Archive | National politics

The English programme is for steady growth

Bill English, completing his second month as Prime Minister, opened Parliament yesterday with a statement that was long on boring. The word ‘continue’ cropped up throughout his speech.

And that’s neither odd nor bad. A prime minister who’s just finished 8 years as deputy and also as finance minister is hardly going to tell you he’s been doing a bad job and is going to change everything.

Nevertheless, I read through it in case something had moved out of line. One thing I’d hoped might have moved a little closer to action was the Resource Management Act reform programme. It was down the end of the speech and is still a work in progress. That’s perhaps for the best, because it needs work to remove some of the unnecessary turmoil some changes were going to make.

Mr English said economic growth was expected to average about 3%/year over the next 5 years, “supporting more jobs, reducing unemployment and allowing incomes to rise faster than inflation.

“Unemployment is forecast to drop to 4.3% by 2020-21. Over the same period another 140,000 jobs are expected to be created and the average wage is forecast to increase by a further $7000 to $66,000.

“The Government’s overall fiscal strategy remains unchanged – getting on top of spending and paying off debt in the good times so that the Government can support New Zealand communities through future challenges.

“The operating allowance remains at $1.5 billion for each of the next 4 Budgets. The capital allowance has been increased to $3 billion in Budget 2017 and to $2 billion in future budgets to provide for a number of high quality infrastructure & investment projects.

“Treasury’s latest forecasts of the operating balance before gains & losses (OBEGAL) is for a $473 million surplus this year, rising to $8.5 billion in 2020-21.

“Net debt is expected to fall to 18.8% of gdp by 2020-21, with contributions to the NZ Superannuation Fund forecast to restart the same year.”

Among projects for the year (there are others, in case you think the most important one has been omitted – check the link below):

“The Government will continue work on improving the quality of our rivers & lakes, and progress work on a fair & equitable allocation system for water & discharges.

“The Government will encourage petroleum & mineral exploration while adhering to strong environmental & safety provisions. Investment in data acquisition projects such as aeromagnetic surveys will continue, ensuring aeromagnetic data on around 30% of New Zealand’s land surface will be available by mid-2018.

“The Government will continue to promote competition in the electricity market to help keep downward pressure on power prices. It will also continue to promote renewable energy, with a target of reaching 90% renewable energy by 2025, up from 81% in 2015. Work will be progressed on setting renewable energy targets beyond electricity.

“Investment in modern infrastructure is a priority for the Government. Capital spending over the next 5 years is forecast to total $32.1 billion, compared to $18.4 billion over the last 5 years, with major investments in transport, schools, hospitals, defence & housing.

“The Government will continue construction of the remaining 5 roads of national significance, and accelerate a package of regionally important state highway projects under the accelerated regional roading

“Housing will remain a key focus for the Government this year, and work will continue to increase the supply of land for housing.

“Legislation to reform the Resource Management Act will be progressed, to reduce costs & delays for homeowners & businesses, and the Government will also proceed with reform of the Building Act.

“The Productivity Commission will deliver its final report on the urban planning system. This will consider options for the long-term replacement of planning legislation.

“The Government will work with Auckland Council to ensure the successful implementation of the city’s unitary plan. Additional special housing areas will be established, and more underutilised Crown land will be made available to support an increase in residential building.

“The Government is reforming the social housing sector to grow supply and get better outcomes for people & families most in need of housing assistance.

“The Government will build & fund additional social & emergency housing places, having last year provided permanent funding to the emergency housing sector for the first time.

“The social housing reform programme will progress, with the transfer of up to 2500 Housing NZ properties in Christchurch to community housing providers. The reforms aim to drive more diverse ownership of social housing, engaging providers who can support tenants with additional social services, and redevelop social housing to better match tenants’ needs.

“The Government will progress the advanced survey & title services project, which will significantly improve the quality & range of survey & title services provided by Land Information NZ.

Legislation to amend the Local Government Act will be progressed, allowing local authorities to create more shared services across regions, particularly for core infrastructure such as transport, water & sewerage.

“The Government will continue to review New Zealand’s immigration settings to ensure they support economic growth and provide employers with access to the international labour market to fill labour needs that cannot be met domestically. A new global impact visa will be piloted to attract up to 400 young technology entrepreneurs.

“The Government will implement initiatives to contribute to its goal of raising Government investment in research & development to 0.8% of gdp, including the rollout of the $250 million/year strategic science investment fund.

“2 new regional research institutes will be established in Marlborough & Alexandra, and a second round of regional research institute funding applications will be completed, supporting 1-3 additional institutes.

“The Government will continue to resolve historical Treaty of Waitangi claims, and intends for all willing & able iwi to have settled or have an agreement in principle by the end of 2017.”

Prime Minister’s statement, 7 February 2017

Attribution: Speechnotes.

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English explains his thinking

Prime Minister Bill English used a Rotary Club address in Auckland yesterday for his first election campaign offer, a big lift in police numbers & resources.

The package would amount to $503 million and includes adding 1125 more staff to the police force over 4 years, 880 of them sworn officers; an increase in cash & assets seized from gangs & organised crime, up from $230 million to $400 million over 4 years; and $115 million for rehabilitation & reintegration programmes.

The National proposal, the first promise heading into the 23 September general election, comes 4 months after Labour leader Andrew Little berated the Government for holding police income down to 14% since it was elected in 2008, compared to a 25% rise in costs over that period arising from immigration & inflation. Labour proposed lifting police numbers by 1000 in 3 years.

More interesting to me from Mr English’s address yesterday, though, were some of the pictures he painted from his upbringing on a Southland farm, his time as a young farmer fighting the debt which threatened to overwhelm him and, he said, learning economic reality. Below, I’ve run those parts of his speech:

A successful recipe

Some people believe New Zealand’s location protects us from the most immediate pressures. But in time, the effects of decisions made in Washington, Berlin, Moscow & London will wash up on our shores.

When our values & direction are tested, we should remember that history shows we’ve developed a successful recipe for New Zealand over many years, and we can hold true to our values. That allows us to face international challenges with confidence. Confidence in our resilience, confidence in our ability to adapt and confidence in our place in the world.

We have forged a distinctive place in the global community as a fair-minded people with a successful economy open to trade, investment & migration. That economic success has been hard won by New Zealanders. It should not be taken for granted.

As some of you know, I was brought up in Southland, a place where hard work & farm skills were respected more than profit, and where no one could do it all on their own. I got my politics around our large dining table growing up, and from my mother who ran a farm, raised 12 children and was a serial community activist.

By the early 1980s, I was a new, keen & highly indebted young farmer. Interest rates were around 17%, but farm costs were held down by wage & price freezes.

That wasn’t sustainable and just papered over the economic problems that had built up over a number of years.

The economy had to be restructured. My community was hit hard as farm subsidies were wiped.

I made lots of financial & farm management mistakes. But with the help of family and a lot of hard work, we stayed on our feet.

Many New Zealand families had similar experiences in other industries, as jobs were lost and they struggled to rethink where they fitted in a country that had suddenly changed.

We thought the world owed us a living. It didn’t.

Small steps

I learned then that business & families in a small trading country like ours needs to continuously adapt in small steps – and that government should back Kiwis to do just that, focusing on resilience & aspiration rather than fear & isolation.

Hiding from economic reality eventually requires drastic & damaging change.

