'The Nation' Steven Joyce Interviewed by Duncan Garner

Duncan Welcome back to The Nation. We welcome to the programme the architect of the new super Minister of Business and Innovation, Economic Development Minister, Steven Joyce. Thanks for coming to the studio.

Steven Joyce – Economic Development Minister
Good morning Duncan, how are you?

Duncan Good, look so much focus with your government has been on cost. It's hard isn't it to see from the public's point of view that this is anything that is cost cutting?

Steven Well firstly this is not the whole answer in any manner of means, and yes it is partly about efficiency, partly it's about organising government policy in a better way, but yes we're focused on cost. We're also focused on the growth side. We've made huge investments in Broadband and Transport, in Science and Innovation, there's big investments there over the last couple of years, and this is really just about organising ourselves a bit better to move ahead again on some other issues.

Duncan We'll talk about growth in a minute, but you told parliament this week that due diligence process is now underway within this merger. Why don’t you don’t what this will cost or what it will save?

Steven Oh we're very confident based on our past record that it will save some money in terms of the cost of operating these agencies. If you look at the MAF MFISH merger that’s saved significant money, in fact it looks like it's going to save more than expected. Department of Internal Affairs picking up National Library and Co, that’s saved more money than expected. So we're pretty confident about that, but in terms of the due diligence exercise and the order of which you do things, you make a strategic decision as to whether this makes sense, and this is something that we want to do, and you actually have to go out to all of those agencies and do the work, and it's very hard and obviously you're in a public environment. You’ve gotta say well this is our intent and now here's the work we've gotta do to actually bring it through.

Duncan Because in the Cabinet papers I understand the term is clear efficiency dividend, that’s the words that are being talked about.

Steven That’s part of it.

Duncan That means job cuts doesn’t it, that means hundreds of millions of dollars potentially from a budget of about 1.4 billion across all these departments.

Steven Well there will be some job reductions, there's no doubt about that, particularly in the back office area where you currently have four departments that have their own back office. They won’t need that obviously when it comes together. but there's also some real opportunities for synergies between departments. Currently in the Innovation space for example we have MSI, now that’s an improvement because there used to be two outfits where MSI is now. We also have MED having their spoke in, and we also have NZTE reporting into MED but working with MSI. It's a bit of a spaghetti soup, and you know the people there are doing a great job, they're making the best of it. But actually you can simply it and really get focused a bit further forward and just reduce some of the churn and friction that exists between agencies.

Duncan Reduce some of the churn and friction. Is there a 10% savings figure here. I know the Better Public Services' Report at the end of last year talked about 3 to 4%. You're gonna have 3,200 employees in this new ministry. It's massive, the size of if you like Justice Ministry and Corrections. But how many employees are going to go? I mean there's 10% you're talking 300 jobs.

Steven No we haven’t put those sort of targets on it, and for a deliberate reason because you actually want to go through and do this properly, and yes you want some efficiencies out of it. We haven’t actually priced in any efficiencies into the budget or anything like that. You'll take what's appropriate and what will allow the agencies to operate efficiently. So yes you'll get some productivity improvements, and the agencies yes there will be some job changes and losses, but we're not there putting an arbitrary target on it, which our opponents would criticise us for.

Duncan But you're talking hundreds of jobs though aren’t you, I mean this is a massive – it's a massive ministry Mr Joyce.

Steven I'm not gonna put a number on it for you today. We're just gonna work our way through the process, and that’s what we've gotta do.

Duncan And you’ve effectively got four CEOs there, three of those or all of them are gonna lose their jobs aren’t they?

Steven Well one of them of course hasn’t been replaced, which Department of Labour chief, and one of them I think doesn’t have a long way to go in their contract. So they’ll work their way through that, but yeah again these are issues for the State Services Commissioner who's gonna work through it. But you're right we will only need one departmental executive, certainly.

Duncan Does that mean, these people are gonna lose their jobs?

Steven Oh there's a range of options in terms of the way it's organised and that’s the process it's gotta go through at the moment. It's not appropriate for me to sit down and try and sketch it out for you now, but I think there are some real advantages. There are advantages in the Innovation space, advantages frankly in the Skills space. Somebody's who's been around the Skills table if you like for the last two or three years, the reality is it is a massive collection of agencies that want to be involved in Skills in government the moment you have a discussion about it. We're going to reduce that number a bit, and that will allow us to actually get more forward momentum in some of the challenges. And this has been an issue for governments for some time. I was talking to a former Labour Minister yesterday and he said to me it's a really smart move he said because we had these people tripping all over themselves. They're good people but the system wasn't set up to work with them.

