A problem with Kelvin Davis

There is no doubt that Jacinda Ardern stepped up into the role of Labour leader, and stepped up further in post-election negotiations, as new Prime Minister and generally in her role in international politics (Manus aside).

Not so Kelvin Davis. It seemed to be a good idea to appoint him deputy to Ardern, he had appeared to be a good prospect, he complimented Ardern and he strengthened Labour’s Maori mana.

But Davis always seemed uncomfortable in the role. Some initial swagger was swept aside after he made some poor comments, and he slipped into the background, probably by design of Labour’s campaign.

He has been forced into the foreground again over the last week as acting Prime Minister when both Ardern and Deputy Prime Minister Winston Peters were overseas. Davis was unimpressive fronting for the Government in Parliament this week. He stonewalled without conviction.

Jo Moir at Stuff talks tough: Labour has a problem – the trainwreck of acting prime minister Kelvin Davis

For the last week, Kelvin Davis has been acting prime minister and it’s been nothing short of a trainwreck.

While Prime Minister Jacinda Ardern and her deputy, Winston Peters, have been cutting deals and forging relationships on the international stage in Vietnam and the Philippines, Davis has been left back in New Zealand to handle the day-to-day business.

Before embarking on this week-long mission, Davis was pretty cool and calm about the whole thing and even described the role as a “figurehead” position.

In this column a week ago, I congratulated Davis for doing an excellent job of saying absolutely nothing, but nobody seriously thought that was a strategy Labour could keep up.

Roll on to Tuesday and Davis was back in the House facing Opposition Leader Bill English on statistical steroids as he did what he does best – stringing together sentences with enough jargon and numbers to make a Treasury report look like child’s play.

National worked out a long time ago that Davis was the weak link in the Labour leadership team and the party is in overdrive finding every way possible to expose that.

Every question Davis had thrown at him on Tuesday was answered first in muffled tones by ministers Phil Twyford, Chris Hipkins and Grant Robertson. Davis then stood up and repeated the answers.

I hadn’t noticed that. Question 1 from Tuesday:

You can see it at times here, with Robertson prompting Davis on some answers and appearing to act as his minder.

The ministers didn’t even try to hide the fact they were doing it and Davis blatantly looked to them every time before rising to his feet.

It was like a seriously bizarre game of Chinese whispers that started at Twyford and ran along the front bench until the message was received by Davis.

That wasn’t noticeable on video but must have stood out from the press gallery.

Wednesday arrived. It was a new day; perhaps a new strategy? Not a chance.

There were only two political stories anyone was interested in that day – North Korea and the Government’s net debt target, economists having warned billions would need to be borrowed over the coming years.

As the media gathered on “the tiles”, where ministers are questioned on their way into the House, Davis strode across the bridge toward journalists on his own.

Davis got thrown to the pack and desperately tried to keep his head above water.

Asked what year Labour wanted to reduce net debt to 20 per cent of GDP by, Davis stumbled around before spluttering “over the economic cycle”.

Unconvinced, the reporter asked again, yes, but what year?

Red-faced and out of his depth, Davis conceded he had lost and switched to straight-up honesty, saying, “I’m sorry, I don’t know the answer to that”.

This is a key policy of Labour’s and, yes, it’s hard to remember lots of numbers and years but Davis was presumably well prepped on this topic and still didn’t get across the line.

Was Davis prepped? Or is he just being left to flounder by Labour?

Things didn’t get much better in Question Time. The Opposition had not one but three questions lined up for Davis to put him under pressure in a number of portfolios.

But that’s not before he had made a clarification to the House, after saying the week before in answer to a question about the cost of additional police that “those costs have been finalised”.

Actually, “those costs have yet to be finalised”.

This isn’t just a problem with Davis. There seems to be a problem across Labour with different stories on a number of topics – there appears to be a lack of communication and knowledge on key policies.

In Question 1 on Wednesday Davis tried a different strategy – he gave all his answers in Maori, which mewant that many people listening would not know what he said, but again they were vague and ‘in due course’ answers. Nothing answers.

The problem Labour has is that Robertson is the obvious person to be acting prime minister and actually there’s no reason he can’t be.

Peters is barely ever going to fill that role because chances are if Jacinda Ardern’s out of the country, then, as foreign affairs minister, he’s likely to be too.

Labour needs Davis to remain the party’s deputy leader because his promotion to that role ahead of the election was a smart one and no doubt went a long way to helping it win all seven Māori seats.

A smart campaign strategy – once they worked out that Davis needed to be kept in the background. But not so smart it seems when it comes to governing.

But the party can’t sustain the cringeworthy chaos on display of late and it needs a new plan by the time Ardern and Peters jet out of the country again.

Ardern can appoint Robertson in the acting role and keep Davis as deputy leader. It’s messy, but not as messy as what was on display last week.

Failing that, the Government can choose who answers questions in the House on behalf of the prime minister.

