Reserve Bank predictions about KiwiBuild – very slow, and crowding out private development

Reserve Bank Governor Adrian Orr has said that the Reserve Bank predicts a very slow start to the KiwiBuild programme – that’s hardly a prediction, it appears to be current reality – and also that due to lack of capacity much of the numbers eventually built may simply replace what private builders would have constructed.

RNZ: Reserve Bank predicts KiwiBuild will crowd out private building, progress slowly

The Reserve Bank has sounded a warning that the government’s KiwiBuild programme is likely to crowd out other private house building, because the construction industry simply doesn’t have enough capacity.

Reserve Bank Governor Adrian Orr told MPs on Parliament’s Finance and Expenditure committee this morning KiwiBuild would need time to fully pick up momentum.

“It will be a very slow start, which it has proved to be, we haven’t had to change our forecasts much over the last six months,” Mr Orr said.

The Reserve Bank report said the sector was struggling to find enough skilled and non-skilled labour to meet demand.

“Capacity constraints are restricting firms’ ability to meet that demand.

“The ability of the construction sector to build additional houses therefore depends on whether these constraints can be eased.”

That meant resources were limited, which could impact on private investment, Mr Orr.

“It would crowd out resources if you’re chasing for land building activity etc then you have compete to build KiwiBuild versus something else”.

According to the bank’s estimates that would mean for every 100 KiwiBuild homes built, 50 to 70 houses would not be built elsewhere, Mr Orr said.

This isn’t a new idea either.

Housing Minister Phil Twyford said the Reserve Bank’s estimates were just “one more projection” and that he was not “fussed all at” about them.

He agreed with the concerns about capacity constraints.

“We’ve inherited some real difficulties in the construction industry, it’s both a lack of workforce, firms that have trouble scaling up, low productivity, lack of access to land.”

Twyford and Labour should have known that before they made bold promises.

NZ Herald – KiwiBuild warning: Reserve Bank governor Adrian Orr warns scheme ‘crowding out’ private sector

But Finance Minister Grant Robertson appeared to be at odds the central bank’s estimates and said Orr’s forecast was “certainly challengeable”.

Robertson did not seem to agree with Orr’s data when questioned this morning.

“Whether or not I accept that that is the level of crowding out is certainly challengeable, as we have had other advice.”

Robertson would not say what level of crowding out the Government was expecting; only that the Government’s goal was to add “significantly to the housing stock”.

The aim of KiwiBuild was to promote the building of affordable housing, the Finance Minister said.

I don’t think there is any sign so far that Kiwibuild is making housing more affordable.

The project has been trying to get promised numbers of houses built (dismally) but this focus doesn’t seem to have done much if anything to address the costs of building and the lack of available land (that also contributes to the cost of land).

“If we are starting to shift where some of the development is to more affordable, more affordable homes for first home buyers, that’s good.”

Note that he says ‘if’, not that that is what is actually happening.

The Government has a lot of work to do to prevent this from being both a big embarrassment and a costly failure.

“Government is stuck in a fiscal holding pattern”

Bernard Hickey thinks that the Government is “stuck in a fiscal holding pattern” this term due to their commitment to Budget Responsibility Rules, which committed them to get net debt down to 20 percent of GDP and keep the budget in surplus across the economic cycle.

This fiscal straightjacket has been criticised by those who want the Government to launch into significant (and expensive) tax, benefit and social reforms.

Hickey (Newsroom):  ‘Let’s do this’ in a holding pattern

Jacinda Ardern’s first big economic speech of the year warned of global economic headwinds, but it lacked action in response, or a major plan to improve wellbeing. Instead, it exposed how her Government is stuck in a fiscal holding pattern before the 2020 election, when it hopes it can throw off its debt target and capital gains tax shackles.

The breakfast speech to a polite audience of Auckland’s business elite at the Hilton Hotel on the waterfront showed the Prime Minister at the top of her game. She is a smooth operator with a knack for a self-deprecating quip or an aside that can win over even the most sceptical audience.

“Our starting point for the Wellbeing Budget is that while economic growth is important, it alone does not guarantee improvements to New Zealanders’ living standards,” she said, going on to make a strong case to address our obvious wellbeing problems.

“An everyday New Zealander – hearing of the “rock star economy” while their housing costs are skyrocketing, or they can’t afford to send their kids to school with a proper lunch or their mental health is strained – tends to have their faith in the system and in institutions undermined.”

She went on to detail the plans and the priorities for the first Wellbeing Budget in May, and suggested it would help New Zealand cope with economic headwinds from overseas.

“It will ensure that those closest to the margins are protected and that no one is left behind,” she said.

Really?

