Judge our Government on “how we lift productivity,” says Finance Minister.

The Labour-NZ First Government has made some “pretty significant moves” on lifting New Zealand’s productivity already says the Finance Minister Grant Robertson.
“We want to lift our expenditure on research and development; we’ve got a massive focus on increasing skills, which is one of the major and most important parts of lifting productivity. And we want to get capital to those businesses that can grow, invest in infrastructure,” says Minister Robertson.

When asked by our political editor Corin Dann if he was “crimping” on foreign investment the Minister replied saying his Government still welcomes foreign investment where it adds to the productivity of New Zealand.

“Our concern is being when it’s just speculation in the housing market. That’s actually not helping New Zealand and not helping the New Zealand economy,” says Minister Robertson.
“So there’s still a place for foreign investment, but equally, we do want to see New Zealanders being able to make sure that they do invest in their own future, and we want to have some conversations with the Super Fund about the way in which they’ll be able to contribute,” he says.

And when challenged on the new Government’s housing policy Minister Robertson says supply issues will be a carefully managed process.

“We build the affordable houses, but we also crack down on the speculation. And I think there’s been enough discussion about that in New Zealand over the last few years. People understand what our plan is and that in the end, it’s actually about New Zealanders, particularly young New Zealanders, being able to get into the housing market and the security that that provides. I think people understand that,” he says.



Q + A
Episode 34
GRANT ROBERTSON
Interviewed by CORIN DANN

CORIN Congratulations on the new position.

GRANT Good morning, Corin.

CORIN You, in a way, fell into this job three years ago, didn't you? I mean, you weren’t planning to be the Finance Minister. Are you sort of an accidental finance minister?

GRANT No, not at all. I’ve spent three years as the Labour Party's finance spokesperson. I’ve enjoyed that; I’ve learnt a lot, and I feel really excited about the possibilities of what we can do for New Zealand.

CORIN What sort of a finance minister do you think you’re going to be? Are you a radical? Are you a reformer? Where do you sit?

GRANT Look, what I think is that for too long, we’ve focused on the data in the economy as the endpoint, rather than what we’re doing for New Zealanders’ living standards. What are we doing to improve the well-being and the lives of our people? So I think I’ll be a finance minister who’s got my eye on the outcomes. Of course we’ve got to make sure that we keep the fiscals ticking along, that we do the right thing when it comes to fiscal responsibility, but that can't be the end of the road. What we’ve got to do is focus on how we can use a strong economy to benefit all New Zealanders.

CORIN Are you a bigger government, smaller government?

GRANT We’re an active government, and I think that is a fundamental difference as well.

CORIN But not bigger, are you? Because you’ve got this fiscal responsibility clause which says you won’t actually, what, grow the government as a size per the economy.

GRANT Well, actually, it will grow a little, because the current government had planned to reduce that quite significantly, and we do see an important role for government in helping to stimulate—

CORIN For bigger government.

GRANT Well, slightly bigger, yes, but actually, it’s more important to me that it’s a government that works alongside our social partners, that works alongside businesses, workers and unions, iwi to make sure that we’re actually growing those decent jobs that pay well, that we’re looking after the environment, that we’re building up the skills of our nation. That’s an active government, and I believe that what we’ve seen for too long in New Zealand is governments that are prepared to sit on the sidelines, see people miss out, see our environment degraded, see the value of our wages drop. That won’t be what we’ll be; we will be there as a partner.

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?’

CORIN Any formal sort of sit-down? Or are you just saying…?

GRANT Oh, look, it’ll come over in a number of different forms, and we’re certainly committed to getting out early to all of our social partners, and I think it’s really important, Corin, that we include everybody in those conversations. It’s not just about big business—

CORIN You’re not talking about some business summit or something.

