On Newshub Nation: Simon Shepherd interviews Minister of Finance Grant Robertson
• Finance Minister Grant Robertson says he is not concerned about the foundations of the economy. “I think the
economic fundamentals for New Zealand are good. The books are in surplus; we’ve got debt at a relatively low level;
unemployment’s around 4.5 per cent and tracking downwards”.
• He says the potential trade war means New Zealand must have a financial buffer and diversify its export markets.
“It’s why the EU free trade deal matters, it’s why finishing the Pacific Alliance deal matters, and it’s why we’ve got
to diversify the exports we are sending overseas.”
• On vertical construction, Mr Robertson says he is not considering regulation of the private construction
industry to ensure best practice, but “if we have to revisit some of the changes made by the previous government to the
Construction Contracts Act we will, and we’re taking another look at those now.”
• On his suggestion that Kiwisaver funds be invested in New Zealand infrastructure: “My view is that if we do a
good job of packaging up some of the big infrastructure projects in New Zealand, they’ll be attractive to those fund
managers. I want to see is more of New Zealanders’ savings being invested here inside our borders.”
Simon Shepherd: Business confidence continues to fall... the New Zealand dollar has plunged to a two year low against
the greenback, manufacturing activity is down for the third month in a row and the reserve bank is sticking with record
low interest rates. It looks like our economy's losing its shine, but the Prime Minister and Finance Minister seem
convinced there's little to worry about. Simon Shepherd: Finance Minister Grant Robertson joins us now from our
Christchurch studio. Good morning, Minister. Thanks for your time.
Grant Robertson: Morning, Simon.
Well, you said to me this morning we can’t transform the economy if we haven’t got the foundations right. So are you
worried that the foundations are looking a bit shaky right now?
No, I’m not. I mean, I think the economic fundamentals for New Zealand are good. The books are in surplus; we’ve got
debt at a relatively low level; unemployment’s around 4.5 per cent and tracking downwards. And the things that make our
economy work well – the fact that our banking system is solid, that, you know, we’ve got a good reputation for ease of
doing business – all of those things are still there. And I read in the New Zealand Herald this morning Don Braid
saying, you know, New Zealand is still a good place doing business, to invest in, and I back that judgement.
And, yet, you’ve got indicators saying other things like the manufacturing index, which is talking about three months
where the activity’s lessened. And, of course, the ANZ’s own activity index has dropped to its lowest level since 2009.
Look, and I’ve never denied the fact that among some in the business community there are issues out there that are
concerning them and I share some of those concerns, particularly around global trade tensions and the potential that
that has to impact on the New Zealand economy. And we are in that transition that we talked about the last time I was on
the show – which is that the economy is being propped up by population growth and an overheated housing market. Both of
those things are changing. We have to transition to being more productive, more sustainable, a modern 21st-century
economy. There’ll be one or two bumps in the road on the way to that, but we’ve got to plan to do it.
OK, but are you dismissing this, sort of, lack of business confidence as just perception? I mean, even your Associate
Finance Minister David Parker said it was the vibe of a self-selected subset of CEOs. Are you taking them seriously?
Oh, look, you know, we take all opinions we get from the business community seriously. And I’ve been travelling around
New Zealand speaking to audiences all over the country and hearing from them, both their concerns but also their
excitement about what’s possible for them. And, overall, I think business is optimistic about their own future, but
there are some issues, and they are, you know, those ones I’ve just mentioned. The thing that tops the issue is access
to skilled staff, actually. And that’s something we’re working on. We had an announcement this week around the Mana and
Mahi Programme. We’re getting more people into apprenticeships, more opportunities for training. And, yes, there will be
one or two government policies that some members of the business community don’t like. But I still continue to believe
as a country we’re well positioned. Actually, the trend in decline in GDP growth started at the beginning of 2017. The
difference now is that we’ve got a Government that has a plan to turn that around into a more productive set of growth
numbers.
But if growth isn’t going to be as good as first forecast by the treasury, and as rosy, are you going to make any
changes to any of your policies as a result of that and as a result of business feedback?