If Ardern is away, then Robertson needs to be nominated as acting leader for the purposes of the House at least. It doesn’t solve the issue of press conferences but it gets halfway there.

Labour obviously has a problem with Davis, who is more than struggling.

They have wider problems with mixed messages over a number of policies, so overall their policy decisions and communication needs to improve.

Ardern and Peters are back in the country so the Davis problem can be forgotten for a while, but if Davis can’t step up into a leadership role then Labour need to seriously look at his position.

Robertson must be frustrated, he looked like he was squirming in Parliament each time Davis got up to speak.

Fiscal fight continued

Steven Joyce continues to push Minister of Finance Grant Robertson on expected net debt in relation to Labour’s pre-election fiscal plan. Joyce had been widely criticised for suggesting their was an eleven billion dollar hole in the plan. Robertson was adamant Labour’s plan was sound and accused Joyce was scaremongering.

Yesterday from Stuff: Economists see Government debt rising billions more than Labour’s plan

In Opposition Labour laid out a fiscal plan which would borrow around $11 billion more than National had proposed, but still cut debt as a share of the total economic output from 24 per cent to 20 per cent by 2022.

The plan formed a major point of contention during the election campaign, as National finance spokesman Steven Joyce was widely mocked for his claim that Robertson’s plan had a major “fiscal hole”.

But bank economists, who monitor the likely issuance of government bonds, are warning of pressure for Treasury to borrow billions more than Labour had signalled because of new spending promises.

The fiscal situation continually changes, but there was always a likelihood that spending would increase due to coalition bargaining.

ANZ chief economist Cameron Bagrie

ANZ has forecast that Labour will borrow $13 billion more than Treasury’s pre-election fiscal update maintained the former Government would over the next four years, although around $3b of that would go to the NZ Super Fund. This would see net Crown debt at 23 per cent of gross domestic product, 3 percentage points higher than Labour’s plan.

Outgoing ANZ chief economist Cameron Bagrie said the estimates for new spending were “conservative”, including an assumption that the new $1b a year regional development fund would come entirely from existing budgets.

“[S]pending pressures are all headed one way – and a lot depends on the economy holding up.”

BNZ senior economist Craig Ebert

BNZ has also indicated it expects borrowing to be stronger than Labour had flagged. Strategist Jason Wong said the half year economic and fiscal update would probably show “in the order of” an additional $2b-$3b a year in bond issuance in the coming years.

BNZ senior economist Craig Ebert said the figures were hard to determine so early in the term, but borrowing “could amount to a number of billion dollars” more than Labour had outlined.

“Some of this is taking place in a little bit of a vacuum still, because we’ve heard a lot of policies but it’s still a little unclear which ones have been confirmed confirmed, as opposed to just strongly proposed,” Ebert said.

ASB chief economist Nick Tuffley

However ASB chief economist Nick Tuffley now forecasts that unemployment will eventually fall to 3.9 per cent by 2021, while wage growth would gradually rise to 2.8 per cent by early 2020, on the back of both lower migration and plans to hike the minimum wage to $20 an hour by 2021.

Tuffley said based on its forecasts, and the assumption that Labour was able to stick to its spending plans, ASB was forecasting borrowing would be $1b higher than Robertson had signalled.

“Any slippage in [spending plans] will mean more debt issuance,” Tuffley said.

Joyce questioned Robertson about that in in Question Time yesterday, joining a patsy (question 1):

Tamati Coffey: What objective does the Minister have for core Crown net debt?

Hon GRANT ROBERTSON: As indicated during the Speech from the Throne, the Government is committed to reducing net debt to 20 percent of GDP within five years. Progress towards this will be set out by the Government during the usual Budget reporting cycle to the House, starting with the Half Year Economic and Fiscal Update, before Christmas.

Hon Steven Joyce: Has he seen amongst those reports the economic forecast from ANZ chief economist, Cameron Bagrie, who calculates that the Minister , in fact, won’t be able to meet his own Budget responsibility rule No. 2, to keep net debt below 20 percent of GDP, even with some rather heroic spending assumptions?

Hon GRANT ROBERTSON: I have seen those reports and I disagree with them.

Then in question 3:

Transcript (slightly edited):


3. Hon STEVEN JOYCE (National) to the Minister of Finance: Can he confirm core Crown net debt was $59.5 billion at 30 June 2017, and that it is his intention as Minister of Finance to increase net debt to $67.6 billion by 2022, as laid out in Labour’s pre-election fiscal plan?

Hon GRANT ROBERTSON (Minister of Finance): I can confirm that at 30 June 2017 net core Crown debt was $59.48 billion. I can further confirm that it is this Government’s policy to reduce net core Crown debt to 20 percent of GDP within five years. As the member knows, the exact dollar amount of debt in each year will be determined by the Budget process.