GRANT No, not at this stage, but we are talking about getting around not just to big business but particularly to small businesses as well, because we know that they are at the driver of a lot of the job creation in New Zealand. Equally, we want them to work in partnership with their workers. I’ll give you one example that’s, I think, been missed out in the last few years. We need a coordinated strategy on skills that brings together all of our social partners – working people as well as employers, and I will be sitting down with the Minister of Employment and with the business community and with unions to say, ‘How do we lift the skills of all working people?’

CORIN All right, some quick-fire questions, because you’re looking at a potential mini Budget. So we can expect a number of things you’re your government is going to do in the first hundred days. Can we just run through a few of those? The five-year bright-line test for the property market.

GRANT Yup, we expect to do that in the first hundred days.

CORIN So by early next year, that will be in place.

GRANT Correct.

CORIN Negative gearing.

GRANT That may take a little bit longer for design purposes to make sure that we get that right, but we’d expect that work to be well underway in the new year.

CORIN The foreign buyers ban or something similar.

GRANT Correct. That will be in the first hundred days, and you’ll hear more about that shortly.

CORIN I mean, just on that, are there other mechanisms? Is that a live issue?

GRANT The goal is, the important thing for us is – how do we make sure that New Zealanders can get into the property market? That we don't set up a situation with people who have got no intention to ever live here or any right to live here.

CORIN So it doesn’t matter whether it’s ban or not; you’ll block them somehow.

GRANT Yeah. What we want to make sure is that there’s a fair go for first-home buyers. We’re working on the design of that right now.

CORIN Is it possible that it won’t be the straight-out ban so you can get round the trade issues?

GRANT Oh, look, there are a number of options on the table that we’re looking at, and we’ll have something to say about that very soon.

CORIN Stamp duty on the table?

GRANT There are a number of options.

CORIN The tourist tax.

GRANT That also will take a little bit longer to design. Obviously, within the coalition partners, there are slightly different ideas about how to do this, so we’ll take a little bit of time over that, but again, early next year.

CORIN That’s not a ‘first hundred days’.

GRANT No, it’s not first hundred days.

CORIN Neither is the petrol tax, right? Is it?

GRANT No, that’s right.

CORIN On the petrol tax, will that apply to other parts of the country?

GRANT No, that’s not our intention. We’ve been working closely with Auckland Council—

CORIN So only Auckland can implement that tax.

GRANT That’s correct. It’s their view that in order to get over the major problems that Auckland has in terms of congestion, they need additional revenue. We want to give them the power to charge that as a regional fuel tax, but nowhere else at this stage.

CORIN Why shouldn’t other regions be able to do that?

GRANT Well, partly because nobody else has asked us but also because these problems are specific in Auckland. And again, I come back to that Mood of the Boardroom event that I went to. Congestion in Auckland, how it’s constraining productivity – one of the biggest issues that business raised in that survey – we want to get action on that. In order to get action on that, we need a variety of funding sources, one of which is a fuel tax.

CORIN Will you consider fuel taxes in other regions if they do ask you?

GRANT It’s unlikely. I don’t see the need for that at this time.

CORIN And, of course, the Reserve Bank Act changes – will we see them quickly?

GRANT We need to again, do the review, but I'm very conscious of the fact that we have a governor due to be appointed in March next year. I want to make sure that people understand that for now, the Policy Targets Agreement stays. That’s the agreement that we work under until a new governor is appointed. What we’re proposing to change there is in line with what’s happening in other parts of the world – the United States, Australia. We want to see a slightly broader objective, but we are maintaining price stability. There will still be that band for inflation within the Policy Targets Agreement.

CORIN So you’re looking at putting in employment so that the Bank has to consider unemployment. Will there be a hard target on that?
GRANT No, we’re not intending there to be—

CORIN A 4% goal, right?

GRANT Yeah, that is our goal as a wider government, but I'm realistic about what the role of the Reserve Bank is in achieving that goal. What we want to make sure is that the objectives of the Bank reflect that overall view of the economy, that this is about the well-being of New Zealanders; it’s about sustainable development.

