On Newshub Nation: Simon Shepherd interviews Prime Minister Jacinda Ardern

Simon Shepherd: The Prime Minister says this will be the 'year of delivery' after 'turning the ship around' last year. Yet the number of people waiting for a state house has shot up, so has the cost of hardship benefits, and Kiwibuild's missing its targets. And with another commercial construction company hitting the wall, I began by asking Jacinda Ardern if she's concerned about the wellbeing of the construction industry.

Jacinda Ardern: There’s definitely work to be done, and I think even the industry itself acknowledges that. Some time ago now, we had a group of ministers meet with members of the industry, looking at what we in particular can do. We do as, I guess, consumers make up part of what the construction industry’s working with.

Eighteen per cent.

Eighteen per cent, and so we’re looking to model the kind of behaviour that we’d like to see as a purchaser in that industry.

Right. Does that mean you will share the risk of those projects?

I think it’s more about just generally acknowledging that there has been a level of undercutting that has bought the construction industry to a place where it is incredibly fragile, that serves no one, and that there is something we can do in that space as well.

Are you concerned that we actually will have to have more overseas companies here rather than local employers?

Oh, I think we should, across the board, be concerned about the state of the industry. And, look, the industry themselves acknowledge the problems that exist. We have been working—

Are you going to be a better buyer of services?

That’s absolutely what we intend — modelling the kind of behaviour that we need to see across the board.

And when will that come in?

Well, really, work’s already underway in that space. We’ve already, again, reissued some of our procurement expectations across government departments, because the industry actually tells us there’s some departments that are already really good; others where we could lift our games, so we’ve already done that, and we are working on a wider piece of work with the construction industry where we each take a bit of responsibility to try and firm up the sector.

All right. You started this year by saying that this is going to be the year of delivery — your words. So can you tell me — what would be the three big tangible that New Zealanders will see by the end of this year?

And absolutely, this is the year where we have to — and we’ve said from the beginning — tackle the big challenges that New Zealand is facing. And they are significant. Look, if we take, for instance, the housing crisis that we came in and inherited, it is a significant issue in New Zealand. It’s impacting on the daily cost of living for a number of New Zealanders. And so our focus there is broad. We need to make sure that we are supporting tenants, which there’s an increasing number of, making sure that they’re operating in quality rental properties. We need to make sure that we have more affordable housing in the market. And we need to make sure we’re building more state houses, which we are — over 1000 since we came in.

So by the end of this year, we’re going to see movement on all of that.

We already are.

Okay.

You know, what we had to, of course, acknowledge through the KiwiBuild programme — it’s not easy, and I don’t think anyone expected that it would be. One of the issues we’ve had is in order to move quickly, we’ve wanted to work with developers to try and produce some of our KiwiBuild homes, and it has been, frankly, difficult, in some cases, to attract developers into the affordable housing market, which you would understand, and that’s why we have this problem in the first place.

Would you acknowledge that the KiwiBuild, as you say, it was a flagship programme — $2 billion —has it been a flop so far?

No. It’s one of many programmes. That’s the first thing I would say, because, of course, we have to address our housing crisis across the board.

Sure, but this particular programme has got 62 houses built, and, you know, the targets have been scrapped. There was supposed to be 1000 by July. You know, you might get 300 built by July.

About 280 under construction currently.

Yeah.

We’ve contracted roughly 10,000 over a 10-year period so far.

Yeah.

And, look, we absolutely acknowledge it is difficult, and I think people understand that, because under the last government, they made no effort to build affordable houses at all. And so the alternative for us, Simon, is to do nothing. And if we do nothing, we will not solve the fact that we are tens of thousands of houses short in New Zealand, and roughly only five per cent of the houses that were being built were for first-home buyers.

Okay, but that’s KiwiBuild, right?

Yeah.

So you also need the social houses as well.

Absolutely.

Okay, and so you have a target of building 1600 social houses a year.

We’ve said that, and we’ve created 1900 public housing places since we came into office, and there’s been 1000 state houses built.

Okay, but some of those are transitional houses, so, you know, 1000 houses built — you want 1600 a year. Salvation Army says we need 2000 a year, do you need to expand that goal?