Well, look, you know, we’ve got a surplus, Simon. I mean, we’re in a position now where the books are strong and able to
handle the things that come at us. That’s one of the reasons why we focused on that and keeping debt relatively low is
to give ourselves a buffer. We’ve got business at the table with us working on the issues that are in this government’s
programme and the issues that business want us to work on. And, clearly, we’ll be listening to the interests and
concerns that they bring to the table on those issues. So we’ve got the programme. We want to work with business and, by
and large, the business community has come on board on issues like climate change and even some of those industrial
relations issues as well.
Well, let’s talk about that, because there are concerns about industrial relations issues, especially as, like I say,
the 90-day rule. I mean, are you going to just push ahead with those or just haul back and not give so much, sort of,
uncertainty to the business community?
Well, look, and in terms of the 90-day rule, that’s already been altered in the process up to now, and we have listened
to the concerns of both our coalition partner, in that case, and the business community. But the direction of travel is
one about getting, you know, fairness into workplace relations. We’ve got working groups set up on fair pay agreements,
on the Holidays Act, which the business community are very much part of. We’re at the table with them. We’ll keep
talking, and we’ll keep listening, and the outcome will be the result of that.
You mentioned the trade war. That’s a big concern for businesses. How bad could that actually be for New Zealand?
Yeah, look, I think it is important not to overdramatize the current situation. The tit-for-tat tariff exchanges we’re
seeing between the US and China are bad. But, at the moment, I wouldn’t say it’s having a huge effect. But as you look
ahead, if that escalates and goes into a full blown trade war, there’s no doubt that that’s bad for New Zealand. I mean,
we’re an open economy that relies on our exports to be able to give us the standard of living we all want, and if we’ve
got a global trade war that potentially leads to countries retrenching. It does lower confidence. It can upset some of
the global-supply chains that New Zealand relies on. And so I back what both the Reserve Bank Governor and Treasury have
said this week, which is that is a potential risk to us. It’s the very reason why we’ve got to make sure we do two
things; firstly, be careful with the finances and keep a buffer there to be able to deal with any impact; but, secondly,
diversify our export markets. It’s why the EU free trade deal matters, it’s why finishing the Pacific Alliance deal
matters, and it’s why we’ve got to diversify the exports we are sending overseas. That’s part of our plan.
OK, look, you’ve talked a lot about transforming the economy. You’ve mentioned that several times already, and we talked
about that in May when you delivered the budget. Nine months in, we’re still a bit light on the detail. You’ve got
something like 130 reviews, but business is still waiting for that detail — Carbon Zero detail, areas like tax reform.
How long can they wait?
Well, you know, this is the transition period. And actually, again, the business community has been really engaged in
the Zero Carbon work to the point that we now have the Climate Leaders Coalition, 60 of New Zealand’s biggest
businesses, backing the direction that the government’s going in, making their commitments on emissions reductions and
being held accountable for that. They want us to get that policy right, and rather than clicking our fingers and saying,
‘Right, that’s what’s going to happen there,’ we’ve brought them on board there. It’s really important to us that we get
the design of our research and development tax credit right. No one would want us to reform the tax system without going
through the process we’re going now. The direction of travel there is clear, and we’re working with all of the people
who are engaged in the economy to get those settings right so that we can be more productive and more sustainable. This
is the transition period. We’ve done some things to support the economy through fiscal stimulus with the Families
Package and the KiwiBuild programme. They’ll help grow the economy. And bear in mind the Reserve Bank’s forecast this
week is still for three per cent growth over the next three years. A little bit of a dip at the moment, but then picking
up through 2019 and 2020. That’s a good, solid growth outlook for New Zealand.
All right. Your employment relation changes — do they fit with this idea of transforming the economy into something
innovative and productive? Because some businesses fear that you’re going back to, sort of, an old model.