CORIN So just give people a sense of – how will that help? I mean, will it mean they pay lower interest rates at some point?

GRANT Potentially, it could. What it means is that when the Reserve Bank is making its decisions about the official cash rate, when it’s thinking about monetary policy, of course it thinks about managing and controlling inflation, and that’s vital. But also, it thinks about other goals in the economy, such as making sure that we maximise employment. This is done in the United States; it’s done in Australia in another form. We’re actually just bringing our monetary policy up to speed to make sure it’s contributing to the wider outcomes we want in the economy. It’s a reform, but it’s one that I think people can have confidence in, because it does work in other jurisdictions.

CORIN How does it fit with your minimum wage policy? There is a danger that that will push up inflation. I mean, you are going to lift wages through the minimum wage. That will push other wages up, presumably. You’re going to have pay rounds; you’re going to have teachers. There’s going to be some wage pressure coming through. Surely that’s going to counteract any move by the Reserve Bank.

GRANT I think if you can look to history, we’ve seen the minimum wage go up when Labour was last in Government by a dollar a year, and we were able to manage those expectations at that time. This is actually about making sure New Zealanders get a fair share in prosperity, and I think one of the things we saw in the election campaign and over the last three years is expecting people to raise a family on $15.75 an hour is unrealistic. We want to lift that, but we’re going to do it in a steady way, and we’re offering certainty here, Corin – that’s the advantage of the coalition agreement. We’ve given the $20 target to come into force by April 2021. People will be able to see that progression and plan for it.

CORIN Fair share, and I think everyone gets that in terms of living on the minimum wage and the difficulties that that brings, but that is not a strategy or a recipe for lifting New Zealand’s productivity, is it? You can’t just magic up wages and expect us to be a wealthier country.

GRANT Absolutely not, and that will be one of the main things I want our Government to be judged on, is how we lift productivity. And we’ve made some pretty significant moves on that already. We want to lift our expenditure on research and development; we’ve got a massive focus on increasing skills, which is one of the major and most important parts of lifting productivity. And we want to get capital to those businesses that can grow, invest in infrastructure. Now, if we get our infrastructure right, if we get Auckland moving, reduce that congestion, if we make it possible for people to start businesses in the provinces, knowing that they’ve got a good rail line that will get them to a port, knowing that they’ve got good broadband – that will lift…

CORIN All right. Can I pick you up on a couple of points you’ve just made? R&D tax credits – you’ll do that?

GRANT Correct.

CORIN Does that Callaghan Institute go?

GRANT No. The intention is not for it to go, but we want to get a better balance between the grant-based system that Callaghan covers and the certainty that a Research and Development tax credit provides. Both of them have a role to play, but….

CORIN Presumably they’re getting a lot of money at the moment. That’s going to have to come down.

GRANT Well, we’ll take a look at that. We certainly want it to be used effectively, but what we heard from the business community, particularly during the election campaign and before, is that an R&D tax credit gives them the certainty that they can invest in innovation and that they will receive that credit back for it. The grant-based system needs to be looked at. It’s still got a role to play, but clearly it will be a reduced role alongside the industry.

CORIN You said then, too, getting capital to business, getting money to businesses, but your Government’s looking at crimping foreign investment, making it more difficult for foreign investors to invest here. Are you saying that you’ve got to find ways of getting local capital to businesses, and how would you do that?

GRANT Well, we still welcome foreign investment where it adds to the productivity of New Zealand. Our concern is being when it’s just speculation in the housing market. That’s actually not helping New Zealand and not helping the New Zealand economy. So there’s still a place for foreign investment, but equally, we do want to see New Zealanders being able to make sure that they do invest in their own future, and we want to have some conversations with the Super Fund about the way in which they’ll be able to contribute.

CORIN So you would like to see the Super Fund increase the amount that it puts into New Zealand?