This has been the guiding philosophy behind the National-led Government’s approach over the past 8 years. And it has delivered the strong economy we have now.

As a new MP in 1990, I saw the deep-seated resilience of our rural families & communities as they rebuilt their skills & their confidence. I saw the same qualities in the big city when I married into a Samoan Italian family.

I must admit the scruffy unemployed farm worker who turned up on the arm of their eldest daughter wasn’t quite what Mary’s parents had in mind as a son-in-law – busy as they were with several jobs and raising a large family. From them I saw the grit & determination it takes to feed & educate a large family, own a home and win respect when starting afresh in a new country.

Mary and I have raised 6 children of our own. Along with the hundreds of families we’ve met through school, church, relatives & dozens of sports teams, we’ve shared the experience of working multiple jobs, getting everyone everywhere on time, finding time to spend with the children & each other – and for enough sleep – as well as answering the hardest question of all every day: what’s for dinner and who is cooking it?

The people who shaped my life are resilient & capable.

I’m proud that on the other side of the globe from the European capitals I visited a few weeks ago, New Zealanders have built a cohesive & globally competitive country that can provide valuable lessons to the rest of the world.

In recent years, New Zealand has dealt with the biggest financial crisis since the Great Depression, we’ve dealt with devastating earthquakes and we’ve made significant progress on deep-seated social & Treaty issues.

A sound footing

We now have a dynamic & diversified export sector, sound government finances, low unemployment and thousands of new jobs. People are voting with their feet. New Zealanders are staying home, more tourists want to visit us, and more people want to live here. The outlook remains positive and the economy continues to grow, with over 130,000 jobs created in the last year. Average wages are expected to keep rising and reach $66,000 a year by 2021. That means more opportunities for our kids to get jobs and more money in people’s pockets.

The global economy is looking a bit better than last year, with improving prospects in Europe & the US. However, the political instability I mentioned earlier means there is no room for complacency.

In this environment, I believe the biggest threat to New Zealand is disruption of the international system of open trade. Under my leadership, New Zealand will continue to advocate for free trade and aim to execute high quality trade agreements. When we open doors for our exporters, they walk through and create opportunities & jobs for New Zealanders.

Immediate challenges

Our immediate challenges at home are what I call the positive challenges of growth. The Government is building the roads, schools & houses needed to support our growing communities. We’re providing the public services & infrastructure needed by a successful, growing & modern economy – and there’s much more to do.

The whole point of building a strong economy is to improve the lives of all New Zealanders. If we can stay on course and build on the progress we’ve already made, we have the best opportunity in decades to make positive sustainable choices for our country – choices that deliver better incomes for our families, safer communities, and provide better government services for everyone.

As prime minister, I want people to be rewarded for their hard work & enterprise.

Businesses, farms and entrepreneurs across New Zealand are the engines of growth in our country – as are the people who work hard every day in those enterprises.

So we’ll continue to back people who take risks to create new jobs & new businesses.

We’ll back hard-working people who get up early in the morning to milk the cows or to catch the bus to work, so they can raise their families. And we’ll back people who bravely leave behind welfare dependency to move into work or who work hard to manage their health issues or disability so they can live independently. I believe in the capacity of all New Zealanders to improve their lives in some way, large or small. And I believe in the generosity of this country to help them do it.

Here’s what I mean.

Last year, I visited Kaiti School in Gisborne, where many of the children come from low-income families. I saw inspired teachers sign up parents, mostly young mums, to the local iwi savings scheme. I met a 5-year-old who presented me with a business plan for selling toffee apples at the school fair. He told me about his products, his customers & his marketing.

If we accept the normal assumptions, then that young Maori boy hasn’t got much chance. But what I saw in his eyes, and in the teachers supporting him, will change his life.

Finding the bright side

Through my extensive family & many years as a local MP, I have seen hundreds of examples of suffering & loss of hope turned around by quiet heroism in our communities, families, schools & public services. It never happens without the hope of one person for another.

I’ve also seen lives blighted by poor public services, bad decisions, neglect & bureaucratic inertia. A well-intentioned public service on its own is no guarantee of success – we have to help people to fan the small flames of hope. This government is committed to doing that.

We’ve developed a better understanding of the needs of people who rely on us most. Public servants can now see the lifelong benefits of intervening early to help those in need, and the lifelong costs when that doesn’t happen. We know, for example, that a teen parent on welfare will spend an average of 17 years on a benefit, at a cost of just under $300,000.

There is a group of around 1000 5-year-olds each year who, in later life, are far more likely to commit crime, be on a benefit or go to jail, and they’re far less likely to succeed at school. Left alone, each of these children will cost taxpayers on average around $270,000 over the next 30 years, with some costing over $1 million. We will spend time and money now to change the course of their lives.

For too long, governments have serviced misery, rather than investing upfront to help people change their lives for the better. Some New Zealanders need ongoing support to help them lead a decent life – and they should have as much choice as possible in how that happens. But there are many more who will benefit from smart, lighter-handed assistance and will then move on.

A basic: Money isn’t always the answer

It seems pretty basic to me that if you are spending billions of dollars on social programmes like health, education, welfare, housing and law & order then it should work. You should actually be achieving something, otherwise you’re wasting taxpayers’ money and messing with people’s lives. So we now publish results every 6 months showing what has been accomplished.

Spending more public money is not, in itself, an achievement. Real achievement is reducing welfare dependency. Real achievement is getting better results for our kids at school. And real achievement is preventing rheumatic fever, and reducing emergency department waiting times. Real achievement is changing lives. This approach, which we call social investment, is showing promising results.

There are now over 50,000 fewer children living in benefit-dependent households than there were in 2011. And the number of sole parents on a benefit is the lowest since 1988.

My government is willing to take the risk of trying new ways to help those most in need. Some new services might not work. Others might be opposed by existing providers. In election year, some will say the answer is always more money. If that were true, we would have no social problems, as we’ve been increasing funding for decades. The recent rise in the prison population confirms we need to do better.

We’ve made some progress in breaking the cycle of welfare dependency, child abuse, low education levels & escalating criminal offending, a cycle that is often intergenerational. It is a long job.

The people who fall through the cracks

But there remains a small number of people who have a disproportionate impact on the safety of our communities. Too many people in prison and on community sentences are regulars in the government system. So today I want to address that issue.

This Government’s Policing Excellence and Prevention First programmes have focused on reducing crime and preventing reoffending. These programmes contributed to a 20% reduction in crime between 2009-14. They improved public confidence in police, and they drove productivity gains that freed up the equivalent of more than 350 extra frontline officers. More recently, we’ve set challenging targets to reduce violent crime, youth crime & reoffending.

We’ve made it harder for violent offenders to get bail and we’ve sharpened our focus on preventing family violence. And we’re using social investment to better understand the people who most need our intervention and identify what really helps them to lead better lives.

We have driven government agencies to address the drivers of dysfunction, rather than just responding to the symptoms. Because preventing crime often requires intervention from education or housing agencies rather than just the police, for example.

Here is a surprising fact: The most common age of an apprehended burglar last year was 16. That’s right – just 16 years old. We need to push harder to keep every young person on a track that avoids first offending and prevents them moving on to even more serious crime. But the police frontline need more time to dedicate additional resources to crime prevention & working with other agencies, while also meeting higher demand for dealing with serious crime now.