How can that be true when Kiwibuild is behind schedule and there are massive infrastructure deficits in housing, health, education and transport, which can only be addressed with tens of billions of extra public investment. New Zealand’s population is growing five times faster than the OECD average and Ardern acknowledged in her speech that governments had encouraged population growth without investing in infrastructure to deal with it.

That’s what National had been criticised for (with some justification).

I asked Ardern afterwards if the Government was planning to respond to the slowing economy and higher unemployment by loosening fiscal policy with extra operational or investment spending.

She stuck to the usual line that the Government would keep operating within its Budget Responsibility Rules.

Ardern and right-hand-man and now-Finance Minister Grant Robertson agreed with Green Leader James Shaw shortly after her election as Labour leader to essentially sign up to the same fiscal settings as National had up until earlier that year.

They imposed those rules on themselves to stick with a campaign promise, made to promote Labour as fiscally responsible to combat attempts by National to portray them as loose with money.

Ardern and Robertson are playing a longer game here, but that is frustrating those who want rapid and meaningful reforms.

The only exception to this rule is the need to spend up large to cope with either natural or man-made financial disasters such as the Global Financial Crisis and the Christchurch earthquakes.

The irony is they need a new global financial crisis to give them the excuse to do what they need to do to make a real improvement in wellbeing.

So should the Government use its strong balance sheet to fix New Zealand’s massive infrastructure deficits? Yes should be the answer, but the timing should be now, not in two years time.

Unwilling to break its promise, it is now in a holding pattern and hopes voters keep the faith for long enough to give it a chance to throw off the shackles.

The Government has already committed to some extra spending – they boosted the Families Package, rushed in a tertiary education fees policy, and gave NZ First a $3 billion Provincial Growth Fund kitty. They will also end up with significant increases in teacher and nurse wage bills.

There are pressures to address what Labour had claimed was underfunding in health, but there seems to be no urgency there. They are now seem to be kicking the ‘mental health crisis’ down nine separate working group roads (see Mental health crisis -> 1 working group -> 9 working groups), and have stretched out their promised rebuild of the Dunedin Hospital (now due for completion in ten years).

Ardern has promised big in this year’s ‘wellbeing’ focussed budget, but has also promised small in debt targets, so Grant Robertson will have quite a balancing act to do.

Hickey sees this as a virtual holding pattern for the next two budgets, unless the world economy turns to custard and gives them an out clause.

 

National announces policy to address tax bracket creep

The last two governments and their finance ministers persistently refused to address tax bracket creep, which is seen as tax increases by stealth – as inflation increases incomes it pushes more income into higher tax brackets.

The incoming Labour led government actually did something, but that was negative – they scrapped catch up tax cuts put in place by National.

Today Simon Bridges announced that a future National government led by him would legislate to raise tax brackets in line with inflation every three years.

National would introduce rolling tax relief

A National Government would link income tax brackets to inflation, ensuring income taxes are adjusted every three years in line with the cost of living and allowing New Zealanders to keep more of what they earn, National Leader Simon Bridges says.

“New Zealanders’ incomes are struggling to keep up with the rising cost of living because this Government is imposing more red tape and taxes,” Mr Bridges said in his State of the Nation speech in Christchurch today.

“Over the next four years, New Zealanders will be paying almost $10,000 more per household in tax than they would have been under National. The Government is taking more than it needs, only to waste billions on bad spending.

“On top of that, by 2022 New Zealanders on the average wage will move into the top tax bracket. That’s not right or fair. So in our first term National will fix that by indexing tax thresholds to inflation.

“We will amend the Income Tax Act so tax thresholds are adjusted every three years in line with the cost of living. That will mean that within a year after every election, Treasury will advise the Government on how much the thresholds should be adjusted for inflation.

“This would prevent New Zealanders from moving into higher tax brackets even when their income isn’t keeping up with the rising cost of living. It would ensure New Zealanders keep more of what they earn to stay on top of rising costs of living such as higher prices for necessities like petrol, rent and electricity.

“We will include a veto clause so the Government of the day can withhold the changes in the rare circumstances there is good reason to. But it will have to explain that decision to New Zealanders.

“The changes would make a real difference. Assuming inflation of 2 per cent, someone on the average wage would be $430 a year better off after the first adjustment, $900 after the second and $1,400 after the third.

“We will also do more on tax – but add no new taxes – and I’ll continue talking about our plans between now and next year’s election.

“National is committed to helping New Zealanders get ahead. This step means that as well as cancelling new taxes this Government has piled on, we won’t allow future governments to use inflation as an annual tax increase by stealth.”

In response Minister of Finance trotted out the overused and irrelevant ‘they didn’t do it in their nine years in office’.