GRANT I think I certainly would like to see the Super Fund invest more into New Zealand. It’s done some, and I know the Super Fund itself is looking into opportunities here. It has to get a good rate of return; we all understand that. But if we’ve actually got the incentives right in the economy, that we are investing as a government in our infrastructure, we think that will encourage other investors as well to move away from that speculative part of the economy into the productive part.

CORIN When you were in Opposition, you talked about the whole issue about surpluses and this debate about you being able to meet your targets, etc. You talked about cutting some areas. Defence – will we see cuts in Defence spending?

GRANT What we’ve committed to in the coalition agreement is to look at the way Defence does its procurement. I’ve had a concern, and I know the New Zealand First Party has had a concern, over a long period of time, that we aren’t necessarily getting value for money in what we do for procurements. So the first stage of the exercise is to look at that. There’s a Defence capability plan that’s out there. We want to review that in the context of getting value for money.

CORIN Any other things you can give us that will be up for the chop?

GRANT What I’ll be asking all of the ministers in our Government is to look at where they can achieve productivity gains, where they can be more effective and more efficient, where there are spending plans underway that don’t line up with both Labour’s plan and what we’ve agreed in our coalition agreements. That piece of work has to be undertaken now, and I will be asking ministers to do that seriously.

CORIN The Deputy Prime Minister, Winston Peters, in his speech when he announced the Government who he is going with, he was very gloomy about the outlook. You must have had a Treasury briefing by now on the state of the economy and the forecasts. Did that square up with what Winston Peters was saying?

GRANT There’s a variety of views when it comes to the economy, and certainly if we carried on allowing the economy to be only driven by population growth and speculation in housing, then I would have some real concerns. But I am optimistic about the future of the New Zealand economy if we get our settings right, if we get our investment and infrastructure going well, if we lift our productivity, if we make sure that we are investing in people and skills, I think we will be able to ride out whatever headwinds there might be ahead of us.

CORIN How will you measure the economy and economic success? In opposition, you really hammered the issue of per capita growth. Will that be your yardstick?

GRANT That’s one important yardsticks, but I want to go much further than that. I think it’s time that we measured our economy for how it lifts the living standards.

CORIN Do you want a happiness index, do you?

GRANT I want to do some work on alternatives to Gross Domestic Product. I think GDP is quite a good measure of activity in the economy, but it’s not a good measure of quality. So I want to make sure we have measures that are about how we lift living standards. And we’ve been quite specific about this. We’ve said that we will amend the Public Finance Act so that we actually have to talk about reducing child poverty.

CORIN Could you imagine a happiness index one day? Is that how you’d see it?

GRANT I don’t know about a happiness index, but I certainly want to work on, and Treasury’s started some of this work, on what we call a living standards framework. How do we actually improve the social, economic and environmental outcomes of-?

CORIN Because none of that matters when it comes to your Budget.

GRANT It will, Corin.

CORIN GDP growth matters in terms of how much you have to spend, though, isn’t it?

GRANT Correct. And having a strong economy will always be the basis of what we do. But as I said in the start of the interview, I want the success of our government to be measured not just by a figure like a GDP growth figure, but actually by the outcomes we achieve in lifting people’s living standards.

CORIN On housing – I mean, a lot of talk about the Auckland housing market coming off the boil and now starting to come down a little bit. How worried are you, though, about the confidence affecting housing? Regardless of whether the prices– you know, they come off and it affects the confidence in the economy. Is that a risk?

GRANT The way that we want to do our housing policy is a careful and managed way of making sure that we address the supply issues; we build the affordable houses, but we also crack down on the speculation. And I think there’s been enough discussion about that in New Zealand over the last few years. People understand what our plan is an that in the end, it’s actually about New Zealanders, particularly young New Zealanders, being able to get into the housing market and the security that that provides. I think people understand that.

CORIN Grant Robertson, thank you very much for your time.

Please find attached the full transcript and the link to the interview

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