that are sleeping in the cars are the victims of years of misdirected planning…

Yes, but you’ve had eight years.

…that’s focused on high-value housing.

You’ve had eight years, Minister.

Yes, but we don’t make the decisions, Lisa. Auckland City Council make the decisions. Even the government can’t build a house in Auckland unless Auckland City Council frees up the land, provides the subdivision consent, processes all the consents, provides the building consent and allows the house to be occupied.

All right. I want to come back to that a bit later. But, as promised, you brought forward spending from the 2017 budget to keep pace with immigration. So are we getting as much per person in health and education?

Yes, we probably are, but the amount of money that’s spent is less important than what results it gets. You know, there’s some people trying to argue that you show you care by shovelling more and more money out. And the history of that in government is that you can shovel out a whole lot of money and make no difference whatsoever. So the budget’s got a pretty strong focus on results, including in health, where the money goes, for instance, to the roll-out of the bowel cancer screening programme, which when it’s up and running will screen 350,000 people on average each year.

Point taken, Minister, but I just want to be clear on this, because if you look at the figures, let’s say for health, a variety of economists say that we needed about 700 million a year just to keep pace, yet health is getting about 570 million a year. You’ve frozen the schools’ operational budgets, so to be absolutely clear, per capita spending on health and education, it’s down, isn’t it?

No. Look, I couldn’t say for sure whether it’s up or down. It’s probably about the same. The point I’m making is it’s the wrong measure. The measures that matter are the ones that are about focusing on getting results.

Shouldn’t you know whether it’s up or down in terms of spending per capita? Because that’s something that our viewers will want to know.

It’s not a measure we apply. And I think your viewers are as interested in— probably more interested in the results we get for them. For instance, in education, we have targeted the spending on the 150,000 children who are most at risk of educational underachievement. Now, per capita, I can’t tell you whether it’s up or down. What I do know is for children from benefit-dependent households, there will be $80 per child of those in our schools. And they’re spread right through our schools, regardless of decile. So that’s trying to focus the resource where it’s going to have the most impact.

This kind of takes us back to where I started here — the people in the cars, the first-home buyers who are locked out of the Auckland market, Auckland infrastructure. People will look at this and think that you are effectively asking those people to hold tight for at least another year so that you can afford to give tax cuts.

No, that’s not the case. For instance, for the cases that have been in the media around living in the cars, a lot of those are a bit more complex than people might realise. But in any case, we have more money than we can spend on places, on houses for people in serious housing need in Auckland. The problem isn’t money; there’s enough of that. The problem is getting enough houses. Even though Auckland City is actually completing 40 houses every working day, it’s still not enough. And that’s why in the next few months we’ve got to work hard with the Auckland City Council to get more houses, because the government can’t just magic up houses; they have to be built by real people on real land. And that’s controlled by the Auckland City Council.

Well, actually, let’s look at that. The problem, you’ve said, is a huge supply shortage, isn’t it? So is that shortage getting better or worse?

Well, it depends. There’s some signs that demand might have flattened out a bit, because it’s all supply relative to demand. But in terms of the supply itself, I don’t think it’s getting worse. We’re just focusing on working with the council and doing what the government can with its own land to ramp up the supply, because we know Auckland needs more, and it needs it faster than we’re able to deliver it.

Okay, well, just let’s look at some of those figures. I mean, experts can’t agree exactly, but they think that we’re down about between 20,000 and 50,000 houses in Auckland — we’re short of those — and that we need to build about 13,000 a year to play catch-up. We’re not building 13,000 a year, so the supply must be getting worse.

Well, and that’s in the hands of the Auckland City Council, who are the people with the legal and community responsibility to get more land available so that more houses can be built faster. We’ve been through this in Christchurch. You can ramp up the construction workforce. You can change the planning rules. In Christchurch, house prices are flat to slightly falling, despite the fact that two or three years ago there was very substantial demand. And I might say the same kind of stories about it. Now, there was a lot of tension at the time in Christchurch as the system cranked up supply to meet the strong demand.

The thing is you point the finger at the council there, but the council has been very clear about the fact it needs help with infrastructure. it says it needs 3 billion in the next 10 years for infrastructure. Where do you think that money’s coming from? Because the council’s nudging its debt ceiling. It can’t rate people off their properties. So where is the money coming from?

Well, fundamentally, that’s Auckland’s issue to deal with. We are certainly contributing. I mean, right now we’re in intensive negotiation for a contribution of over $1 billion from the taxpayer to an Auckland City Council transport project called the Central Rail Link. Now, in the normal course of events, they would pay for that. We’re negotiating where taxpayers will pay for that. That’s a significant reduction in the burden on the council, and it allows them to pay for other infrastructure.