Hon Steven Joyce: I raise a point of order, Mr Speaker. That was a question written down on notice, and I don’t believe the Minister of Finance answered the second part of the question. He talked about something about 20 percent of GDP, but he didn’t actually answer yes or no to whether it was his intention to increase net debt to $67.6 billion by 2022.

Hon GRANT ROBERTSON: Speaking to the point of order, I’m not sure if the member heard the last part of my answer, where I did specifically address the question of what the exact dollar amount might be.

Hon Steven Joyce: He didn’t answer the question. Nobody is any the wiser as to whether, actually, he will allow net debt to get to $67.6 billion by 2022, as laid out in Labour’s pre-election fiscal plan.

Mr SPEAKER: Well, Speakers’ rulings are pretty clear in this area. I think somewhere around page 171 is the ruling that members cannot demand a yes/no answer, and I’m just about confident enough that the former Minister of Finance understands that these figures might be affected by growth figures.

Hon Steven Joyce: Sorry to prolong things, Mr Speaker, but actually it is possible to say whether it will be higher or lower or about that figure. It is a question on notice—it’s not a supplementary question—and I do think that the Minister of Finance could be a bit more specific as to that number, given that prior to a certain date in September he was actually accusing people of showing an affront to democracy for—

Mr SPEAKER: OK—[Interruption] All right, OK. I think where I’m going to leave it is that I might be slightly more liberal, as long as they are direct, on the supplementaries, if the member wants to drill down that way.

Hon Steven Joyce: Can the finance Minister confirm that the pre-election fiscal update forecasts net debt to reduce to $56.2 billion by 2022, meaning that his forecast of $67.6 billion is over $11 billion higher than in the pre-election fiscal update?

Hon GRANT ROBERTSON: I can confirm that those were the numbers in the pre-election fiscal update. What we have discovered is that those numbers did not take account of the need for increased spending in education capital expenditure, health capital expenditure, or a range of other areas.

Hon Steven Joyce: Is the Minister then saying that, actually, he expects to increase debt significantly higher than $67.6 billion because of his concerns about the matters he raised in the previous answer?

Hon GRANT ROBERTSON: The commitment of this Government has been that we will reduce net core Crown debt to 20 percent of GDP. The member well knows, from having prepared a Budget himself and being beside someone else who’s prepared Budgets, that the exact dollar figures for debt are never decided until later in the Budget process.

Hon Steven Joyce: Why doesn’t he agree with the ANZ analysis of 7 November that concludes net debt will be billions of dollars higher than he has forecast, and that he will breach his own Budget responsibility rule number 2 to reduce net debt to 20 percent of GDP within five years, particularly as he’s just told the House—

Mr SPEAKER: Order! The member’s finished his question.

Hon GRANT ROBERTSON: Because nothing that I have seen, in terms of the advice I’ve got to this point, would point to that, and because this Government is committed to reducing debt as a percentage of GDP—20 percent—within five years of taking office.

Hon Steven Joyce: If he doesn’t like the ANZ’s commentary, does he agree with the comments from the Bank of New Zealand on Monday, who stated that Labour’s election campaign budget was just too tight to be credible; if not, what does he think the BNZ has got wrong?

Hon GRANT ROBERTSON: What this Government has committed to is a set of Budget responsibility rules, and we will work within those. We made commitments before the election to address the social deficits in health, in education, and in infrastructure, and we will do that. I make no apology for having a slower debt track than that Government if it means that we build affordable houses, contribute to superannuation, and invest in our regions.

Hon Steven Joyce: Just to be clear, does he commit to meeting all the Government’s promises, including those in his coalition agreement and his agreement for confidence and supply with the Green Party, and also the Speech from the Throne, while increasing net debt by only $11 billion, from what it was going to be, over the next five years?

Hon GRANT ROBERTSON: I absolutely stand by those Government commitments and the Budget responsibility rules that we have put forward.

Hon Steven Joyce: Does he commit to meeting all the Government’s promises, including those in those coalition agreements from the Speech from the Throne, not in relation to a percentage of GDP but by increasing net debt by no more than $11 billion relative to the pre-election fiscal update over the next five years? A very specific question.

Hon GRANT ROBERTSON: The final exact dollar figures, as the member well knows from the Budgets he’s been involved in, will be decided later in the Budget process, but we remain 100 percent committed to our goal of reducing net debt to 20 percent of GDP within five years.


No doubt there will be continuing questioning on Government spending and deficits.

Minister of Finance refuses to commit to campaign promises

In the first Question Time (Oral Questions) in the new Parliament the Minister of Finance Grant Robertson was asked repeatedly whether he would stand by his fiscal statement made prior to the election. Robertson repeatedly refused.