Well, of course, we are working across both — working with the social sector to up their provision, building state houses ourselves. We’ve also increased the number of Housing First places by a significant amount. Now, just to give a little background on that — what we’ve worked out is transitional housing, yes, we need it, because we don’t want people living in cars. But, actually, if you want people to permanently be in housing, Housing First, which gives people security from the outside, is actually what’s getting our rough sleepers off the streets long term. And we’ve been successfully increasing the rollout and funding a rollout of that in Auckland, in Hamilton — across the country.

Let’s talk about the state houses, or the social houses, because, yes, you’re committed to building those, but the wait list for the state housing has shot up in the last year by 73 per cent. Now you said, ‘Look, we’re going to get the ship sailing in the right direction.’ That does not sound like it’s going in the right direction.

Actually, what I acknowledge is that that is the true reflection of the housing crisis in New Zealand, and we cannot shy away from that. What we had before — and the Salvation Army themselves commented on this — that they believe that people are coming through the door, and when they’re seeking to be put on the register, when they seek a special-needs grant that that’s happening more often. Because we said to our frontline workers, ‘When you see need, we respond.’ Whereas before, you will have seen once before, we have hit that kind of number, the last government instead cut two categories out of the waiting list. Now, hiding our homelessness and our housing crisis is not a way to respond. We need to own it, acknowledge the numbers and do everything we can.

So that’s a tangible difference, is it, that we’re going to see by the end of the year. You’re still sort of laying the blame back on the previous government for that.

No.

But you’ve had a year, and now these figures are not going the right way after a year.

No, actually, for me, this is not about apportioning blame. You know, I think, actually, if you ask a member of the public, you know, ‘Have we had a housing crisis?’ Actually all the politicians now seem to accept that that’s the case. Is it easy to resolve? No, but, again, I put the counterfactual — yes, KiwiBuild isn’t happening at the pace we want. I’ve acknowledged some of the issues we’ve faced. The suggestion seems to be that we do nothing. I do not accept that.

Well, what about take the money from KiwiBuild and stick it into state housing and get rid of that register? Could you do that?

Of course, keeping in mind, we’re building state houses as quickly as we can. You know, we do have an issue with a skill shortage. Of course, that’s been a major part of— we’re having to build up that workforce at the same time. But KiwiBuild — the $2 billion put aside for that — of course, these aren’t subsidised houses; they’re about people buying them, that money gets recycled back through, and we build more.

Yeah, I appreciate that, but you could also use that same model for building more state houses.

And we know we need to build more state houses. In fact, Simon, what I point out — we, as a government, are building more houses than any government since the 1970s. I just want it to happen faster.

The government’s about to deliver the world’s first well-being budget. Okay, so there seems to be concerns from economists that this budget might not be so much based on data. One of the examples that’s come up recently is the Treasury’s cost-benefit analysis, where it puts a figure, a specific value on things like contact with a neighbour or feeling lonely. I mean, how do you put a value on those things that you can’t count?

Incredibly difficult, granted.

Yeah.

Actually, what some of the Treasury have used actually were — some of the modelling, as I understand, was actually developed under the last government, when they were doing social investment. These are all pieces of information that we use in a budget process. But it is not the thing that determines precisely what we then prioritise. It’s an input. It gives us extra information. Because you’re right — some of it— it’s quite hard to build evidence base in some of these areas, and yet we know the economic impact of, actually, some of the social issues we’re trying to address. Now let me give you an example. Internationally, a big discussion around the economic impact of mental health and well-being — we know that there are groups of our society who are experiencing more social disconnection, less contact with the outside world, greater levels of loneliness. Now, that might seem fluffy, but there actually is an economic impact for that downstream. How do we make sure we prioritise investing in the areas that help us from a social perspective, but also, ultimately, economically too.

But some of the, sort of, criteria seem a bit out of whack, as it were. Like, you’ve got minus-$17,000 for loneliness, and that seems to be a greater figure than avoiding a heart attack and all these kinds of things.

And, unfortunately, the Opposition have completely misused the tool that Treasury has created by comparing cost benefit and outputs incorrectly.

Okay.

Treasury have debunked the way that that’s been dealt with, but the primary point I’d like to make is these are just different pieces of data and evidence we can use. Ultimately, though, we are still the ones making the decision over what changes these things at an intergenerational level.

So tell somebody. I mean, it sounds lovely and a bit woolly. So tell someone. It’s a tangible difference about having a well-being budget. What’s a concrete example?