Minister, isn’t it central government’s responsibility to assist with that infrastructure?

No, fundamentally it isn’t. It is the council’s responsibility. That’s the deal. They get to decide on how their city is planned, and they get to pay for the development. And for a lot of the people living outside Auckland and inside Auckland, there are real benefits from growth. And part of the puzzle here is that as more people turn up in Auckland and as incomes rise, growth is good. The council benefits from that, and so do ratepayers. And so they’ve just got to work out a better alignment between the funding and the growth.

In terms of that better alignment between funding and growth, then surely when you come up with the national policy statement in a few weeks’ time, it has to make some kind of allowance for the council to raise money, using a congestion charge or something similar.

The government generally keeps out of their way, and generally councils don’t want government interfering with how they run their affairs. The national policy statement won’t cover all the issues. It’ll focus on primarily…

But you are interfering, aren’t you? You’re going to make a national policy statement that lays down the law. They want some kind of levies or taxes. They’re not allowed to do that. So you are interfering.

Well, there will be a discussion from the national policy statement as it goes out. As I’ve said in the Budget, it’ll be more directive to councils to enhance supply, bearing in mind that in Auckland they spent a lot of years trying not to grow supply, and that’s the price—the people who pay the price for 20 years’ misdirected planning are the low and middle-income families whose stress you are seeing represented in the media. That’s who misses out – not the high-income people. They can afford to pay for the nicest looking apartments and the nicest looking streets. But low- and middle-income families can’t.

All right. Well, I want to talk about the story that we broke on The Nation about homelessness. In Auckland, every social agency that we went to about that story told us that emergency housing is full. Did you know that? Did you know it’s full?

Well, that is why there has been a package announced a few weeks ago to underpin the funding of emergency housing – about $40 million – so that we can get more emergency housing in places around the country.

Yes, but that doesn’t add new places, though, does it? Sorry, I’m just wanting to establish whether you knew when that story went out. Did you know that emergency housing was full up?

Yes. We’ve known about housing stress in Auckland for a number of years. It’s why the government has made some very direct statements about the obligations of the city council to change the planning rules to enable more supply so we can get more houses. That is the only way people who aren’t in houses can get in houses is when a house gets built. The only people who can agree to get that house built are Auckland City Council. We provide subsidies. The government provides 2 billion of subsidies a year. We subsidise 60 percent of all rentals in the country and probably more than that in Auckland. We’re putting up the money. They have to put up the land and the houses.

Minister, in terms of the emergency housing, I just want to be clear on this. Social agencies told us about a year ago that those places were under stress and now they are full up. Do you know the difference between under stress and full up? Did you appreciate that change in climate?

Yes. That is why the package was announced, actually, a number of weeks before you apparently broke the story – the story that has been sitting there for a couple of years. That is why the package was announced – because of stress on the emergency housing. And we put in 40 million. Emergency housing’s been a bit of a dog’s breakfast for decades. We worked a way with the agencies over quite a long period of time – very good work done by Paula Bennett – to work out how to make it more effective. And that’s why the package was announced.

So why didn’t you do more? If you’ve known all along that this is the issue, why not do more? Because that package doesn’t add new places. Why not do something more in the Budget?

It will add new places. We put in quite a bit of money. The agencies get to use that money, and we’ll see how it beds down. And if more is required, we would do that. But it is only a short-term fix, because you can’t put people in houses that don’t exist.

But don’t you think from what we’ve seen, it absolutely is required? You seem to be questioning whether it is needed.

No, I’m not questioning that. We’ve taken a big step to organise emergency housing so it’s more effective, to sort out the funding, make it clearer, more transparent and a lot bigger.

So more is needed? More is absolutely needed, Minister. Is that what you’re saying?

Well, it could be. We can’t fund houses that aren’t there.

‘Could be’ or ‘is’? ‘Could be’ or ‘is’ needed?

Well, look, we put in the money. I’m sure that in six months’ time, there will still be people who have significant housing problems. Some of those will be able to be directed to social housing. Some of them will explain the full stories of their lives which aren’t always explained to the media in the way that they’re represented. And some of them will be really genuine cases who need more emergency housing, and if that’s the case, then we have the capacity to respond. But bear in mind, when we pay for more emergency housing, we’re probably using houses that would otherwise be available for social housing. And when we pay for more social housing, we could be using houses that would otherwise be bought by first-home buyers. The answer to all that is more houses on the ground faster, otherwise we’re all competing with each other for a limited supply of houses.

All right. Well, I want to look at you’re choosing to pay down debt rather than borrow, and you’re choosing to do that rather than build at a time when money is the cheapest it has ever been. Can you just explain the logic of that to me?