Although recorded crime has fallen since 2009, overall demand for police services has recently increased. That’s down to the complexity & time-consuming nature of cases such as family violence, child abuse & sexual assault, as reporting of these crimes increases. In addition, recorded crime has begun to rise again over the last 2 years – particularly burglaries, robberies & assaults.

As I’ve said, this government is prepared to invest up front in programmes that will tackle these complex issues and make a positive difference to communities.

Warning: examine the promises closely

Delivering better public services for a growing country is all about investing where it’s needed, while working smarter and being more accountable for results.

In weighing up promises by political parties this year, I challenge you to look beyond the dollar-figure soundbites. I want you to ask whether the policy sets out exactly how it will improve people’s lives – or whether it is just taking the easy option of throwing money at a problem.

Attribution: Bill English speechnotes.

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Housing minister no more

Nick Smith has lost the housing portfolio in today’s Cabinet reshuffle by new prime minister Bill English, and nobody’s picked it up, although 2 ministers have social housing & Housing NZ in their titles.

Dr Smith has retained the building & construction (previously building & housing) and environment portfolios.

Ministers with ‘housing’ in their title are:

  • Amy Adams, responsible for social housing, responsible for Housing NZ Corp, also Associate Minister of Finance, Minister of Justice, Minister for Courts, Minister Responsible for Social Investment, and
  • Alfred Ngaro, Associate Minister for Social Housing.

Steven Joyce picks up finance & infrastructure, Gerry Brownlee remains Leader of the House and retains Supporting Greater Christchurch Regeneration, Defence and the Earthquake Commission portfolios. He will also be appointed Minister of Civil Defence.

Simon Bridges continues as Minister of Transport and will pick up the economic development & communications portfolios and associate finance.

Anne Tolley becomes Local Government Minister, replacing Peseta Sam Lotu-Iinga, who is retiring from Parliament.

Full ministerial list

Attribution: Prime ministerial release.

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Williamson quits as minister, not as MP, over support for Chinese developer

Building & Construction Minister Maurice Williamson, 63, resigned as a minister outside Cabinet yesterday – but said he wasn’t resigning as an MP – after a news investigation established he’d contacted police over their investigation of Chinese property developer Donghua Liu.

Mr Williamson, MP for Pakuranga since 1987, had a series of unusual links to Mr Liu. Mr Williamson & Prime Minister John Key opened Mr Liu’s refurbished Boulevard Hotel in Epsom just before the Rugby World Cup in 2011. That was to have been the forerunner to a $70 million redevelopment around the hotel, which didn’t proceed.

But the intended investment helped sway Mr Williamson to support Mr Liu’s application for citizenship, and to call Immigration Minister Nathan Guy about it, although Internal Affairs had recommended declining the application because Mr Liu didn’t speak enough English.

Mr Williamson conducted the citizenship ceremony himself, the day after the application was granted.

In March, Mr Liu pleaded guilty to charges of assaulting his de facto wife and her mother in December.

He’d also advocated reducing the sum required of applicants for citizenship under the business migrant category to be halved to $5 million.

Mr Key said yesterday he’d accepted Mr Williamson’s resignation. The prime minister said: “I have been made aware that Mr Williamson contacted police some time ago regarding their investigation of Mr Donghua Liu. Mr Williamson has assured me that he did not in any way intend to influence the police investigation. However, Mr Williamson’s decision to discuss the investigation with police was a significant error of judgment.

“The independence of police investigations is a fundamental part of our country’s legal framework. Mr Williamson’s actions have been very unwise as they have the potential to bring that independence into question. I have advised the governor-general to accept Mr Williamson’s resignation as a minister.”

Mr Key said he would appoint a new minister outside Cabinet early next week. In the meantime, Housing & Conservation Minister Nick Smith would act in the Building & Construction portfolio, Nathan Guy in Land Information and Simon Bridges in Customs & Statistics.

Attribution: Government release, news stories.

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Political triumph at heart of Key housing message

Prime Minister John Key delivered the triumphal speech to the National Party’s annual conference in Nelson yesterday of a man who knows he has his opponents beat, using the issue of affordability to beat them.

He spoke of how this government had taken New Zealand forward despite difficult times – the global financial crisis topped with earthquakes – and it is the rising economy that will win him re-election next year.

He & his ministers announced policies on resource management reform and more loan package support for first-homebuyers at the conference of the party that is the controlling force in the Government.

Resource management is a convenient scapegoat: while home construction has been at the bottom of its cycle, it has been easier to blame councils’ failure to rezone more land for causing higher prices. Councils have also steadily introduced more compliance costs over the last decade, largely to meet the philosophies of sustainability & care for the environment – taking compliance to an unreasonably high proportion of housing cost.

Increased loan support for first-homebuyers will feed into prices, just as easier credit & low interest rates have done. The next package of resource management reforms still contains safeguards, but there will be more pressure on councils to act faster.

That conforms to the underlying philosophy Mr Key enunciated yesterday: “The fundamental difference between us and the opposition is that we are about doing things, and they are about stopping things.”

Each of Finance Minister Bill English’s 5 budgets had laid out further stages in National’s plan to deliver a brighter future for New Zealand, Mr Key said: “Under our plan, we have protected the most vulnerable New Zealanders through difficult times, set a path back to surplus and built a solid platform for growth.

“Under our plan, the economy is growing, wages are rising, the cost of living is well under control and there are 65,000 more jobs in the economy than there were 2 years ago.

“Under our plan, business confidence is the highest it has been since 1999, we are delivering better public services for Kiwi families and crime rates per capita are at their lowest level in more than 30 years.

“Under our plan, we are overhauling a welfare system that is trapping thousands in dependency and giving people more support to get off the benefit.”

Mr Key labels his opponents disparagingly far more effectively than they do to him: “Under MMP, all elections are close elections. And they are not just about National versus Labour, but about the centre-right versus the left. And it’s clear for everyone to see that Labour has hitched their wagon to the Greens, lurching the opposition to the far left. Make no mistake, our opposition comes from the far left of politics. The Greens are leading Labour by the nose.

“It’s important that New Zealanders understand what a Green-dominated government would look like. They want to tax you more, rack up more debt and make you work 2 more years before you can retire.

“They want a government department to run the entire electricity system, just like it did in the old days when we had blackouts. They want to stop oil, gas & mineral exploration that would create jobs & growth. They blame foreigners for all the ills of the country when our future prosperity lies in being open & connected to the rest of the world. They even characterise businesses relocating jobs from Australia to New Zealand as ‘deeply worrying’.

“We believe in a supportive government but also in personal responsibility. We understand that businesses large & small create jobs & prosperity in our country. We believe in supporting people’s hard work & enterprise. We have tolerance & respect for all New Zealanders and we don’t favour one group over another.”

From that platform, Mr Key devoted a large part of his address to home ownership & affordability, and his opponents made it easy for him to win the argument. Labour has proposed building 10,000 affordable homes/year to dilute the market. But, in reality, what homebuyer wants prices to stay down? Everybody wants the value of their purchase to rise. And what homebuyer wants to aim for the cheap house when available credit, low deposits & low interest rates mean you can aim higher?

Part 2 of the John Key housing story: Key points finger at councils, changes loan support

Link: Full Key speech

Attribution: Speech notes.