Let me give you an example. So health, for instance. In the past, we’d just tell you how much we’d spent in the health budget. It doesn’t really tell you anything about the well-being or the health of New Zealanders. So then you’ve seen governments over time would instead tell you how many operations we’re purchasing. But, actually, again, that doesn’t necessarily mean we’re investing in a way that saves us money in the long term. What we’re trying to do is factor in, for instance, the fact that children that grow up in poverty are more likely to have health problems as adults just by virtue of that trajectory, and they have the equivalent of what looks like post-traumatic stress. So, actually, if we want to save health dollars here, it makes sense for us to invest in the health and well-being of kids.

Hasn’t that been the motivation of government ministers? Shouldn’t that be the motivation — you know the general well-being of the population from day dot?

It should be, but—

So why do you need the marketing stuff over the top? That should be your primary motivation.

It’s not the way policy is developed or spending decisions are traditionally made. Unfortunately, when you’re a minister — and this has happened through successive governments over decades, and it’s an international problem that was being debated at Davos, for instance —individual ministers, of course, make budget bids in their own area, and so that means that, you know, the Minister of Education might not be thinking about, you know, mental health and well-being issues even though he actually has a role to play in that area. The Minister of Health isn’t necessarily— has the responsibility to deal with what happens with child trauma and child poverty, and yet he picks up the pieces. It’s about trying to get everyone to work together to resolve what are long-term challenges. So, actually, this isn’t about ideology; it’s not about left and right; this is just, I think, a good methodology to use in the future.

Housing is critical to well-being. So you will acknowledge that.

Absolutely.

Okay, so one of the reasons that the state housing list that we’ve talked about has shot up recently is so big. Is that because the rentals are being— they’re being priced out of the rental market. So I wonder what you’re going to do as a government to make private rentals more affordable for people.

Well, ask the likes of the Reserve Bank, and they will say, ‘It’s supply.’ And we have a shortage of houses in New Zealand. It’s been modelled in various ways, and there seems to be absolutely no dispute in that regard. Ultimately, if we want to make sure that we see more stability in our rental market, we need more houses, which is why we’re being so audacious around KiwiBuild.

Yeah, but counter to that are the policies that you’re bringing in around private landlords. And they’re telling us that they’re feeling a bit hammered — like, healthy homes, bright-line test, possible capital gains tax, lack of depreciation. So there’s nothing there to encourage rental investors from your government, is there?

The bright-line test, obviously, ultimately was first and foremost brought in by the last government.

You are the government now, though.

Yes, but— And that’s something we haven’t shied away from, but that’s a bit a rich for the current Opposition to now claim that’s a problem when they—

No, I’m talking about the landlords. I’m not saying the Opposition. The landlords are feeling hammered.

Do you know, actually, I think— particularly when you talk about healthy homes, I think we do a disservice to landlords. To claim that they somehow wouldn’t want to ensure that the home that they rent is healthy, warm and dry.

That’s one particular policy. We’re talking about the whole batch of policies. The climate of the landlords right now — they don’t feel like they’re being encouraged to invest in rental properties, and we need that supply, otherwise the prices will keep going up.

We absolutely need supply in our housing market — that includes first homes; it includes rentals. But, again, that’s why I come back to what the likes of the Reserve Bank say, which is not that it’s about those individual policies in terms of rental prices; it’s actually about supply. More houses, less demand, and then you see greater competition then in the market. But for landlords themselves — I do just want to come back to this — you know, of course I’m sure we’d all agree that we want people living in healthy homes. We have a huge number of preventable hospitalisations and even premature deaths because of the quality of our houses in New Zealand. You know, landlords, I do think want that quality offering for their tenants. And we want people to not be sick. We want our kids to not be sick. So I don’t think it’s a big ask.

Speaking of housing, just thinking more than half of those who are in severe deprivation are Maori or Pasifika, in terms of housing.

Yes.

So last year’s budget allocated $15 million more to the Papakainga initiative. I was just wondering whether you are going to do more to address the inequality in that housing area.

Actually— And, of course that’s— both the initiatives we undertake are around housing, but also, of course, wages and incomes, and, in fact, one of our five priority areas, because when you use an evidence base to develop up your priorities as we have for this budget, and we have five, it includes the income of Pasifika and Maori because we know the long-term impact that’s having and the inequality that we see for those groups. And so that is a focus this budget too.

But does that mean that you’re going to have to do more targeted funding to help people lift these incomes and get them into housing?