Crown Expenses—Fiscal Plan

3. Hon STEVEN JOYCE (National) to the Minister of Finance: Can he confirm it is his intention as Minister of Finance to ensure core Crown expenses do not exceed $81.9 billion in 2017/18, $86.1 billion in 2018/19, $88.2 billion in 2019/20, $91.8 billion in 2020/21, and $96.1 billion in 2021/22, as specified in the Labour Party’s pre-election Fiscal Plan?

Hon GRANT ROBERTSON (Minister of Finance): I can confirm that it is my intention for core Crown expenditure as a percentage of GDP to be within the recent historical range. As to the exact figures in the member’s question, I cannot confirm those as, of course, they are subject to detailed Budget decisions and revenue forecasts that are yet to be finalised.

Hon Steven Joyce: Can he confirm that he stands by his statement from 4 September this year, and I quote, “Labour’s Fiscal Plan is robust, the numbers are correct and we stand by them”?

Hon GRANT ROBERTSON: I can confirm that the Budget that this Government is putting together will be robust and it will deliver on a commitment that this Government has made to ensure that all New Zealanders share in prosperity.

Michael Wood: What else, in addition to managing core Crown expenditure, will guide the Government’s approach to responsible fiscal management?

Hon GRANT ROBERTSON: The Government will observe the Budget responsibility rules as indicated in the Speech from the Throne: namely, delivering a sustainable operating balance before gains and losses; reducing net core Crown debt to 20 percent of GDP within 5 years; and ensuring a fair and balanced progressive taxation system. We will also never forget that the purpose of a strong economy is to give every New Zealander the chance to share in prosperity, and we will never be satisfied while children live in poverty or families sleep in cars.

Hon Steven Joyce: Does he stand by his statement also on 4 September, and I quote, that “Our operating expenses are above the line and are clearly stated.”?

Hon GRANT ROBERTSON: The Budget that this Government will prepare will be clear about what we are spending and where the revenue for that is coming from.

Hon Steven Joyce: So that’s a no. Can I also ask: does he stand by his statement, and I quote, “We have quite clearly put in the spending requirements to meet the promises we have made. Our fiscal plan adds up. We are absolutely clear that we have the money to meet the commitments that we’ve made.”, also on 4 September?

Hon GRANT ROBERTSON: The Government will prepare a Budget that shows how we will pay for the important commitments that we have made to ensure that every New Zealander benefits from economic prosperity.

Hon Steven Joyce: Can the Minister of Finance then confirm that it is not his intention to necessarily ensure core Crown expenditure does not exceed $81.9 billion this current financial year, $86.1 billion in the next financial year, $88.2 billion in 2019-20, $91.8 billion in 2020-21, and $96.1 billion in 2021-22? Can he confirm that’s not his intention, even though it was specified in the Labour Party’s pre-election fiscal plan?

Hon GRANT ROBERTSON: I can confirm that we will keep Government expenditure as a percentage of GDP in line with the historical range.

Hon Steven Joyce: Can the finance Minister then confirm that he doesn’t at all stand by the numbers he presented in the Labour Party’s fiscal plan prior to the election?

Hon GRANT ROBERTSON: The Government is currently going through the usual process of putting together a Budget. We are absolutely confident that we will deliver a Budget that is in line with the Budget responsibility rules that were outlined in the Speech from the Throne and that will deliver to New Zealanders a fair share in prosperity. As I said in my primary answer, the final numbers are the subject of the normal Budget process.

Hon Steven Joyce: I’m sorry, Mr Speaker, but just to be clear, the Minister released a fiscal plan prior to the election—

Mr SPEAKER: Order! I will sit the member down now and ask him to ask a question. Speaker Hunt used to have an old saying that questions start with a question word, rather than something else.

Hon Simon Bridges: I raise a point of order, Mr Speaker.

Mr SPEAKER: No.

Hon Simon Bridges: It’s a fresh, genuine point of order.

Mr SPEAKER: Right.

Hon Simon Bridges: It’s simply this. The question was straight, really: whether he stood by the numbers they had pre-election. There really wasn’t any attempt to answer that specific question.

Hon Chris Hipkins: Point of order.

Mr SPEAKER: No, I’m not going to take any further comments on that. Both the asker of the question and I thought that there was a very clear response.

Hon Steven Joyce: Is he saying that the actual numbers written on the Labour Party’s fiscal plan prior to this election, which he and his colleagues defended vigorously during the election campaign, are no longer relevant? The comments he has made suggest that he will put whatever numbers he likes in front of the public in due course in the next Budget.

Hon GRANT ROBERTSON: I have been absolutely clear that the commitment that we have made is that Government expenditure as a percentage of GDP will remain in line with the long-run historical trend. Members on the other side of the House well know that we will now be looking at new revenue forecasts and, indeed, new growth forecasts. They will determine the exact numbers that are presented. But we are very clear on this side of the House: our number add up.

During the campaign Robertson had also been absolutely clear about commitments on expenditure and the robustness of Labour’s fiscal plan.

From PDF of Labour’s  fiscal plan (3MB).