But this is a smart move by National. Not only does it allow them to campaign on not raising taxes or allowing taxes to rise ‘by stealth’, they can compare this with what is predicted to be some sort of capital gains tax that will tax inflation affected increases in value of assets.

Of course Labour can come up with a competing policy, but that could be some time away as they ponder the Tax Working Group recommendations.

This looks a bit corny though:

 

Tax reform and capital gains tax still unresolved

According to media claims the Cabinet has received copies of the Tax Working Group recommendations, but it could take some time to find out what they are going to decide to run with. – or what the are allowed to run with by Winston Peters.

Group chairman Michael Cullen has suggested that tax changes could be decided in Parliament this term ready to come into effect in April 2021 providing Labour gets a mandate in next year’s election. But Grant Robertson has warned that it could take some time to work through the recommendations with Labour’s partner parties in Government.

Audrey Young (in Major challenges for ‘exasperated’ Ardern):

Robertson played Robin to her Batman at the post-Cabinet presser, initially fronting on the Government response to the insurance industry inquiry.

The subject quickly changed to the final report of the Tax Working Group and its promised capital gains tax which is due to be handed to the Government this week.

Robertson patiently continued his mission to change the language over the tax by calling it a “capital income tax” rather than a “capital gains tax” — an attempt to equate it to all other income.

Ardern became impatient when questions turned to the undisputed veto that NZ First will have on any capital gains tax — the Greens have been unequivocal supporters and NZ First longstanding opponents.

Apparently a capital gains tax is just like every other issue the Government debates, and requires the agreement of all three parties.

Not just apparently. Tax reform is far from a done deal. It is a Labour only promise, but with no public agreement with either NZ First or the Greens.

Stuff:  Decision on capital gains tax will take a wee while, Grant Robertson warns

There will be no quick decision from the Government on whether to implement a capital gains tax, Finance Minister Grant Robertson has signalled – noting Labour would have to work that through with its coalition partners.

The Tax Working Group (TWG) chaired by Sir Michael Cullen is understood to have completed its report for the Government, with a “clear majority” favouring subjecting capital gains from the sale of property, shares and businesses to income tax.

But Robertson told RNZ the Government would need to take its time to read the TWG’s report “work through the details of it and work out what package we can agree to as a coalition government”.

Remarkably the Labour-NZ First coalition agreement did not mention the Tax Working Group, nor CGT, and neither did Labour-Green Confidence & Supply Agreement, so the recommendations of the TWG and what Labour would like to do will all need to be negotiated with Winston Peters and NZ First, as well as with the Greens. This alone is likely to take time.

Inland Revenue said on Tuesday morning that the report had not yet been delivered to the Government, and no date has been set for it to be made public, but sources said the report was being read in the Beehive.

Robertson said he expected to get the report by the end of the week but he and Prime Minister Jacinda Ardern did not rule out a coalition partner vetoing any legislation.

“There is a wee ways to go before the final decisions about this report will be made,” Robertson said.

“As we do with all these reports, we will take a look at it and put it out with a few interim comments from us,” he said.

So it could be some time even before the report is made public. Labour want to work out how to try to sell it before they advertise it.

Cullen said in December that he believed Parliament would have time to pass legislation paving the way for any proposed tax changes before the election, so those changes could take effect from April 2021.

Theoretically Parliament may have time, but Labour won’t want to take any tax changes to Parliament without agreement from NZ First, and the Greens.

Politik: And now the hard part; getting Winston to agree to a capital gains tax

Prime Minister Jacinda Ardern confirmed yesterday that iot was still the government’s intention to bring forward legislation for any tax changes before the end of its current twerm though those changes would not come into effect until after the enxt election.

But whether it will propose a capital gains tax will now depend on whether it can persuade NZ First to agree.

Ardern and Finance Minister Grant Robertson were coy yesterday on whether they thought they could win that derbate.

Meanwhile NZ First Leader, Winston Peters, is not saying much beyond repeating his 2017 assertion that we already had a capital gains tax.

“What i tried to point out then was that we had a cpaital ghaimn tax and that we had had one for a long time,” he told POLITIK last night.

“Now the question is are you talking about broadening it.

“The position of New Zealand First is that we will wait for the report, we will evaluate it and then we will give our view.”

Tax reform has already limited by Labour in their terms of reference for the TWG. They will presumably also want any changes to fit within their wellbeing agenda.

It will only happen if it also fits with the electoral wellbeing of Winston Peters and NZ First

Recession imminent? Economic indicators to watch this year

The world is overdue a recession, or worse. US sharemarkets ended the year dropping a lot from earlier record highs and then recovering a bit, but still well off the highs. So what is likely to happen this year?