Yeah, look, I think they do, and I think what we are looking at is some changes that were similar to what was in
operation 10 years ago, and the economy was humming along there. I don’t think there’s anything to fear from workers
having guaranteed rest and meal breaks. I think that’s actually part of a fair society. But the other part of the
industrial relations work we’re doing is around the issues of High Performance High Engagement. These are the programmes
that companies like Air New Zealand and KiwiRail and even Fonterra have done, where they actually are working much more
cooperatively between workers and management and seeing big productivity gains. And I had business leaders and union
leaders in last week at parliament talking about how we can push that out further and support small and medium
enterprises. So there’s a lot of elements to the employment relations agenda. Ultimately, it’s about providing balance
and fairness and ways of driving higher wages and productivity. I think they’re good things to be working on, and I
think the business community being at the table is really important.
And yet we’ve seen things like more strikes. We’ve had the teachers. We’ve had the nurses and IRD staff. That seems to
be a step backwards.
Well, I’d say, particularly in terms of those state sector workers, that’s really nine years of frustration of the
previous government. The offer we put on the table to the nurses was double what the previous government had offered and
significantly higher than offers in previous years. We worked our way through that. We stuck to our guns on how much
money we had available, but we addressed the issues the nurses wanted. We’ll do the same and work it through with
teachers and other staff. But, you know, we can’t solve nine years of neglect in nine months, but we’re doing our best
to set a path forward where we do properly reward people like nurses and teachers who do such an important job for us.
Okay. Let’s talk a couple of specifics. You’ve allocated $42 billion for infrastructure projects over the next five
years. Now, given the state of our construction industry, are you confident that you’re going to be able to deliver on
that?
Yeah, absolutely. I mean, we need to be careful about the way we talk about the construction industry. If we’re talking
about residential construction or horizontal infrastructure, things are going well. The pipeline of projects is there.
The companies have built in appropriate risk profiles into their costings. We do have an issue with the vertical
construction industry in New Zealand, and that’s been recognised by the industry itself in the last couple of weeks. And
we’re sitting down with them, working with them on what we need to do to make sure that the 18% of the vertical
construction industry that the government’s responsible for, we get our procurement practices right and make sure we’re
not contributing to the problem, and the industry needs to make sure it’s apportioning risk properly. But I’m confident
in terms of that big infrastructure spend that we’ve got planned, we have the ability to deliver that in New Zealand.
Let’s talk about the government’s role in that vertical construction industry, in the 18%. Would you give a guarantee
that the government won’t lowball all its offers from now on, and that you’re going to actually share the risk and make
profitable margins for government— sorry, for that construction industry when it’s a government job?
Yeah, look, Minister Jenny Salesa has been really clear. We want our government departments and agencies abiding by the
procurement guidelines that the government has. There has been some suggestion that that hasn’t been happening, and
we’ve put the word back out to all of our ministries and agencies that they should be abiding by that. The race to the
bottom in the vertical construction industry has been clear for everybody to see, but bear in mind we are only 18 per
cent of that market. Local government’s probably 10 per cent. So you’ve got 72 per cent of the work coming out of the
private sector. So we’ve all got to share responsibility for making sure that risk falls in the right place. And I think
it’s in the interest of taxpayers that we make sure that we don’t have companies going under, because that actually ends
up leading to higher costs. So we’re working with the industry on that, but I have a very high expectation of government
agencies to have best practice procurement.
So you’re putting a warning out to the government agencies — best practice procurement. Would you actually need to
regulate the private part of the industry to make sure that there’s best practice?
Look, no one’s suggesting that at the moment. The industry itself is sitting down and saying, ‘Well, how do we make sure
that our members in the vertical construction industry understand where risk lies and do appropriate contracting?’ But
we have said that we’ll take another look at the Construction Contracts Act to make sure that it’s fit for purpose, that
it’s upholding those high standards. Also, protecting the subcontractors as well. I mean, the sight of subbies not being
able to get their tools out of some of the EBIT construction sites is not one that I want to see. And so if we have to
revisit some of the changes made by the previous government to the Construction Contracts Act we will, and we’re taking
another look at those now.
And would you introduce something like risk sharing on government projects?
Well, that’s exactly what the procurement rules need to be about. I’d rather make sure that we set the rules properly so
that everybody knows what the highest standards are. And I think that’ll avoid some of that race to the bottom. I mean,
clearly, issues like fixed-price contracting have been a problem for the industry. And everybody needs to agree on where
risk lies and being aware of risk. We’ll accept our share of that, as the private contractor needs to as well.