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Key points finger at councils, changes loan support

I finished the first part of this 2-part story on John Key’s address to the National Party conference yesterday by asking: In reality, what homebuyer wants prices to stay down? Everybody wants the value of their purchase to rise. And what homebuyer wants to aim for the cheap house when available credit, low deposits & low interest rates mean you can aim higher?

Mr Key hasn’t said he’ll lower the price of housing across the board, but that specific support measures will enhance the opportunity for new buyers to compete.

The housing issues just happen to provide National with an excellent opportunity to win praise for dismantling the carefully constructed environmental support system of the previous decade, which turned into a bureaucratic nightmare instead of being valued as a way to get better development.

It’s not clear that the new package of resource management reforms will make development that much easier – the main changes look like they will add bureaucratic requirements rather than simplifying anything. The reforms will enable the Government to constantly wield a stick at local government, and it will be local government that gets blamed for not performing.

I deal with the resource management package separately. This article covers Mr Key’s speech on housing affordability & loans.

Said Mr Key: “The Government has been working on issues around home ownership & housing affordability for quite some time. We share the concerns many New Zealanders have that some young people who have worked hard to get a reasonable income, have saved to put a deposit together and who want to settle down in a home of their own are either being locked out of the housing market altogether or are having to spend far too much of their incomes on housing. The National-led government is committed to ensuring home ownership is attainable for New Zealanders.

“ I want to make it clear at the outset that I think orderly increases in the value of homes over time is generally a good thing. Most New Zealanders have a lot of their savings tied up in their home, so if that is increasing in value then well & good. But if those increases are so rapid they leave other people behind, we have a problem.

“In the 9 years to November 2008, the end of the last term of the Labour government, the average wage rose about 40% while the national median house price rose 100%. No wonder home ownership was much more difficult for a lot of Kiwis after that 9-year period. And no wonder Labour are feeling guilty about home ownership – they were in power all that time… and they did nothing but talk about it.

“Since 2008, house price rises have been more subdued. Over the last 4½ years, house prices across the country have gone up only 13%, while the average wage has risen 15%. But the national picture hides what’s going on in some regions. Over the last year or so, the housing market has been heating up in parts of the country like Christchurch & Auckland.

“Christchurch, of course, has its own unique set of issues, which we are addressing. But Auckland, amongst other places, is a city where many people have to stretch way too far to buy a house. The problem, in a nutshell, is that not enough land has been set aside for building, planning & consenting processes are too cumbersome and the costs of construction are too high. So not enough houses have been built to keep up with demand.

“Some pretty elementary economics tells you that prices for existing houses have to rise as a consequence. And they can rise very rapidly. That affects people wanting to buy a house but it also has an impact on the economy as a whole. As the Reserve Bank has repeatedly said, rising house prices affect financial stability and put pressure on interest rates & the exchange rate. If a bubble is created & bursts, it could leave many homeowners with little or no equity, and leave banks in a vulnerable position. I know that the Reserve Bank governor is very worried about this risk, and precisely that situation has occurred in other countries. We certainly do not want it to happen here.

“I want to tell you that homes can be made more affordable in New Zealand. The way to do that is pretty clear. When you have a shortage of something you make more of it. So the answer is to build more houses. That’s what will really make a difference at the end of the day. And building more houses, at reasonable prices, comes down to ensuring that there is more land available to build on, that there are better consenting processes and that costs are lower. Addressing this set of issues is far & away the most important thing the Government can do for housing affordability.

“For example, we will have a law passed soon that will speed up the provision of new housing and streamline approvals in areas where housing is least affordable. We already have a housing accord agreed with the leadership of the Auckland Council which will see 39,000 homes consented over 3 years – a massive increase on what we’ve seen in the past. And yesterday [Saturday] we announced a number of significant changes to the Resource Management Act.

“These include making councils plan for a minimum of 10 years of urban land supply, to cope with projected population growth. And in the shorter term, there are other things the Government can do to help people get into their first home. We do some of that already – through KiwiSaver & Welcome Home Loans. And what I’m pleased to announce today is that we will significantly beef up those 2 programmes, to give more New Zealanders a helping hand into their first home.

“In KiwiSaver, if you have been a member for at least 3 years, after that period you can already withdraw not only your money but also any employer contributions and any investment income earned, and all of this can be used as a deposit on your first home. That part of the scheme is not going to change.

“But many first-homebuyers in KiwiSaver can also get extra assistance towards their deposit. They can get $1000 for every year they have been a member, up to a maximum of $5000. They are eligible for this extra help if their income is under a certain level, and they are buying a house under a certain price. So the first thing I want to announce is that we are going relax these restrictions.

“At the moment, for example, a couple who want to get a first-homebuyers’ subsidy from KiwiSaver have to be earning under $100,000 together. We are going to bump that up to a new combined income of $120,000. At the moment, you can only get the subsidy in Auckland if you are buying a house under $400,000. We are going to bump that up to $485,000. A quick look at Trade Me yesterday showed about 2000 house listings in Auckland under $500,000.

“We are also raising the house price cap in other parts of the country with housing affordability problems. That includes Wellington, Christchurch, Queenstown, Hamilton, Tauranga & here in Nelson. We’re not helping wealthy people buy an expensive house – they can do that on their own. But we do want to help more people with low & moderate incomes get a foot in the door of home ownership. So that’s the first thing.

“The second announcement is around the Government’s Welcome Home Loans scheme. We give about 850 of these/year to first-homebuyers. Under this scheme, the Government underwrites loans for eligible people who have sufficient incomes but may only have a relatively small deposit. Again, you have to meet certain income & house price criteria. But these haven’t changed since 2003 and they are even stricter than the criteria that apply under the KiwiSaver first-homebuyers’ subsidy.

“So we are going to relax those restrictions and make them the same as the new criteria in KiwiSaver. And what is more, we are going to triple the size of the scheme so that 2500 first-homebuyers/year will now be able to get a Welcome Home Loan.

“The third & final thing I want to announce is that, in the future, to get a first-homebuyers’ subsidy from KiwiSaver or to get a Welcome Home Loan, you will have to be able to put a 10% deposit together, including what you can access through KiwiSaver. At the moment, for example, you can get a Welcome Home Loan having saved a very small deposit, or no deposit, if the house is valued at $200,000 or less. International experience shows it’s risky to lend 100% of the value of a first home.

“So in expanding these schemes, we are assisting these people to put together a deposit, but we are also requiring them to have an initial stake in their asset as well. In total, the package of changes I have outlined complements the Government’s broader programme of work on housing affordability. It will come into effect from 1 October this year and cost $64 million over 4 years. The package gives more first-homebuyers access to financial support, whether it’s through a bigger deposit – thanks to KiwiSaver – through underwriting their mortgage – through a Welcome Home Loan – or through both of these together.

“It encourages people to save for a bit longer, get a better deposit together, and therefore be in a more solid financial position when they own a home and become responsible for servicing a mortgage. And the expansion of Welcome Home Loans reduces the risk to banks & the economy from lending to first-homebuyers.”

In company with the loan extensions & deposit requirement, Mr Key was at pains to say he wasn’t interfering with the bulk of the market: “We have been very careful, of course, to ensure that this package of policies doesn’t contribute in any excessive way to the demand for housing. That would put more upward pressure on house prices and that is not the intention of this policy. And we have been very careful not to cut across the Reserve Bank’s options for cooling down the heated housing market.