Well, look, I think we’ve taken a bit of a dual track, so, obviously, Papakainga housing, that’s an example of where we’ve been targeted. At the same time, actually, if you target low incomes, unfortunately, by default, you’re targeting Maori and Pasifika. So in the very first mini budget we did, we put $5.5 billion overall into boosts in Working For Families, the best start payment, the winter energy payment. A good proportion of that went specifically to Maori families because of where they sit in our income bracket.

That’s where they sit in the overall — that’s universal.

That’s right.

But, you know, your Finance Minister and Willie Jackson’s also suggested that more targeted funding — the Salvation Army also says more targeted funding is the only way to really address the inequality.

In that families package, it was about targeting low and middle-income families. We targeted by income, and that did have a positive impact on Maori and Pasifika families. We even know how many, and it was a large number. But, at the same time, you know, things like targeted programmes that exist, Papakainga housing and others — those are the areas where you’ll see us also consider during the budget.

Okay, let’s talk about capital gains tax, the subject on everybody’s mind at the moment. Mr Peters, your coalition partner, has said that they— he’s spoken out against it in the past. He’s talked about, you know, it doesn’t work. And you’ve talked about needed to reach a consensus.

Yes.

So how big a compromise are you going to make with Winston Peters?

Well, obviously, it won’t surprise you that I’m not going to conduct a negotiation here and— or not least without my coalition partners present. We, of course, have three parties we will be negotiating with.

Yeah, and the Greens are all on board with the capital gains tax. It’s Winston Peters who could prove the hurdle. And you yourself, pre being elected and pre being in this coalition situation have talked about maintaining a right as a leader to make sure the tax working group reports back and that you’re able to— you can enact whatever it say. And, you know, that’s your right, and so that right might be lessened.

I don’t know how that’s been characterised. Of course, we all campaigned as individual party leaders. And everyone will have seen some of the statements I made as Labour leader.

Yeah.

I’m now the Prime Minister in a coalition government, and I have three parties I need to build consensus with. And, actually, that’s what I just have to do day-to-day. And the tax working group report — it’s no different. But having said that, obviously now we’re in a process of just allowing the public to see and the public to have that debate, and I think we should. You know, one of the things that I do think is unfortunate, though, is that, you know, there is a large group of New Zealanders, particularly young New Zealanders now who actually, if their aspiration has been homeownership has just become harder and harder. There’s a group of New Zealanders who don’t have columns in the Herald, who might not be having a chance to have their say on this. We need this debate in New Zealand, because we’re one of only a handful of countries in the OECD that doesn’t have this form of tax.

Sure.

And so let’s debate it.

And you’re leading it. You’re part of that debate, obviously, and your language is being scrutinised. Earlier this week, you seemed to be softening your language about, you know, having concerns about farmers and small businesses. So does that mean that you’re going towards where Winston Peters might sit?

It was an acknowledgement that in all of the debates we’ve had on capital gains. It often has been quite heavily focused in the commentary around, for instance, investment properties, and less so in the space where the tax working group went, which is broad-based and covering additional sources of income, and so small businesses in particular have been brought into that debate. And message was I hear that there’s a lot of arguments for and against, and I hear that. Because that was a new part of the debate, I didn’t want anyone to think that we weren’t considering all of the issues around that area.

So you say that, you know, you’re not going to reveal your position until you’ve reached consensus with your partners.

Yes.

That’s two months away. Are you concerned that this is creating uncertainty?

No. It’s a debate.

Business confidence — yesterday, stalled.

April is not that far away, and this has been an issue that has been debated on and off for a number of years. We’re moving as quickly as we can to give certainty. We’re giving people a lot of input at the same time. I think that’s actually what a robust democracy is about.

Do you think you have the political will to actually go through with a capital gains tax this time?

Again, for me, my job is consensus building.

Okay. Will you be able to convince enough people that it’s a good idea?

Well, actually, when you look at some of the polling, more people were in favour of a CGT with a tax switch attached to it than weren’t, so obviously there’s a debate here to be had. And, of course, we inserted into the debate the idea of it being revenue neutral, about there being, you know, cuts attached to anything that might be implemented. So let’s have that debate. Because, ultimately, even if you look at Australia, you know, 95 per cent of people aren’t affected by their capital gains tax. You’d see something very similar here if we were to go down that track. But people can end up being better off, so let’s have the debate.

All right. And just quickly, one question on China — have you set a date for your trip to China yet?

No.

Okay. Prime Minister, thank you very much for your time.

Thank you.

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