Reuters: Breakingviews – Three key indicators to watch like a hawk in 2019

Want to know whether there’s going to be a U.S. recession, a flare-up in the trade war, or a spate of corporate implosions?

…just stay focused on these three proxy indicators.

Soybeans. American farmers have been early victims of the escalating response to President Donald Trump’s import levies. When crops from other countries like Brazil are relatively more valuable, it suggests traders are more worried tariff barriers will persist.

U.S. yield curve. Different experts pick different comparisons, but in the past when the yield on 10-year Treasury bonds has dipped below the return on two-year government paper, a recession has followed. As 2018 draws to a close, the gap is once again very thin.

Corporate health. One hint at sentiment comes from indexes that track how many stocks in given markets are in bear territory, meaning they have fallen 20 percent or more in value from their peak prices in the last 12 months. About half are in that zone in developed markets and more in emerging economies. That might mean shares are cheap. Or it might signify negative sentiment and an accelerating slide in 2019.

This is very US-centric, but the health of the US economy has a major effect on the rest of the world, including us.

It is difficult to predict when recessions will occur, but one near certainty is that they will keep occurring. The world is overdue from an economic setback.

The New Zealand economy is in good shape, but can be easily impacted by overseas markets.

Fortunately Minister of Finance Grant Robertson took a prudent approach to his first budget in 2018. However there is pressure on the Government to deliver on it’s social promises – or at least on expectations on what a kinder more progressive government should be doing.

The best time for significant tax and social reform is when there is money available to do it, like now when our books are in surplus.

If major measures are not put in place before the next recession it will get a lot harder.

And back to the US – tax changes there have substantially increased US debt, so they are not in a good position to weather a recession. This could make an economic hiccup worse.

Grant Robertson explains how his ‘wellbeing’ budget will work

Minister of Finance Grant Robertson was interviewed on Q+A  last night on how ‘wellbeing’ will be woven into next year’s budget.

Wellbing in the budget  is described as ‘a new way of delivering public policy and measuring economic success, and now in a world first GDP won’t be the only indicator of our prosperity. Happiness indicators like mental health and poverty will be given weight”.

Is this a new approach? Or is it the ‘social investment’ ambitions of Bill English renamed and repackaged? Possibly a bit of both.

Beehive: Wellbeing of New Zealanders at the heart of Budget priorities

The five Priorities for Budget 2019 are:

  • Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy
  • Supporting a thriving nation in the digital age through innovation, social and economic opportunities
  • Lifting Māori and Pacific incomes, skills and opportunities
  • Reducing child poverty and improving child wellbeing, including addressing family violence
  • Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds.

“These priorities are focussed on the outcomes that will make real improvements to New Zealanders’ wellbeing,” Grant Robertson said.

“All Ministers and agencies will be collectively responsible for delivering on the priorities. For the first time, they are being tasked with developing their own Budget bids through the lens of the priorities. They are being asked to work together, across portfolios, on initiatives that will deliver the outcomes identified by the priorities.

“New Zealanders will see a difference with next year’s Budget. It will show how we are building an economy that is more productive, more sustainable and more inclusive,” Grant Robertson said.

“Strong economic fundamentals and sustainable economic growth remain integral to New Zealand’s success but they are a means to an end, not an end in themselves. We are widening our Budget focus to look at the wellbeing of our people, the health of our environment and the strength of our communities,” Grant Robertson said.

Q+A:

Robertson:

The caveat to all of this is of course is there are a certain amount of things in a budget that you have to spend on, for example the demand driven expenditure, welfare benefits and funding for children…and that includes some really basic capital needs that we’ve got. And actually we’ve got a lot of left over legacy needs that weren’t invested in.

As any new government does. Labour have kept hammering the ‘lack of investment’ of the last National Government (who kept spending more each year).

Each minister has to put all of their bids for new spending through the lens of wellbeing. There are twelve specific areas (domains) that range all the way from the impact on health to the impact on someone’s life satisfaction…

Who does a budget consider the impact on everyone’s life satisfaction?

These budgets will be based on the evidence of what makes a difference.

Bill English said similar things.

Why is it the Government’s job to address loneliness in the community?

It is never just the Government’s job to do something like that, and I’m absolutely clear about the fact that wellbeing is not something that the Government controls, but by making it part of our purpose therefore we can contribute to supporting an individual or community or a family to reach you know a state of wellbeing that they’re happy with.

We know that if people are disconnected from their communities that can see them becoming unwell, it can see for some people it leads them into mental health issues…

Science or subjective?

There’s no doubt we are putting together here the tangible and the intangible.

What would you do to help someone who is lonely and isolated, what can a Government do to ensure that they’ve got friends?