“The Reserve Bank governor has a tough decision to make. On the one hand, he can put a limit on the number of low-deposit home loans that banks can make. On the other hand, he can raise interest rates across the board, which would impact on every homeowner & business in the country and most likely push up the exchange rate and affect every exporter.

“That is his call to make, and he acts independently of the Government. But either way, first-homebuyers would be affected. Today’s package is a way of ensuring that, even if lending is restricted or interest rates rise, first-homebuyers are looked after. First-homebuyers will get a significant portion of the new loans that are written, because they will be in a stronger financial position. Over 1600 more first-homebuyers each year will be getting Welcome Home Loans and, because these are Government-guaranteed, they will be a priority for the banks to lend to. And we estimate we will be doubling the number of people who could potentially get a KiwiSaver first-homebuyers subsidy.

“Again it is about balance. We want to support the Reserve Bank’s objectives, which are crucially important. But at the same time we are going to ensure that first-homebuyers don’t unfairly carry the cost of policies intended to support the economy as a whole. I have said for some time first-homebuyers are a priority for the National-led Government and this is one way we are demonstrating that.”

Part 1 of the John Key housing story: Political triumph at heart of Key housing message

Links: KiwiSaver
Welcome Home Loans

Attribution: Key speech.

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Brash on bedrock values – we need to discuss the future shape of our society

Published 2 August 2006

National Party leader Don Brash has a penchant for raising issues New Zealanders don’t like to discuss in a rational way. In his Orewa Rotary speech in 2004, he broached the subject of racial separatism.

In an address to the annual conference of the NZ Association for Migration & Investment in Auckland last week, the issues were the kind of expectations immigrants should have and, on the other side of the coin, the kind of immigrants New Zealand should want.

Below is Dr Brash’s full address:

Anyone who finds time to follow international news these days will know that immigration is possibly the hottest topic of politics in the UK, France, Australia, the US & many other countries. The rights & wrongs of current & past policies are debated openly and fundamental questions routinely asked.

In Britain today, many question whether multiculturalism has failed as an ideal. Many now feel that we should be putting more emphasis on what we have in common – especially the shared values which act as a glue to bind our communities – rather than over-emphasising our cultural & ethnic differences.

While immigration is a favourite topic of conversation around many New Zealand dinner tables, it remains strangely under-discussed at the political level.

In part, this reticence reflects our recent history. Winston Peters’ handling of the topic in the 1990s left a very bad taste in the mouths of many New Zealanders.

And in New Zealand, by contrast with the experience in Europe, we haven’t yet had to deal with large unintegrated and at times hostile populations in our midst.

In fact, we have been fortunate that immigrants of all cultures have mixed fairly readily with locals. You only need to wander through university campuses in Auckland to see countless couples of different origin hand in hand. This is a good tradition we’ve had in New Zealand for at least 2 centuries, since the first meeting of Maori & European.

We are, after all, an immigrant people, and owe much of what we are to very recent immigrants, or the descendants of immigrants from a wide range of countries. At the last census, there were 700,000 people living in New Zealand who had been born overseas – that’s one in 6 of us.

Former chief justice Sir Thomas Eichelbaum was born in Germany. Andrew Mehrtens & Irene van Dyk were born in South Africa. David Tua & a significant fraction of the All Blacks were born in the Pacific. In the New Zealand Parliament, Michael Cullen & Peter Brown were born in the UK and Pansy Wong was born in China. We rightly regard all of these people as New Zealanders. Even most people who regard themselves as Maori New Zealanders have several recent immigrants among their forebears.

In my own case, I regard myself as a fifth-generation New Zealander, and one of my ancestors did arrive in Dunedin 1848, but one of my grandparents was born in Australia and another in the UK.

The muted political discussion around immigration also reflects the fact that both major political parties, and most of the population, understand the benefits of immigration and welcome migrants to our country.

Most understand that, at a minimum, we need migrants to offset the large & growing outflow of Kiwis. When you lose to foreign shores the equivalent of nearly twice the population of Wanganui each year, you’re obliged to actively seek out replacements.

So long as we have a continued large outflow of Kiwis, our immigrant flows are going to need to be high, and over time that has the potential to substantially change the cultural make-up of our society.

Accordingly, immigration policy – its objectives & its risks – must be an important topic of discussion.Today I want to give you an insight into our current thinking on the topic.

The case for on-going immigration is straightforward and largely uncontroversial. Essentially, it boils down to 3 points.

I’ve already stated the first: we need immigrants to replace the New Zealanders we lose.A related point is that, in common with most other developed countries, our birth rate has fallen below replacement rates. I’ve done my bit with 3 children, but on average New Zealanders are not replacing themselves. Even with no loss of Kiwis overseas, we’d need a steady flow of immigrants to maintain a stable population.

But National believes we should do more than just aim to hold our population stable. So my second reason for supporting on-going immigration is that, for primarily economic reasons, a moderate growth in our population is desirable: there seems little doubt that business investment is less risky – and therefore more likely to occur – with a gradually increasing total population than with a static or declining population.

There is a third argument for an immigration programme. Immigrants benefit New Zealand in a great many ways which are much broader than the narrowly economic ones – think, for example, of the contribution which those from the Balkans have made to our wine industry, or the contribution which those from Asia have made to the quality of our restaurants and to our rapidly growing trade with Asia.Of course those examples are fairly obvious – in fact, they are stereotypes. It’s all too easy to forget the breadth of contribution immigrants have made by virtue of entrepreneurial, intellectual, artistic or sporting flair.

Consider, for example, the remarkable story of a Chinese immigrant who arrived in New Zealand in 1866. This man, Chew Chong, became one of Taranaki’s most visionary characters who, almost 80 years after his death at the age of 92 in 1920, was inducted into the NBR Business Hall of Fame. He was a remarkable entrepreneur and a key figure in helping to develop the region’s dairy industry, especially in the making & refrigeration of butter. He was even responsible for producing one of New Zealand’s most recognisable food items – the iconic pound of butter.

I’m sure we could go on endlessly with such examples. I certainly don’t pretend to be an expert, but my kids tell me that the New Zealand music scene would be much less dynamic without the likes of Nesian Mystic & Che Fu, and of course Asian names are heavily represented in the finals of every classical music competition.

So for these good reasons, the National Party supports an ongoing immigration programme.But we’re not uncritical cheerleaders for ongoing immigration that’s poorly thought out or poorly implemented, and we understand the limits to what immigration can do.

New Zealanders have been fed some myths about immigration. It’s often argued, for example, that we “need” a large flow of immigrants because we currently have such a shortage of people to staff our factories, our hotels & our orchards.

Bringing in a skilled person from overseas can often fill a gap for an individual company, and indeed it may be the only effective way of filling that gap in the short term.

But it’s an illusion that bringing in thousands of people will ease a general shortage of people. Why? Because when immigrants first arrive in the country, they need a roof over their heads, they need to buy furniture and sometimes new clothes; their children will enrol in school.

In other words, in the short term new immigrants add more to the demand side of the economic equation than they do to the supply side, and so can accentuate the economy-wide pressures that you might otherwise expect increased immigration to relieve.

Certainly, when I was Governor of the Reserve Bank we regarded a very strong surge in net immigration as a reason to be on the lookout for inflationary pressure, not a reason to expect reduced pressures in the labour market.