LabourFiscalPlan

Obviously coalition agreements and changing fiscal situations can force changes on a Government.

But the Opposition has kicked off by establishing a clear separation between campaign promises and what the new Minister of Finance is prepared to commit to at the start of his tenure in charge of the country’s finances.

Who will reversing the tax cuts affect the most?

The previous (National) government legislated for tax cuts from next April that would benefit everyone earning money, in particular all workers.

Labour campaigned on scrapping these tax cuts, and intend to pass legislation that will reverse them. But they have been quite quiet about it.

In two interviews in the weekend new Minister of Finance Grant Robertson mentioned then just once in passing. On Q+A:

CORIN You will be well aware of the famous winter of discontent or so-called ‘winter of discontent’ – 1999, Labour government that came in. Are you worried that business is going to react badly to you? I mean, what is your message to, I guess, the small business owners, the business people in New Zealand this morning watching? Can you assure them that you’re not going to rip up the rulebook for them?

GRANT Absolutely. I mean, we are a party that’s committed to a partnership here with business, with working people as well. And, yeah, I went to a Mood of the Boardroom event with, you know, 150 CEOs just before the election and heard from them that their biggest concerns about New Zealand were about inequality. They said that we didn’t need tax cuts; we needed to invest in social services. They were worried about multinationals not paying their fair share of tax. They’re the same policies that we’ve got. Now’s the time for us to sit down with the business community and say, ‘How do we make this work together? How do we grow businesses and ensure a fair share in that prosperity?’

CEOs said “we didn’t need tax cuts” – good for them, they probably don’t, but they don’t speak for all workers. It’s curious to see a Labour finance minister taking a justification for a significant policy from big business CEOs on what they think all workers don’t need.

From the interview on The Nation:

Lisa Owen: Minimum wage — you’re going to raise it to 20 bucks an hour by the end of your first term. Are you worried that that’s going to put a handbrake on job creation?

Grant Robertson: No, not at all. When Labour was last in government, we were raising the minimum wage by about a dollar a year during that period. In fact, we had some of the best economic growth and the lowest unemployment that we’ve seen. Bear in mind, the people who will be getting these minimum wage increases will then be spending that money in the economy. It actually stimulates growth.

Lisa Owen: So in terms of paying for that, the Prime Minister’s indicated that there could be some breaks for small businesses, perhaps, to offset the cost of rising wages. But the thing with that is that will lower your tax take, and don’t you need that money?

Grant Robertson: Look, obviously, as Minister of Finance, I’m always keen to see the money that comes in that we can use, but we do have to make sure we’re being fair on small businesses. Australia has this — the idea of potentially a progressive tax rate for small businesses with low turnover. We want to take a look at that and see whether that could work in New Zealand.

Increasing the minimum wage will help low paid workers (if it doesn’t trigger price inflation. And Labour are also considering tax cuts for small businesses.

Jacinda Ardern has also mentioned small business tax breaks – see Ardern considers tax cut for small businesses to offset $20 minimum wage.

Ardern has also said little about reversing the tax cuts. She has said that their first 100 days plan is largely going to happen. This includes:

  • Make the first year of tertiary education or training fees free from January 1, 2018.
  • Increase student allowances and living cost loans by $50 a week from January 1, 2018.
  • Increase the minimum wage to $16.50 an hour, to take effect from 1 April 2018, and introduce legislation to improve fairness in the workplace.
  • Legislate to pass the Families Package, including the Winter Fuel Payment, Best Start and increases to Paid Parental Leave, to take effect from 1 July 2018.

So that will provide more money to students, low wage workers, families and superannuants (Winter Fuel Payment).

From Labour’s Families Package:

Now is not the time for tax cuts. The top 10 percent of income earners get $400 million from National’s tax cut, which is as much as the bottom 60 percent receive combined. So Labour will eliminate National’s tax cuts, saving $1.5 billion a year. Making this choice provides Labour with the opportunity to reduce inequality and boost family incomes.

Families, students, old people, and possibly small businesses will all benefit from Labour’s changes.

There’s a large group of people who will miss out on the currently legislated tax cuts, and will also miss out on handouts from the incoming Government – wage earners who earn more than $20 an hour who don’t have dependant children.

Many ordinary middle New Zealanders will be paying for ” the opportunity to reduce inequality and boost family incomes”. They will do this in a number of ways.

They are already gradually paying higher tax rates due to bracket creep, and that will continue.

If pushing up minimum wages pushes up inflation those not getting more wages will see their costs increasing.

There is also a risk that interest rates will be pushed up – that will impact in middle New Zealanders the most.

The fuel tax will cost Aucklanders more.

And there’s another risk – house prices may drop. Prices have already levelled off in Auckland. The incoming government has plans to dampen property inflation further. This could impact on middle new Zealanders who already own homes (and have mortgages).