Well it’s not about ensuring that they’ve got friends, it’s about ensuring they are connected to their communities.

I’m not sure how that will be done via a budget.

ACT Party:

Great question from : “Why is it the Govt’s job to address loneliness?” The Govt’s “wellbeing” approach is about nanny-state politicians and bureaucrats deciding what your best life is, even though every New Zealander is different.

The panel discuss the interview:

Liam Hehir:

It’s all very laudable and unobjectionable in principle.

I do take exception to the idea that it’s the first time the Government has ever been concerned with anything other than GDP, a claim he’s made on several occasions. Governments have always been concerned with the wellbeing of citizens.

I just see this as a mushy PR job.

John Tamihere:

It’s a global movement.

There’s no doubt that the narrative has changed quite dramatically under this government.

The wellbeing, collective impact it’s called, it was championed out of Stanford University 15, 16 years ago, it is running globally and been tested. New South Wales Treasury has been tasked with running a wellbeing budget next year, so there’s a global movement about this wellbeing’s narrative.

It’s a response to supply side economics as the be all and end all, and you’ve got to actually shift your public investments to where you can measure the bang for the buck on whether it’s actually working.

It sounded to me like a great new idea from Labour. Sounds quite similar to where English and National were heading, they just didn’t frame it as “collective impact”.

Jennifer Curtin:

It’s actually about investing in more than economic growth…

You need economic growth to have the money to invest – we have good economic growth at the moment, so a good time to invest.

…and using that as the sole measure of how the country is doing. So it’s about measures. It’s almost a follow on from what Bill English was doing with his social investment strategy.

It’s using the term wellbeing, picks up on what the OECD and what serious economists there are recommending.

I hope it is angled more at ‘collective impact’ than ‘impact on the collective’.

The guidance issued to Ministers and departments:  https://treasury.govt.nz/publications/budget-policy-statement/budget-policy-statement-2019

 

Robertson signals 2019 ‘Wellbeing Budget’

In his speech to the Labour Party conference this weekend Minister of Finance Grant Robertson has pre-labelled his next year budget as a ‘Wellbeing Budget’.

Budget 2018 was called Foundations for the Future, and I am proud of what we are building. But, there is more to do. More to do to build an economy that is fit for purpose for the middle part of the 21st century; an economy that is focused on future generations: more productive, more sustainable and more inclusive.

To that end, in Budget 2019 we are making a significant change that will embody our values. Budget 2019 will be New Zealand’s first Wellbeing Budget.

It will be the first budget with that label, but it won’t be the first budget by a long shot that has tried to improve the wellbeing of New Zealanders.

Last year, and the year before that (and the year before that), I have spoken about the limitation of tracking our success on a narrow measure such as GDP growth. Well, now we are doing something about it. We are moving beyond GDP to not just look at our financial health, but also the wellbeing of our people, the health of our environment and the strength of our communities.

As the Minister of Finance I will report on all of those measures at Budget time, including on how we are tracking at reducing child poverty.

It is essential that this is based on a robust and credible framework. At the core of our approach will be the Living Standards Framework developed by the Treasury, based on the work of the OECD. It is grounded in core economic concepts to assess the stock of our wellbeing. So, you will hear about financial capital, human capital, natural capital and social capital.

Next month the Treasury will release its first Living Standards Dashboard. This will show a range of indicators of our current wellbeing as a nation. It includes the tangible, like incomes and home ownership, but also the intangible like life satisfaction and cultural wellbeing. It is a work in progress. We need to make sure it is truly reflective of Aotearoa New Zealand, and all that makes us unique. It will evolve over the coming years. But it is a great start to a new way of thinking about what counts as success.

The Living Standards Framework is designed to outlive any particular Government. It will be a critical input to our Wellbeing Budget, but it will not be the only one. We are using the Child Wellbeing Strategy, evidence from here and overseas about intergenerational success and the advice of experts such as government science advisors.

And that is the critical difference in our Wellbeing Budget. Not only are we going to measure our success differently, we are putting our Budget together on a wellbeing basis as well.

We have identified five core priorities that will define our first Wellbeing Budget. I will announce the detail of these during the Budget Policy Statement next month, but they cover the areas where we think the outcomes will make a substantive difference to both our current and future wellbeing.

These priorities will include sustainably growing and modernising our economy, lifting children’s wellbeing, and yes, we will finally be giving mental health the priority and focus that it deserves.

As we speak, my Ministerial colleagues are working together to produce initiatives that will be squarely focused on long-term intergenerational outcomes. This means we are breaking down the silos of government to form a long-term view.

And we have already started.

He gives some examples.