New Zealanders have also been told repeatedly that increased cultural diversity is automatically a good thing. And yes, we are enriched by having among us people who enable us to experience different cultures directly, including their music & dance, their cuisine, their festivals & somewhat different approach to life. These all contribute powerfully to the benefits of our multicultural society.

Bedrock values

But while we celebrate that diversity, it’s equally important that as New Zealanders we share bedrock values that are crucial to New Zealand society.

And the bedrock values I see as fundamental to New Zealanders are an acceptance of democracy & the rule of law, religious & personal freedom and legal equality of the sexes. If you don’t accept these fundamentals, then New Zealand isn’t the place for you.

Put another way, we should not welcome those who want to live in New Zealand but reject core aspects of New Zealand culture.

It is, of course, very difficult to assess the values that a would-be immigrant possesses. It’s impractical, beyond some basics, to screen people for what they believe as they enter the country.

We can ask & expect people to fit in, but the reality is that many migrants to New Zealand in recent times, and indeed to the West more generally, have come from cultures that don’t share the bedrock values that New Zealanders take for granted.

In this situation, the sensible response is one of caution. We cannot be indifferent to whether migrants are likely to share our bedrock values. We can’t just hope it’ll work out fine.

In most respects, it’s a question of quantity and of balance.

Diversity is a bit like red wine: a certain amount is good for one’s health; too much too quickly alters your personality and can be thoroughly bad.

Most New Zealanders like New Zealand the way it is. They value the social cohesion we have built up over many decades. I certainly don’t detect a desire to change our cultural make-up fundamentally over the next 20 years, especially in the absence of a considered debate, let alone a conscious policy decision.

The practical realities reinforce this instinctive caution. It’s a commonsense observation that Australian migrants fit into New Zealand society more readily than those from elsewhere; Aussie children are swallowed seamlessly by the New Zealand school system, their parents’ qualifications are accepted without question in the workforce – in short, they understand our culture and share our values. They even speak a similar language!

So, how are we going?

The most striking aspect of immigration in New Zealand is its scale. This country welcomed nearly 54,000 immigrants last year (excluding Australians). That number represented around 13 migrants for every thousand current residents.

Compare that with Australia: 133,000 migrants (excluding New Zealanders), which is around 7 for every thousand residents; or the UK with 140,000 migrants from non-EU countries, less than 3 migrants for every thousand residents.

If New Zealand were a company, observers would say our churn rate is significantly higher than that of our competitors.

As I’ve already indicated, the main driver of New Zealand’s disproportionately high immigration rate is our disproportionately high emigration rate.

We should be worried about the extent to which the outflow of Kiwis is accelerating. In the year to January 2004, for example, a net 10,000 New Zealanders left for Australia. In the year to January 2005, there was a net loss of 16,000. In the year to January 2006, the loss was 21,000. And this at a time when, to hear Helen Clark tell it, the New Zealand economy is doing well.

Already, a quarter of tertiary-educated New Zealanders live overseas.

There are, of course, many factors that encourage New Zealanders to go overseas permanently. Some are angered by the trend to racial separatism implicit in much of the nonsense talked about the Treaty of Waitangi. Some are fed-up with the over-weaning political correctness of the nanny-state which Labour has been hell-bent on building. Some simply want the challenge of proving themselves on a much bigger stage. But many leave to get a better standard of living for themselves & their families.

That’s why the broader question of New Zealand’s attractiveness as a place in which to live and raise a family is so crucial to the immigration debate.

As I’ve said many times, when the Labour Government came to power in 1999, the average Australian took home 20% more than the average Kiwi – a gap which was little changed since 1984.

But by last year, after 6 years of Labour, the average after-tax income in Australia was not 20% but 33% above that in New Zealand. And since the tax reductions that took effect in Australia at the beginning of this month, it’s estimated that the gap is now 37%. Alas, there is every prospect of the gap getting still wider over the next few years, as the New Zealand economy slows down and the Australian economy continues to grow more strongly.

So the chances are high that more & more Kiwis will head overseas in the next few years, and as a result we’ll need to keep immigration levels high if we are to avoid going into reverse gear.

A new National Government’s top priority will be to improve the attractiveness of New Zealand to hard-working New Zealanders & potential migrants by such policies as letting people keep more of their own money and asserting equality before the law, regardless of race.

If we can retain more New Zealanders, we will take the intense pressure off immigration to plug the gaps.

But even with substantial improvement on that score, New Zealand will still require a substantial number of immigrants. And a better performing economy will be a magnet for quality migrants.

What kind of immigrants?

The critical question which has been little debated or discussed is – what kind of people should we be encouraging to come to New Zealand?

Setting aside the issue of refugees, family reunification & special Pacific arrangements, most people would want the Government to attract only migrants who have something to contribute: be it skills, capital or, in certain circumstances, a willingness to do manual labour.

We’d expect them to have either a good command of English or a determination to learn the language within a reasonable period, and to be young enough to contribute some taxes before going on the pension – or wealthy enough so they can cover their own healthcare needs & income in retirement.

We need to be sensible about the English language requirement. As your chairman noted earlier this week, we have experienced a disastrous collapse in the investor migrant category in the past few years, from over 1000 a year in 2001 & 2002 to only 39 in the first 6 months of this year. In this category, if somebody can’t speak English they can hire themselves a translator if they wish – that would be one job created for starters!

Our policy at the last election for business immigrants was to focus on their capacity for job creation, not expensive business plans or enforced investment in Government schemes for a lengthy period.

We also need a more disciplined approach to the administration of immigration policy. Not discipline of the petty, bureaucratic, kind that makes life miserable for applicants who have an unblemished record of hard work, the sort of people that any interview would reveal as desirable citizens. But discipline around limiting access to welfare & healthcare for an extended period, and swift repatriation in case of serious criminal conviction.

Ideally, we would want our country to be something like a top university, where lots of people apply but only good quality candidates get in. But for now, we have to realise there are other destinations that we are competing with for quality immigrants, especially in the business & investor category.

We must ensure that our immigration policies contribute to our competitiveness, to our country’s attractiveness. And in some respects, particularly surrounding the business & investor category, current policies clearly do not contribute positively to this goal. We still have some important advantages when it comes to attracting good quality migrants. We are a very sparsely populated country with incredible natural beauty; we are a stable democracy; and, while terrorism is an ever-present risk for all countries, we are some distance from the trouble spots of the world.

But these attributes are seldom enough on their own to make up for the gap between take-home pay in New Zealand & take-home pay in Australia & other competing destinations. Currently, around 60% of the migrants to New Zealand come in as skilled migrants. Many of them are highly qualified and would be welcomed in any country.

Incidentally, it’s worth remembering that the overwhelming majority of employed immigrants are regarded favourably by their employers – according to a Labour Department survey released in February, 81% of the 804 employers surveyed rated the job performance of their migrant employees as good or very good, with only 4% rating them poor or very poor; and 56% of employers felt they had benefited more from hiring a migrant than they would have done if they had hired a New Zealand resident.

But we would be kidding ourselves to think that New Zealand is maintaining consistently high standards for the skilled migrant category.

Indeed, only a few weeks ago the Government announced that it was lowering the standard for skilled migrants to get in the door.