During the election campaign Labour kept emphasising the tax cuts ‘the top 10%’ would get in comparison to ‘the bottom 60%’ from the currently legislated changes.

They ignored the other 30%.

Labour will need to be aware of the risks of building resentment by ignoring many middle New Zealanders in their modifications of wealth redistribution. There are a lot of people who will not just miss out, they may end up paying out.

“Full employment”

Labour campaigned on “full employment”, but it was sometimes not quite full.

On 4 July this year Labour’;s then spokesperson for finance, Grant Robertson, said in a speech titled The Future of Work and Labour’s Economic Vision:

Just to refresh. The Labour Party believes in full employment- anyone who can work should be able to work. As Minister of Finance I will re-assert Labour’s historic mission of full employment. In the first term of government we will lower unemployment to 4%.

And we want all parts of the economic apparatus working towards that goal. That is why we will expand the objectives of the Reserve Bank to include not just controlling inflation, but also maximising employment.

Interviewed on The Nation on 22 July (before she took over the leadership) Jacinda Ardern said that while 4% unemployment was their target she wanted to aim for “full employment”.

Owen: You raised jobs, so let’s go there. Labour’s aiming to get unemployment down from 5% to 4%. In real terms, how many jobs is that and how are you going to do it?

Ardern: Yeah, we are, and we’ve talked about some of the specific ideas that we’ve had. For instance—

Owen: Sorry, how many jobs will that be in real terms?

Ardern: Well, we’ve said we want to drop it down to 4% as a target. I can’t give you the specific number that that generates.

Owen: So about 25,000.

Ardern: We’ve set 4% as a target, but we are a party that believes in full employment. I want to make that point.

Owen: …we’re circling back round to the fact that your critics would say you’re not being that ambitious. We’re getting there anyway — 4.3%. You’re offering us 0.3%. Is that enough to motivate people to change, which is what you want them to do.

Ardern: And as I say, we’ve set some targets, but, actually, we are a party, as I say, is ambitious enough to say that, actually, what we want is full employment. We will never be satisfied as long we have anyone—

Owen: But that’s not the target you’ve set in the short term. The target you’ve set is this, which is so close to National’s, it could be National’s.

Ardern: We’ve set a target that allows us to make some projections around the kind of spending in investment in other areas. But, as I say, as much as we’ve got a number in this fiscal plan, our target is that as long as there is anyone who is unable to work because they cannot find employment, that isn’t supported, that doesn’t have the dignity of that work, we will not be satisfied. Yeah, we put a number on it. We believe in full employment. That’s bold.

A few days ago as Ardern was set to become Prime Minister, NBR:  Ardern says unemployment should be below 4%

Jacinda Ardern says New Zealand’s unemployment rate should be below 4%.

She says GDP is “barely growing” and unemployment is stuck at 5% but she says it should be below 4%.

Our unemployment actually dropped to 4.8% in the three months to June, the lowest it has been since the Global Financial Crisis hit in 2008.

Lowering unemployment down further, especially below 4%, will be challenging, although it got as low as 3.7% in 2007.

‘Full employment’ implies virtually zero unemployment, something that is unlikely to be attained. All governments aim for as low unemployment as possible. Sometimes outside influences, like the GFC, work against that.

Pushing up minimum wages significantly may or may nor impact negatively on employment. Same for changes to the 90 day trial period legislation.

Shane Jones, incoming Minister for Regional Development, says he will push for more employment in the regions and has said that both a carrot and stick approaches will be needed. This has already met with union resistance.

NZH:  Unions slam ‘work-for-dole’ proposal

The newly-appointed Minister for Regional Economic Development said today he had been encouraged to look into the idea as part of the $1 billion extra funding to go to regional New Zealand.

Jones said it was not just about regional GDP or giving people who weren’t working the opportunity to find employment,

The Government was also promising to plant 100 million trees a year.

“As we plant indigenous trees I’m going to get my indigenous nephews off their nono and they’re going to go to work”.

First Union general secretary Robert Reid said the entire union movement was implacably opposed to the idea.

“It’s long-standing policy for the union movement right from when it was tried by the National Government in the 1990s.

“What we are in favour of is work-for-wages schemes for unemployed people, even on a temporary basis like the 1970s and ’80s schemes.”

Reid said this would give workers the dignity of working for a proper pay packet as opposed to the indignity of working for the dole.

Greens may resist the stick side of that, having “remove excessive sanctions” from the welfare system written in their agreement with Labour and having campaigned on effectively ‘no questions asked’ benefits that may make it difficult to push those people with entrenched habits of unemployment into work.

Everyone benefits from better wages and more employment, and less unemployment, but the last 4-5% may be difficult to deal with.

 

Grant Robertson on The Nation

New Minister of Finance Grant Robertson was interviewed on The Nation this morning. From @TheNationNZ:

“We understand the importance of fiscal responsibility, but that can’t be an end in itself.”