When we first came into Government we faced a decision about what to do with Waikeria Prison. We were told that we should build a 2,500 bed American mega-prison because it had the cheapest per-prisoner cost. But maybe, just maybe, we could do better if built a smaller prison, with a mental health unit attached to address the underlying causes. And if we focused on more drug and alcohol rehabilitation and more on prisoner housing to support re-integration. That is what we have done and that is a wellbeing approach.

Better mental health support and drug and alcohol rehabilitation have been talked about for a long time, and attempts had been made to address these issues more effectively, but of course better can be done if adequate resources are made available. It will cost more initially, but as Bill English used to promote, it is a social investment that will pay dividends in the longer term.

And just this week the Prime Minister, Phil Twyford and Kelvin Davis announced a once-in-a-generation community renewal in Porirua. Now, this could have been a project just to build more houses, but we see it as a major integrated urban development plan – including education, recreation, social services, and yes, lots of houses. And delivered in partnership with iwi and local council. That is a wellbeing approach.

Al of those things are done now, but perhaps it is new to take an integrated approach to a whole community renewal at the same time.

And we are serious about embedding this approach. Chris Hipkins and I are both working on the most fundamental change to the State Sector and Public Finance legislation in thirty years. This will ensure that collaboration and wellbeing is embedded in how our government agencies work.

Again i don’t think this general approach is new, but if more emphasis is put on improving the wellbeing of people then it could make a real difference – as long as they can avoid getting bogged down with bureaucracy and they can break cycles of dependency.

So delegates, 2019 will be the Wellbeing Budget, and the first steps in changing our yardstick of success.

With finances looking healthy it is a good opportunity to invest (spend more) to achieve longer term gains in wellbeing and in costs of providing state care and assistance.

We will get a better idea of what Robertson is aiming at next May when his ‘wellbeing budget’ is announced.

However if he gets the targets and balances right it may be years if not a decade before the results will be apparent. Wise investments take time.

Full transcript of Robertson’s speech:

http://www.scoop.co.nz/stories/PA1811/S00028/grant-robertson-speech-to-labour-party-conference.htm

Grant Robertson rejects ‘spending spree’

Yesterday the Government announced a much larger than expected surplus of $5.5 billion ($2.4 billion more than forecast)- see Government announces strong surplus.

James Shaw called on a big spend up:

Green Party Co-Leader James Shaw is calling on the Government to use the money from its “extremely healthy” books to invest in New Zealand’s public sector.

“What good is a surplus if you have people living in cars or garages – that makes no sense,” he told the Herald.

“Frankly, a surplus is inefficient if you don’t use it.”

Shaw said the Government should be using that money to invest in New Zealand’s “massive infrastructure deficit”.

“New Zealand’s debt levels are well within what the international markets would deem to be prudent, interest rates are historically low and we have a massive infrastructure deficit; to me, that just all points in the direction of using that surplus for infrastructure investment in particular.”

That investment, he said, should come from both the surplus and the 2.1 per cent headroom the Government has before it reaches its 30 per cent spending limit – a combined total of $11.5 billion.

https://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=12139642

But Minister of Finance Grant Robertson is trying to dampen down spending expectations.

Is this a one off result? Surely Treasury has adjusted it’s budget forecasts after this unexpected result.

Government announces strong surplus

The Government has announced a surplus nearly twice what was in the Treasury’s Budge 2018 surplus – this is good news for spending plans or debt reduction, but may also increase demands from state servants seeking large pay rises.

This gives the Government an opportunity to make some bold moves on things like child poverty, prisoner rehabilitation to reduce prison numbers, reducing violence, addressing drug abuse and related problems, and climate change.


Government books show surplus, falling net debt

A strong surplus and falling net debt reflect a growing economy and show the Coalition Government is managing the books responsibly, Finance Minister Grant Robertson says.

The Crown financial statements for the year to 30 June 2018 are the first official check in on the Government’s commitment to run surpluses, pay down net debt and keep expenses under control.

“It’s important we run surpluses and pay down debt to make sure we are in a good position to deal with any rainy day. Economists have been warning about growing risks in the international economy, particularly due to rising trade protectionism, which we need to be well-placed to face in case this flows through to the New Zealand economy,” Grant Robertson said.

“The headline results today are ahead of the Treasury’s forecasts in Budget 2018. This was largely due to timing issues with Crown expenses, which will reverse out as that planned spending occurs early in the 2018/19 year. This means Budget 2018 spending and investment plans are on track.

“The books show we are meeting the Budget Responsibility Rules. A headline $5.5 billion surplus operating balance before gains and losses (OBEGAL) is $2.4 billion above the Treasury’s Budget 2018 forecast.