Duncan Well let's look at growth because I mean this is what you're talking about in terms of this ministry. John Key said in 2008 we don’t have a debt problem we have a growth problem. I'd argue now we've probably got both problems. What does success look like in two years' time with this ministry because if you look at growth figures this week, 0.3% for the last quarter, 1.8% for the year to end. It's hopeless.

Steven No it's not hopeless because we'd actually all like it to be better, but frankly we've had growth in 10 of the last 11 quarters in this country.

Duncan Well it's significant when you look around the OECD. The Australians are doing better largely because of their resources play into China, but when you look across the rest of the developed world many people would be very proud to have our growth rate currently. Now of course we'd like it to be faster and we're intent on making it faster. But you can't say when you look across the world that New Zealand has had a poor growth rate relative to the rest with the global financial crisis, and frankly Christchurch. Now I'll give you an example of how much Christchurch has held back the economy and people forget about firstly the effect on the people of Christchurch, but also the effect on Christchurch industries. So in international education New Zealand's been growing quite strongly, and the rest of New Zealand has continued to grow quite strongly over the last year. But the Christchurch market has declined dramatically. As a result we're pretty flat right across the board, and that has an impact on growth, you can't get away from that.

Duncan But your Chief Executive of the Ministry of Economic Development has told the Select Committee that conventional methods won’t get us there any more, that our growth has fallen in comparison amongst OECD countries and there needs a deeper – and I'm quo ting from the briefing paper that came from you – a deeper and further action will be needed in the form of a refreshed and more ambitious strategy. I want to know how this merger will impact on growth. Will it?

Steven Well of its own, departmental mergers, as somebody from the private sector doesn’t help grow private businesses, but the opportunity is there definitely to improve government policy and to encourage growth in businesses, and there's a range of areas we can work on much more aggressively by putting this department together – productivity, competitive…

Duncan But will it help growth? Because if it doesn’t it just looks like a … exercise which will go back to the start again.

Steven It will have an impact on growth, but what I'm saying is it won’t have an impact on growth in itself, but yeah David's exactly right I mean you’ve gotta have more of a focus on Innovation, you’ve gotta have more of a focus on Skills. Let me give you an example on Innovation. Innovation is actually a range of policy areas, it doesn’t just include you know how much you put into the Science budget, although that’s important. It includes things like competition policy. Competition is a big spur to Innovation, it includes intellectual policy property. Currently they're scattered across a number of agencies. By putting it together we'll get a more cohesive approach going forward which frankly this country does need.

Duncan They did this in Britain in 2009, merged very similar to what we're doing here, and they're looking at business tax now going down to 23% in April 2013, and that means they're more competitive in Europe in that side of the market than we are. Why would you come to New Zealand to set up a business if you're paying corporate tax of 28% here and 23% there. Is that on your agenda, corporate tax?

Steven Well there's a range of things on our agenda, I'm not gonna go into that.

Duncan Is tax one of them?

Steven We'll look at everything over time.

Duncan Europe's talking about this now.

Steven Well actually, and we have of course, we have done in our last term, we lowered New Zealand's company tax rate from 30 cents to 28 cents and gave ourselves a margin over the Australians, which has been positive for New Zealand. Can we do more? Well we've got fiscal constraint that we come up against as you know, which all developed countries of the world are coming up against, so everything has to be balanced. But across a range of things we are looking to you know – a range of policies to make the boat go faster. So you mentioned business tax which comes into capital markets. The mixed ownership model's a very important part of that because it actually will lift the profile of our capital markets. There's the area of Innovation and Skills, export markets we're doing a lot of work there, a lot of work on trade negotiations as you know with Tim Groser and Murray McCully. And right across the board there's half a dozen areas. The infrastructure area – because we've got that one largely progressing along people tend to forget about it, but the investments in Broadband and electricity transmission and in Transport that are going on right now will have a big impact over the next ten years.

Duncan But what about things like you’ve seen the Treasury Secretary talk about this this week. The cost of superannuation which might be holding us back too. The quality of teachers. None of that stuff's in your 120 point plan if you like.