He says he’s absolutely confident the Labour-NZF govt can meet its budget responsibility rules.

The Govt will be an active one – will partner with the regions, rather than meddling.

Robertson says the govt wants to invest in the long term – it’s not just about the numbers on the sheet but living standard.

He says the regional development fund is an opportunity to correct under-investment in areas like Northland. It will be a “rigorous” process based on the best projects.

Robertson says there’s a lot more work to do to understand where Auckland’s port would be best placed.

He says Labour was heading in the same direction on the min wage as NZF – $20 by 2020 was NZF policy.

The Tax Working Group will be appointed before the end of the year.

He will always make sure the most vulnerable in society are protected.

As Sports Minister, he says he’s looking forward to a conversation with about pay equity.

Interview: Grant Robertson

There wasn’t much of substance in that going by the summary.

Newshub: Finance Minister Grant Robertson won’t cut ‘core’ spending if economy tanks

New Finance Minister Grant Robertson is backing up Jacinda Ardern’s view the economy has been a “blatant failure” when it comes to helping New Zealand’s most vulnerable.

Mr Robertson told The Nation on Saturday the “days of a hands-off, laissez-faire Government hoping for the best for New Zealand are over”.

“What Jacinda Ardern has said is if you’ve got the world’s worst homelessness, then the form of capitalism that we’ve seen in New Zealand isn’t working for those people – and I would agree with that,” he said.

“That’s the foundation principle of the Labour Party… we believe in the fact there is an obligation on Government to help ensure fairness, to make sure everybody gets a chance to achieve their potential.”

To fix it, he says Labour will lead an “active” Government “that partners in the regions with local government, with business, with iwi”. But he appears to want to avoid the ‘nanny state’ accusations that plagued Labour’s last administration under Helen Clark.

“That’s a different thing entirely from meddling and telling people what to do. We actually want to listen.”

“I came into politics to make sure that we provided better opportunities for New Zealanders, that we protected our most vulnerable. There are certain areas of spending that we must do to be a decent society, to care for other people. I would never compromise on that.”

He praised the National-led Government for continuing to spend during the global financial crisis.

“They made sure those core areas of spending carried on – that’s what responsible Governments do.”

Mr Robertson is confident Mr Peters’ “dark days” won’t happen.

“I don’t think we’re going to need to have that conversation.”

Winston Peters can’t be too concerned about the prospects for our economy either, given that his focus is overseas as Minister of Foreign Affairs, and he has negotiated $1b per year finding for Regional Development.

It’s very early days for Robertson – he has been Minister of Finance for two days – so we will have to wait and see how well he manages New Zealand’s finances. His past experience is largely irrelevant. He has time preparing for the role in Opposition, now he has the opportunity to pout into practice what he and Labour think will will work.

A generational change?

The new Government is being described as one of the biggest changes in New Zealand politics for decades, a generational change.

It’s true that the last few governments have largely followed similar directions, and have been similarly aged leaders largely of the baby boomer generation.

There’s no doubt that Jacinda Ardern is a significant shift. At 37 she will be the youngest Prime Minister since the early days of New Zealand government. The influential Grant Robertson is a bit older at 46 but is also of a different generation to past governments. He was a staff apprentice in the Clark government. Deputy Kelvin Davis is a shade older at 50.

James Shaw is a fresh political face and at 44 also relatively young for a party leader. At 43 Marama Davidson is a similar age, and Julie Anne Genter is 37. All born in the seventies.

So that does look like a generational shift based on age.

Of course there’s a contrast in NZ First. Winston Peters is 72 and first stood for Parliament before some of the above were born. He’s an old school politician and a fan of Robert Muldoon. Ron Mark is 63, Shane Jones is 58, all baby boomers.

Of the top ranked NZ First MPs only Tracey Martin at 41 represents a generational shift. She may be an important link between NZ First and the new generation represented by Labour and the Greens.

Any new government means change. Peters should ensure older people are looked after, they are his generation and his core constituency, but the incoming government led by Jacinda Ardern does seem to indicate a probable generational change in New Zealand politics.

It could be a very interesting term, especially for older generation observers.

Joyce v Robertson finance debate tonight

Stuff are streaming a finance debate from 7:00 pm between Grant Robertson and Steven Joyce. This may be challenging for Robertson in particular after today’s tax u-turn.

Ok, I’m getting sick of it already, same old arguments flying to and fro.

Robertson has just interrupted Joyce about five times in a row stopping him from talking. Waste of time.

Joyce is still claiming there is a fiscal hole, but seems to have changed his slant somewhat.

Labour lose their nerve on tax

There’s been a lot already written and commented on today’s tax back down from Labour so I won’t go over it all, but it looks like they lost their nerve on their tax working group strategy.

Labour say they won’t implement any new taxes they haven’t already been announced until after the 2020 election, but if in government they may put legislation in place before the election, set to kick off in 2021.