The danger is that the Labour Government is more preoccupied with trying to stimulate a flat economy by bringing in a few more migrants for a short-term boost in activity than it is in ensuring that our migration policy is in the nation’s long-term best interests.

Meanwhile Labour’s tax policies, and its total failure to do anything to increase our standard of living relative to that in Australia, are steadily making New Zealand a less & less attractive destination for skilled migrants.

The true measure of good government in New Zealand is that the standards for entry to this country should be rising, in tandem with increased demand.

Determining who gets the right to be a New Zealand resident is arguably one of the most important responsibilities of the Government, yet we continue to leave this as the province of a third-rate department populated by too many incompetent bureaucrats.

Far too many people who should be enthusiastically welcomed to New Zealand have huge difficulty getting in, while some who seem to have little to offer are allowed in and allowed to stay.

You may recall the case of the wife of Dr Dean Kenny, former All Black, reported in the media last year.

He complained that the Immigration Service had initially turned down the application of his Welsh-born wife even though they had been married for 9 years and had 2 daughters, both of whom had New Zealand passports. The Service had asked for photos of him & his wife together, copies of letters, proof of shared income, shared bank accounts & evidence of public or family recognition of the relationship. The Asian spouses of New Zealand citizens routinely encounter the same problem.

Or the case of Mrs M Taylor, described in a letter she wrote to the Listener. New Zealand-born herself, she decided after 20 years overseas to return to New Zealand. She described gaining residency for her non-New Zealand husband as “an appalling trial, financially & emotionally. Married for 12 years and now with 3 children, we sent our wedding certificates, children’s birth certificates & family photographs to Immigration, only for them to be returned and we were told that we hadn’t fulfilled the requirements of our application and further proof of the validity of our marriage was required, not less proof that we were sexually exclusive during our marriage…. It’s understandable that there needs to be a rigorous system”, she wrote, “but why are born-&-bred New Zealand passport holders put through this? Do you want us back in the country or not? You had my heart, but somewhere along the way, while I was dealing with yet another irritating & pointlessly discriminating piece of legislation & form-filling, you lost it.”

Or the case of the Dutch citizen, expert in growing hydroponic tomatoes under glass – desperately needed to ensure the commercial viability of an operation employing hundreds of people, but kept waiting for months & months with his Dutch wife & young New Zealand-born children while the Immigration Service pondered whether to grant him permanent residence.

Or the case of the 12 East Europeans arrested for not having work permits while employed at the Takaro Lodge in Te Anau. Clearly, they were in breach of the law and should have had work permits. But why were they denied work permits? It’s almost impossible to get staff for hospitality industry jobs in the Queenstown/Te Anau area, and all sorts of non-New Zealanders are getting work permits to fill the gap.

Takaro is isolated and its requirements specialised, and they just can’t get any suitable local staff.And there are other Government agencies which make life a misery for would-be immigrants. The NZ Qualifications Authority recently refused to recognise a 36-year-old Englishman as a qualified teacher, despite his having a bachelor of science degree, a master of science degree, a post-graduate teaching certificate in further education & four years’ teaching experience in the UK, and despite Morrinsville College – where the would-be immigrant teaches physics – being desperate to retain him.So we make it inordinately difficult for some immigrants who appear to have the very characteristics that we want in immigrants, and yet allow some ratbags to enter & stay. There have been some appalling cases of crimes committed by would-be immigrants and too many of them seem to have deportation orders against them overturned by the Deportation Review Tribunal. Non-New Zealanders who commit serious crimes should be automatically & immediately deported at the conclusion of their prison sentences.

It’s important to recognise that there’s an implied contract between New Zealand & would-be citizens: New Zealand offers you citizenship with all the rights & privileges of being in every respect a Kiwi, but in return you owe New Zealand your loyalty & commitment. You can’t be a New Zealander and seek to undermine New Zealand. You can’t be a New Zealander and claim that some other law takes precedence over the law of the New Zealand Parliament. You can’t be a New Zealander and write to foreign newspapers urging a boycott of New Zealand exports, as one would-be citizen did recently in reaction to the publication by 2 newspapers of some cartoons satirising Mohammed.

The National Party favours an immigration programme designed to benefit all of us – those born in New Zealand & those born abroad.

Our vision is of New Zealand as one nation, with many peoples to be sure, but with shared fundamental values.

Earlier stories:

26 January 2005: What Brash would do about dependency

18 November 2004: Brash talks policy

28 July 2004: Brash: Labour’s wasted opportunity

11 April 2004: Brash tax update, and some questions

25 March 2004: Nationhood – the Brash Orewa address


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Act predicts Maori balance of power

Published 21 March 2006

2 defeats for the Government last week (Wayne Mapp’s probationary employee bill & NZ First’s 200-seat Parliament bill), and Act is now predicting a Maori balance of power is possible after the next election.

The Letter, published by former Act leader Richard Prebble, worked out the power play this way:

Enough voters switch from the general roll to the Maori roll to increase the number of Maori seats to 9, even 10
If the bill to cut the size of Parliament passes, the number of MPs will fall from 120 (or thereabouts) to 100
No party has formed an MMP government without some Maori seats
9-10 seats looks like a permanent balance of power.

Along with that comes a change in what may be considered politically alright:

the dominant Maori view of foreshore rights, for example
perhaps indigenous rights on a wider scale
tax & benefit differentiation
iwi aren’t just consulted on consent applications & other property questions, their power gets extended to one of veto.

If you want to comment on this story, write to the BD Central Discussion forum or send an email to [email protected].


Attribution: The Letter, my extension to property issues, story written by Bob Dey for this website.

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ANZ economist looks at “misguided thinking” & missing policies

Published: 31 August 2005

ANZ Bank chief economist John McDermott did a roundup of election policies from 4 of the parties today, including comments on “misguided thinking” and some of the things he thinks are missing. I’ve skipped the “what we like” part.

Dr McDermott focused on Labour, National, NZ First & the Greens. In the detail, he’s outlined policies and put the pros & cons alongside them.

Some misguided thinking:

Using expenditure rather than tax policy for targeted assistance: If the Government’s primary aim is redistributive & providing social support, then such aims should be undertaken through the most efficient mechanism. Using tax as opposed to spending policy is preferable for 3 reasons. It delivers better incentives (a hand up rather than a hand-out), is more efficient (less bureaucracy) and can be better targeted. While Working for Families has welcome objectives, we question the funding mechanism and the package is situation- rather than needs-based. Individuals & couples could be struggling more than families.

Some targeted initiatives deliver poor economic incentives or are ill-targeted: Just because there is a role for government intervention does not mean it should become the automatic policy setting. Strong hurdles should be established. When we cast our eyes over some of the proposed initiatives (for example, Labour’s student loans package and parts of NZ First’s immigration policy), we struggle to see how they will enhance economic prospects or aid in Government’s redistributive role.

Labour’s student loan package: Free money on offer. You have to pay it back but there is an arbitrage opportunity in the meantime to invest. Borrow at 0% and invest at 6%-plus. Do not use the money you earn over the summer holidays to pay your fees – invest it instead. There is a similar incentive for parents who would previously have assisted with fee payments & living costs. Get your son/daughter to borrow the maximum amount & invest it in the meantime. Pay down your child’s loan when required, by which time your returns will have partially covered the principal. If student debt is an issue, then government should at least look at the root cause of the problem – the level of student fees, student assistance (the point at which allowances cut out through means-testing) &/or what contribution to education should be state- versus individually funded. If you want to spend $300 million assisting tertiary students, why not offer some sort of scholarly incentive for performance?