“A number of factors contributed to this result being ahead of Budget 2018 expectations. A number of one-offs led to core Crown expenses coming in 1.4 percent below forecast at 30 June 2018. The Treasury says that this was largely due to timing issues, meaning much of this variance is set to reverse out in the 2018/19 accounts. Core Crown expenses were stable at 27.9 percent of GDP.

“A strong economy contributed to core Crown tax revenue coming in 0.9 percent higher than expected in the year to 30 June 2018. Corporate tax revenue was up, due to profits for both large and small businesses being higher than the Treasury had forecast at Budget 2018. This result indicates the strength of the growing economy.

“This underlying strength of New Zealand businesses saw the number of people in employment rise by 3.7 percent over the year, while average wages rose 3 percent. These numbers show that our economic fundamentals are strong.

“The financial statements also indicate the Coalition Government’s commitment to making the important infrastructure investments New Zealand needs to unlock the growth potential of our cities and regions. At the same time, we are making up for neglected investment in critical public services in recent years.

“Net capital investment of $5.9 billion in the year was the highest since 2009 and an increase of $2.2 billion from the previous year. This included investments in hospitals, schools and state highways, while also reflecting the Coalition Government’s move to resume contributions to the NZ Super Fund.

“We are committed to a balanced approach by adopting a responsible debt reduction track. At 30 June 2018, net core Crown debt was 19.9 percent of GDP, compared to the 20.8 percent forecast in Budget 2018.

“We remain committed to the Budget Responsibility Rule that net debt will be 20 percent of GDP in 2021/22. This gives us the space required to make the critical infrastructure investments that New Zealand needs, while still building a buffer,” Grant Robertson said.

Release of Curran emails in bungled Handley appointment deferred to OIA

On Tuesday the Speaker told Chris Hipkins to front up in Parliament with Clare Curran emails on Wednesday, but Hipkins himself failed to front up (he has gone on parental leave). Instead Grant Robertson advised that emails would only be released under the official Information Act.

This means the emails will be delayed and subject to possible redactions, but it also means the bungled appointment of a Chief Technology Officer will drag out for another month or two.

Jacinda Ardern responding to Simon Bridges in Question Time yesterday:

3. Hon SIMON BRIDGES (Leader—National) to the Prime Minister: Will she release today all communications between herself, her staff, and her Ministers in respect of Derek Handley and his proposed appointment to the role of Government Chief Technology Officer?

Rt Hon JACINDA ARDERN (Prime Minister): Mr Speaker, my office has received a number of Official Information Act (OIA) requests, including from the Opposition, and is working on a response to those. We will release that information in accordance with the provisions of the Act once it has been compiled and once it has been processed.

Hon Simon Bridges: What did Derek Handley’s text message to her say?

Rt Hon JACINDA ARDERN: Mr Speaker, I would have to go from my recollection. But my recollection is that he mentioned that the Chief Technology Officer (CTO) role had been mentioned to him. Again, as I said, I did not directly reply to that message, and it was received in April.

Hon Simon Bridges: Was there more than one text from or to Derek Handley from the Prime Minister?

Rt Hon JACINDA ARDERN: The text that I received, again, as I said, was in April. I did not directly reply to that text message on that day or engage with him on the CTO role. On the CTO role, I did not engage with Mr Handley via text message.

That is potentially evasive. She said she did not respond “on that day” and “I did not engage with Mr Handley via text message” but that leaves a number of possibilities open.

Hon Simon Bridges: Well, were there any other texts between the Prime Minister and Derek Handley?

Rt Hon JACINDA ARDERN: Mr Speaker, as I acknowledged the very moment I was asked this question, I have known Mr Handley for a number of years and have had correspondence with him for a number of years.

“I have known Mr Handley for a number of years and have had correspondence with him for a number of years.”

Hon Simon Bridges: What other communications by any medium—Gmail, WhatsApp, and the like—were there between the Prime Minister and Derek Handley?

Rt Hon JACINDA ARDERN: Mr Speaker, as a consequence of the member’s question, I have had my office check. Mr Handley sent me an unsolicited email to my private email on 7 June, which I did not open and which I did not reply to. I’m advised by my staff that it informed me that he’d submitted an application for the role. But, again, it was not something I opened, saw, or replied to.

Again that leaves other possibilities open.

Hon Simon Bridges: When will the text, and that Gmail she’s referred to, be released?

Rt Hon JACINDA ARDERN: Mr Speaker, as I said in my primary answer, my office is currently working through the OIA that was received, and we will reply in accordance with the Official Information Act.

So Ardern has had correspondence with Handley over a number of years. She has revealed that she received a text from him in April regarding the CTO job, and an email in June but suggests she replied to neither but doesn’t categorically deny responses or other communications.