Steven Well no because it's not everything, this is about the business face departments.

Duncan It's the two areas that the Treasury has focused on this week, and they're very important issues.

Steven Well yes Education is very important.

Duncan Quality of teachers?

Steven Well that’s right, and I think Hekia's in the media today talking about exactly how she's going to ….

Duncan And Super you won’t talk about.

Steven No, but if you go back to the issues of improvements in Education, we're getting very significant improvements. Your opening piece mentioned Level 1 NCEA, well Level 2 NCEA has actually gone up significantly over the last three years, we're getting some good growth there. We're getting some good growth with young people choosing to do their foundation education in tertiary institutions with the youth guarantee. That’s good progress. And we're doing a range of things at the University and Polytech level to ensure they get better results, and they are getting better results. Now doesn’t mean there isn't more to do. There's a lot more to do, but it's about actually getting the momentum and getting it growing, and we're doing that.

Duncan I want to finish this interview by looking at the deal that your government's doing with the Auckland Sky City Casino. You're looking at 350 to 500 new pokey machines. Correct?

Steven Don’t know those numbers. The reality of it is…

Duncan Aren't you involved in negotiating that?

Steven Well the negotiations are continuing, the numbers have been widely and wildly promoted by various groups in the media, we'll know when the negotiations are complete.

Duncan What's the good bit about having more pokey machines, because these things 2.3 million dollars is lost every day at these machines.

Steven But the good bit about having a Convention Centre – I'll come back to the pokey machines in a minute – is it's about a thousand jobs for construction, it's about 800 jobs going on, and yes you have to manage the impact of pokey machines and manage the impact of casinos. But I'm telling you right now, if we took the approach that you're sort of recommending we take, we wouldn’t have the Sky Tower and Sky City there in the first place.

Duncan But do you need to do a deal with them, because the Commerce Select Committee Report that came out last night, looking into the MED, looking into your Ministry, said that as a result of 500 new pokey machines there's be a 35 million dollar…

Steven Where did you get your numbers?

Duncan Well is it wrong?

Steven Well yeah I think they are wrong actually.

Duncan Well is it lower than 500?

Steven You'll just have to wait and see.

Duncan Okay, well what they’ve said is that 500 machines it's 35 million dollars a year extra revenue for them. That could fund their International Convention Centre without you doing some kinda deal.

Steven I'm not sure quite where you get your logic from.

Duncan From the Commerce Select Committee Report that came out yesterday.

Steven The purpose of as you say the agreement as proposed, is that there would be some concessions around the number of machines in return for the building of the Convention Centre, which I think is the point that you just made. But the wider point is this. We have an economy where a lot of people rightly are saying we need more jobs, and we need better paying jobs.

Duncan But do we need to get more pokey machines to get them there.

Steven No but listen for a second.

Duncan Do we?

Steven Just listen to me for a second, that we have an economy where people are saying we need more jobs, and then they go out and say we don’t want to do anything that would create more jobs, and many times they actually propose, or they want to oppose things that actually have helped build New Zealand. Like I think of the example of the Sky Tower.

Duncan But their revenues last year went up by 10% as a result of pokies it's how they make their money.

Steven Across the economy, you know are people that don’t want to intensify agriculture, they don’t want to invest in …

Duncan It's policy for sale isn't it?

Steven No it's not policy for sale, it's about what you can do to increase growth across the economy and this is just one example of doing that.

Duncan My final question. 2.5% of Sky City Casino's profits are paid back into the community. Okay that’s the deal, did you know that?

Steven Yeah I'm familiar with those numbers.

Duncan Okay. Will that increase as part of this deal, so the community gets something back.

Steven I'm not gonna negotiate that on the television with you.

Duncan Is it on the table?

Steven Duncan you'll just have to wait and see, but the point is this, across a range of areas, and let's be fair this proposed Convention Centre is just a small part of the plan where across a range of areas we're looking for ways to provide more opportunities to grow New Zealand. Convention Centres is one, the irrigation and agriculture is another across a range of areas. The point that New Zealanders have to remember is you can't on the one hand argue for more jobs and on the other hand try and stop every single initiative that would help create more jobs.

Duncan Alright, Steven Joyce, thanks for coming to the studio this morning.

ends

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