Grant Robertson fronted the announcement. here’s his PR:

Labour committed to fair and progressive tax system

Labour is committed to a tax system where everyone pays their fair share and where we start to address the imbalances that have fuelled the housing crisis, says Labour’s Finance spokesperson Grant Robertson and Labour’s Revenue spokesperson Michael Wood.

“Today Labour has released its full tax plan, bringing together a number of previous announcements and more detail on the Tax Working Group. Given the amount of misinformation being spread, it is important that we have all the information in one place.

“Labour will not make any changes to personal income tax, corporate tax rates or GST.

“What we will do is reverse National’s proposed tax cuts and use the billions of dollars to make 70 per cent of families with children better off and invest more in health, education, housing and other public services.

“Our policy also cracks down on those who are exploiting weaknesses in the tax system by speculating in the housing market. Labour will end the practice of negative gearing, and extend the current bright line test that taxes the capital gain on the sale of a property other than the family home to five years.

“We are establishing the Tax Working Group to explore other options to make our tax system fairer, particularly in terms of the balance between taxing income from salaries and wages and property speculation.

“To be absolutely clear, under Labour the family home and the land around it will never be taxed. There will also be no inheritance tax.

“Labour will not shy away from the hard issues such as fixing the housing crisis and we are determined to do what is right, but we also know we must take New Zealanders with us as we do that.

“We have heard the call for New Zealanders’ voices to be heard. We will involve the public at every stage of the Working Group, as well as Cabinet and Parliament’s consideration of any changes that arise from it.

“We know it is important to get this right, so we will balance the need for certainty and urgency by ensuring that any potential changes will not come into effect until the 2021 tax year. This gives multiple opportunities for public input, and a general election before any new tax would come into effect.

“To avoid any doubt, no one will be affected by any tax changes arising from the outcomes of the Working Group until 2021. There will be no new taxes or levies introduced in our first term of government beyond those we have already announced.

“Other highlights of Labour’s plan include ensuring multinationals meet their tax obligations, a Research and Development Tax Credit and the fast tracked abolition of secondary tax as part of the Business Transformation Programme at IRD,” says Grant Robertson and Michael Wood.

Read our tax plan here.

Ardern ‘clarifies’ on land tax

More tax confusion from Jacinda Ardern yesterday, this time on whether some sort of land tax would be considered by their proposed tax working group.

RNZ:  Labour clarifies land tax position

Ms Ardern said Labour’s target was not the family home.

But when pressed by reporters, she suggested that guarantee only covered the building itself and not the land.

“Yes, that’s the complication of those various iterations,” she said.

“That’s why I’m saying to the tax working group – ‘I want the family home to be off the table, please work through the options that remain available to address home ownership and to address affordability and to make sure our taxation system is fair’.”

Ms Ardern was then asked again if she was leaving open the possibility of taxing the land on which the home sat.

“I’m saying that I don’t want there to be taxation applying to a family home,” she said. “The rest is for the working group to work through.”

So news reports came out saying that a land tax was potentially on the table.

A land tax generally takes the form of an annual levy based on the value of the land.

It was one of the recommendations – as part of a broader tax reform package – made by the 2010 Tax Working Group. It was rejected by the National government at the time.

RNZ themselves interviewed someone about how a land tax might work, and what it’s benefits could be:

An expert explanation of land tax

Michael Littlewood is an Auckland University Law Professor and tax expert. He joins Checkpoint to discuss how a land tax would work.

But since then Ardern has clarified.

Labour Party leader Jacinda Ardern has ruled out introducing any tax which would hit either the family home or the land it sits on, saying that’s “completely off the table”.

Ms Ardern has always ruled out introducing a capital gains tax on the family home.

She’s now gone further, saying she’d instruct the working group to stay away from any policies which would affect the home or the land on which it is built.

“My message will be very clear to them – do not bring me any recommendation that includes the family home or the land that a family home sits on.”

Ms Ardern said the tax working group could still consider the possibility of a land tax, but not one which would hit the land underneath a family’s house.

“That will not be up for consideration. It’s completely off the table.”

Some of Labour’s tax policy seems to be still evolving.

The big question is how much more it might evolve should Labour get into government.

Ardern (and Grant Robertson and Labour for a couple of years now) have been pushing the line that they want to wait to listen to experts before making decisions on tax changes, but when they get advice it will be too urgent to wait until the next election to get a mandate for changes.

Over the course of this campaign Ardern has been ruling out an increasing number of possible tax changes, so the tax working group may not have much to work with.

Ardern and Labour have also frequently mentioned the National flip on GST after the 2008 election as some sort of justification for deferring tax policy until after the election as if that would make a surprise tax package ok.

So far Labour have not responded to requests to publish possible terms of reference for their tax working group, nor will the indicate who might be appointed to the group.

Tax continues to be one of Labour’s biggest weaknesses in this campaign.