You mention this meeting— this symposium next week. Is this a crisis in the industry? Are these crisis talks?
No, they’re not. The symposium next week — the Building Nations one — has been scheduled for many months, and that’s
about the infrastructure industry as a whole. And as I say, the horizontal infrastructure industry — the work that’s
done to build the pipes and make sure we have what we need to run our cities — is actually going well, as is residential
construction as well. I mean, I know in Auckland, they’ve got the highest number of building consents granted since
2004. There’s 83 cranes across the skyline of Auckland. There’s good activity happening in our industry, but where there
are difficulties and problems, obviously, we have to address them.
Is there a risk here, though, that in the vertical construction industry, if you don’t address it quickly, we’re going
to have more and more overseas players and no industry here?
Look, you know, we want a domestic-based vertical construction industry, and there are companies who are doing well. But
this is a long-run trend — we can go back to Mainzeal, and, obviously, we saw Hawkins as well and the problems Fletchers
had. So, you know, when there’s a trend like that, you’ve got to deal with them, but equally, we’ve got to learn the
lessons of the companies who have gone well. But, you know, we’ve got an ambitious programme here, and I’m absolutely
certain that New Zealand companies and probably some Australian ones will be involved in that, because we need to get
the work done.
In a speech this week, talking about that massive infrastructure spend that you’ve got on the books, you said this week
you want to see a greater use of KiwiSaver funds as part of the Welcome Home package infrastructure projects. So, I
mean, how would that work? You’re asking Kiwis investing into KiwiSaver funds to channel that into infrastructure
projects in New Zealand?
Well, the fund managers who look after all of our KiwiSaver funds are obviously there to get a decent rate of return for
all of us on our savings. At the moment, the vast bulk of that money is invested offshore, because that’s where those
fund managers can get that rate of return. My view is that if we do a good job of packaging up some of the big
infrastructure projects in New Zealand, they’ll be attractive to those fund managers. And what I want to see is more of
New Zealanders’ savings being invested here inside our borders. You know, that’s what I think New Zealanders themselves
would like. And the New Zealand Super Fund, as an example, have put forward a bid to help build two of the new light
rail lines. We’re assessing that bid alongside others, but that’s a good example of how New Zealanders can see the money
that they’re putting away also helping build the future of their country. I think that’s a great thing.
So there’s a different kind of funding model for this kind of infrastructure. It’s not just about the government
borrowing to build this stuff anymore. It’s about dipping into KiwiSaver retirement funds.
What it is is about making sure we make the best of the private sector and other public sector investment that’s out
there. We’re coming to the table as government with a significant amount of investment, but when you look at the big
urban infrastructure and transport investments around New Zealand, we want to make sure we marshal all of the capital
that’s out there. And the thing with KiwiSaver and Super Fund is these funds are New Zealanders’ money. If we can see
that money being invested onshore, I think that’s a good thing. But obviously, it’s the rate of return that matters to
those funds. And it’s up to us to put together packages that are attractive for that investment.
All right. Just finally, Minister, the first instalment of your transformative budget trilogy was solid, but in your own
words, ‘underwhelming’. If the economy doesn’t improve, how are you going to be able to deliver a hit with your
Wellbeing Budget next year?
I wouldn’t say it was underwhelming. I’d be very surprised if I’d ever said that. It was foundational, Simon, and it was
important for us to lay the foundations, not only, I might say, for economic growth, but actually rebuilding the public
services that have been undermined over the last nine years. Health and education and housing — they were the
foundations of the first budget. The second budget will be the Wellbeing Budget, and we really want to focus on the
things that give long-term intergenerational benefit. And that means investing in things like infrastructure, but also
the issues that we know make a big difference — the first 1000 days of a child’s life, mental health and issues such as
that. So I’m really confident we’re in a position to do that. The fundamentals of the economy are strong, and the growth
rates over the next three years are still projected to be around 3 per cent, which gives us a solid base.
Finance Minister Grant Robertson, thank you for your time this morning.
Thanks, Simon.
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