Well, if you looked at the Budget charts, you would see that in fact our infrastructure spend in 2017 is double what it was in 2013. So it’s a myth—

But it’s down, though, Minister. It’s down. Your spending on infrastructure is down from 1.7 billion to 1.4 billion.

No, it’s not. Look at the charts. In 2013, it was 3 billion. In 2017, it’s 6 billion. That’s double.

Looking ahead, Minister, it’s down.

Well, it peaks in 2017. We don’t do it because economists say money’s cheap. In fact, I listened to a banker this morning say this is the time to pay off debt.

But that’s the point, isn’t it, Minister? Why are you cutting? Why are you cutting back on infrastructure?

We are not cutting, Lisa. There is no evidence of cutting. I mean, I’m involved in the decision-making. The capital allowance this year is about a billion higher than last year. The total spend on the ground is double what it was in 2013. Whoever’s telling you it’s being cut is simply wrong.

You’re saying it’s peaking in 2017 and then tapering off.

Well, there’s further decisions to be made. It may keep going after that. We’ve put out the forecast for how much will actually be spent on the ground over the next five years. Next year we get to make another whole set of decisions about where to spend the next billion or so. But there’s no evidence of cutting infrastructure spending. You’re simply wrong.

Okay. Well, I want to look ahead to next year. You’ve made a virtue out of fiscally responsible, perhaps boring Budgets. You’ve allowed yourself 1.9 billion to spend in next year’s Budget. Are you prepared to blow that spending cap to give tax cuts?

Well, the allowance that’s there for next year is – as I’ve made clear about a month ago – explicitly just for the act for spending and does not include tax reductions. So if there were tax reductions at any time over the next two or three years, that would be in addition to what we’ve allowed for government spending.

And just to be clear, any tax cuts would come in your fourth term?

Well, even if you made decisions in the Budget next year, they would occur in the next term of government, yes.

And they will only come in if you meet all your fiscal targets, yes?

Well, that’s right. We’ve got a set of fiscal targets. Now, there’s always… You never quite know what’s going to happen with the economic forecast. You might find there’s more room or less room. But those decisions are all in the future, which is why we’re not being explicit about it now, because we simply haven’t made the decisions.

 

So the budget won’t fix everything

Another fairly boring incremental budget from Bill English, and again the opposition parties are complaining that it won’t fix all of our society’s problems.

In the old days budgets used to be like an annual Lotto, like in the days of Muldoon in the 1980s, where the people looked in hope of a hand out that would solve all their problems.

Muldoon’s interventions nearly bankrupted the country. The Labour Government under Lange that took over had to take drastic action to save to country, and some on the hard left have been bitterly complaining about Rogernomics and neoliberalism ever since.

Now budgets involve a lead up of building pressure and expectations from the opposition parties, after the decisions have already been made and the budget has already been printed, so the Government can be slammed for not doing enough.

Not reducing debt enough. And not increasing expenditure enough.

I suspect that most ordinary New Zealanders have become bored by Bill budgets and expect little or no change out of them.

Some may listen to the rhetoric and may think that if only an alternative government was voted in everything would be fixed, for them and for the country. That will never happen.

A Government that throws more and more money at social problems may make some short term gains and make a few people happier, but there are almost certainly going to be negative effects in the longer term.

Labour sort of knows this because they have been there themselves and know that it is very difficult getting the right balance in budgets. And they know (or should know) that when tax and expenditure is concerned you can’t please all of the people all of the time.

Some of the people will never be happy, especially  if they don’t like the current Government. Some people dislike all governments.

Greens exude a budget naivety. They give the impression that if only they could make the financial and social decisions then the the world would be put right. Or at least New Zealand would be put right.

They may need to get into a coalition government to learn from experience that improvements are almost always incremental and are subject to outside influences – Green governments don’t rule all the countries in the world so imperfections abound.

Major changes are as likely to cause problems as solve them, especially when an open cheque book approach is taken. Over spending can quickly create major problems for a country. It usually takes much longer to recover from fiscal imprudence than it takes to mess things up.

Regardless, for the next year at least things will continue much the same, albeit with a few tweaks to spending here and there.

There are some suggestions that National are holding back on spending so they have a kitty to dish out bribes in election year.

This is possible, but it’s also risky – if they suddenly have money to burn next year then Labour and the Greens will be able to suggest better ways of dishing it out and National will have difficulty criticising them for proposing increased spending.

It would be good if next National could campaign on some innovative new policies rather than resorting to a tired government tactic of handing out taxpayer money to try and bribe votes.

That may be as likely as Labour+Greens+NZ First looking like a credible alternative.

Most people will get back to their day to day lives doing the best they can. As they should. They may be best backing Lotto to deliver them their dreams. Real Lotto is a long shot but probably a better bet than a Government fix of everyone’s problems.