Nick Smith also had questions for the Minister of State Services Chris Hipkins but curiously (there could be a valid explanation) he wasn’t in Parliament, so Grant Robertson answered on his behalf.

10. Hon Dr NICK SMITH (National—Nelson) to the Minister of State Services: What are the dates and the contents of the work-related emails to and from former Minister Hon Clare Curran’s private Gmail account, in relation to the appointment of the Government’s Chief Technology Officer, that he referred to as having been handed over to the Chief Archivist in yesterday’s Oral Question No 11?

Hon GRANT ROBERTSON (Acting Minister of State Services): Mr Speaker, as I informed your office, this will be a slightly longer than normal answer. There are three email exchanges. The first: on 11 August, where Derek Handley emails Clare Curran about the Chief Technology Officer (CTO) position and questions about the role of the CTO, including resourcing for the role and potential conflicts of interest. On 14 August, Clare Curran replies to that email, confirming a call to discuss these matters. On 15 August, Derek Handley replies to that, confirming times for the call.

The second exchange: on 19 August, Clare Curran emails Derek Handley regarding logistics around the next step on the process of appointment, including the content of any public statements that might be made, and refers to contract discussions with the Department of Internal Affairs (DIA). On 20 August, Derek Handley responds to that email to Clare Curran about those issues, including the contact he has had with DIA and management of conflicts of interest.

The third exchange: on 21 August, Clare Curran emails Derek Handley regarding issues that would be on the work plan of the CTO and attaches some relevant background documents on those issues. On the same day, Derek Handley responds to Clare Curran, acknowledging the material and referring to the discussions that he is having with DIA.

I have sought and received an assurance from the former Minister that these email exchanges will be made available for release subject to the normal Official Information Act (OIA) processes.

Hon Dr Nick Smith: Will he publicly release or table those emails today, given his responsibilities as the “Minister of Open Government” and this Government’s commitment to be the most open and transparent ever?

Hon GRANT ROBERTSON: I believe I have explained the dates and the contents of the emails today. As I said at the end of my primary answer, those emails will be released in accordance with the rules of the OIA.

Hon Dr Nick Smith: Was there any inappropriate content in any of those emails between Mr Handley and Clare Curran over the appointment that influenced the Government’s decision to not proceed with Mr Handley’s appointment?

Hon GRANT ROBERTSON: The Government’s decision not to proceed with the appointment does not relate to those emails.

That leaves other possibilities open.

Hon Dr Nick Smith: Does he agree with the statement “The only conclusion that can be drawn from Ministers using private Gmail addresses for Government business is that they have something to hide.”, a statement made by Chris Hipkins in opposition; if so, what were Minister Curran and the Prime Minister doing having Government business communicated through a private Gmail account?

Hon GRANT ROBERTSON: One of the things we learn on becoming Ministers is that we receive a lot of correspondence from a lot of different sources to a lot of different places, and, as I quoted in the House yesterday, Sir John Key, the former Prime Minister, acknowledged his use of a private email address for ministerial business.

A diversion to ‘Key did it too’, but no response or denial to “what were…the Prime Minister doing having Government business communicated through a private Gmail account”.

So this saga will stretch out further, as we now await the release of communications under the OIA.

In the meantime suspicions of a less than open and transparent government with questions of competency remain.

Curran communications from NZH Grant Robertson reads outline of Clare Curran emails but no release

  • August 11 – Handley emailed Curran and asked questions about the role of the CTO, including resourcing for the role and potential conflicts of interest.
  • August 14 – Curran replied, confirming a call to discuss those matters.
  • August 15 – Handley replied, confirming times for the call.
  • August 19 – Curran emailed Handley regarding logistics about the next step of the appointment, including content of any public statement and refers to contract discussions with the Department of Internal Affairs.
  • August 20 – Handley replied, about those issues including his contact with DIA and managing any conflicts of interest.
  • August 21 – Curran emailed Handley about any issues that would be on the work plan of the CTO and attached relevant background documents.
  • August 21 – Handley emailed Curran, acknowledging receipt and referring to his discussions with DIA.

Is it normal for a Minister to be that involved with an appointment to a job?

Claire Trevett (NZH): Ministers’ evasion on emails release undermines Parliament’s Question Time

The hiring of Handley and then scrapping his appointment before he even began is the messiest mishap of the new Government so far.

The best Labour can hope for is to deal with the fallout efficiently and without being cute about it.

Labour had no doubt hoped the Handley episode would be tidied away with the departure of Curran.

But as long as the contents of those emails remain a secret so too will the suspicion the Prime Minister is somehow involved, or there is something else damaging in there.

Curran messed up and eventually resigned, but there’s a real risk that Ardern will be tainted by this mess as well.