Superannuation policy: Any promised increases in superannuation entitlements may be a vote winner but any pledges are hollow when you look at the numbers. The old-age dependency ratio is projected to climb by 20 percentage points over the next 45 years, dramatically reducing the number of workers supporting each retiree. Health & superannuation spending are expected to rise to 20% of gdp! Health & superannuation spending currently account for 32c of each tax dollar taken. By 2030, this will rise to more than 50c. What will happen to other government spending such as education, roading & core government services if taxes do not rise to compensate? The Cullen Fund is part of New Zealand’s superannuation solution, although not for economic reasons. The primary justification for the fund is that it encourages a degree of fiscal restraint by allowing the money to be implicitly shifted out of the politician’s hands and reining in frivolous spending. But the fund does not change the fundamental financing problem New Zealand faces in the future. The existing superannuation framework is unaffordable and promises of greater assistance (NZ First) or maintaining the status quo (Labour & National) are hollow. With demographics currently very favourable, the government should be getting smaller as a share of the economy rather than larger, particularly as we know the government’s share will rise significantly when the demographics turn against us.

Scare-mongering over asset sales: There are strategic reasons for holding stakes in natural monopolies such as Transpower & some of the energy generation assets. But the debate should be moved forward from previous disagreement over asset-sales handling over who sold what, purchased back & at what price to the future. There is a simple choice to be made going forward. Is the government & economy better off investing in coal production, investing in rural land, owning 75% of the country’s electricity generation assets & a television network, or in areas where there are clear public-good benefits such as such as schooling, health & roading?

The upshot:

National’s policy platform looks to offer marginally more economic upside in terms of overall living standards, while Labour offers more social support. Beyond that, when we step back there are few fundamental differences between the red & blue hue. NZ First’s platform is long on promises but short on costings. The Green environmental platform has sound underpinnings although the economic cost of meeting such obligations is likely to be unpalatable. Most encouraging is the commitment by all to a strong & vibrant economy, although none are prepared to tackle the really hard issues that could make a difference going forward. But since New Zealand already has a winning framework (an independent central bank, free floating currency, responsible fiscal management & a relatively flexible wage-bargaining framework) perhaps the overarching aim of the new government should be to first do no wrong. Unfortunately, that is not what governments think they are elected for.

What is missing:

A lot: As is typical with elections, there is a general lack of willingness to tackle the hard issues that are required to really make a difference in delivering higher living standards.

Welfare dependency is high: Social welfare accounts for close to one-third of government spending. One in 6 New Zealanders relies on some form of benefit as their main source of income. It is rather disconcerting to see those registered as unemployed tracking down, but invalid & sickness beneficiary numbers heading up. Active (as opposed to passive) labour market policies implemented by Labour are assisting getting the unemployed back into the workforce. National are targeting medical evaluations, community service/training for long-term unemployed and tougher criteria on DPB recipients, which are further steps in the right direction towards reducing welfare dependency.

Throwing money at Vote Health has not changed outcomes or the service provided: Health-related spending has risen by close to 50% over the past 5 years yet there has been no material change in waiting lists or outputs relative to demand. More money is promised but will it change outcomes? Health needs more effective price signals. Service providers are the gatekeepers in public health – and zero price makes for open-ended demand. Waiting lists are the unpopular rationing device which will not disappear no matter how much funding is thrown at the sector. Efficiency in the sector is vital.

We are a nation of spenders rather than savers: The current account deficit is more than 7% of gdp, we invest too much in housing and the household savings rate is actually a dissavings rate, as households spend more than they earn and go deeper in debt. Kiwisaver is a first home buyers’ grant in disguise. The problem is that New Zealand is being sent mixed messages when it comes to saving. Why save if the Government is going to pick up the bill for health & superannuation, and any incremental dollar earned gets taxed at a higher rate? Why invest in productive assets when the Government is giving free money to buy a house? Alas, tackling such issues is simply not the way you win elections.

The rhetoric around getting people back into the work force needs to be matched by the incentives: While the Working for Families package improves work incentives by widening the wage:benefit gap (to a degree), it also contains a number of disincentives for some outside the workforce from re-entering, and disincentives to increase income from paid work (due to high effective marginal tax rates). National’s tax package – which contains lower effective rate thresholds & a higher after-tax income to all – provides greater incentives to work & get ahead.

A sound strategy for the energy sector: The current setup does not work and there are no viable options being presented by challengers. National’s position on the issue is strangely silent.

If you want to comment on this story, write to the BD Central Discussion forum or send an email to [email protected].

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For policies I get slogans. Politicians, please try harder

Published: 24 July 2005

I keep hoping, somewhat in despair, that sometime in this buildup to an election the occasional politician will present some rational policies worth adopting.


The weekend’s snail mail & email delivered a couple of policy failures.


One was from Rodney MP Lockwood Smith, with a list of 6 National policies and tickboxes for agree/neutral/disagree. The list seeks redneck responses.


By email, Act deputy leader Muriel Newman talked of good governance dramatically improving the New Zealand economy’s performance. Among her remedies, she advocated introducing competition into accident compensation, replacing the occupational health & safety regime and scrapping the Resource Management Act.


I can’t dispute that a strong economy with advanced infrastructure and good governance make sense. But the idea that New Zealand’s private sector will, unchecked, act for the good of the nation is fallacious.


Most of the compliance costs forced on business have arisen because of a widespread failure to act within sensible bounds.


The Labour government elected in 1984 let us loose financially like we’d never been before. The nation responded with a severe bout of business excess & greed, followed by disastrous collapses. So Dr Newman’s statement – “The reality is that it is the private sector that creates the wealth in an economy” – has to be tempered. The private sector is equally capable of creating extraordinary losses, and I’ve worked in plenty of companies whose bureaucracies are as nonsensical as those in the public sector.


Dr Newman went on: “That is why the small business sector is so vital, and why reducing the crippling burden of regulation and bureaucracy – much of it introduced by Labour – that inhibits productivity and profitability is so crucial.”


Reinventing the wheel


Much of her message was about welfare reform. But, she added, “what is equally important is a reform programme to help relieve the compliance cost burden on small business: reducing company tax to 25c/$ to help create a competitive advantage, repealing the Employment Relations Act to enable free workplace contracts once again, and introducing a personal grievance free trial period, will re-create flexibility in the workforce.


Further, introducing competition into ACC, replacing OSH and scrapping the RMA will all help to alleviate some of the punitive burdens on small business to assist in increasing productivity & profitability.


Competition in accident compensation could amount to a return to the litigious payments era, ended because it was fine for lawyers but not as effective as it should have been in getting adequate payments to accident victims. Much new-right thinking involves reinventing the wheel, when often a remodelling job will make the wheel spin better. I’d like to see some suggestions on remodelling.


OSH is seen as a compliance cost, and a PC response, rather than a sensible way to recovery. Again, the Act response is to reinvent, presumably on a private-sector-knows-best basis, rather than remodel.


Labour has spent a long time thankfully not quite getting to its more restrictive remodelling of the RMA, but throwing the whole refereeing process out is not a practical proposition.


National’s Nick Smith told the Planning Institute conference in April: “A nation of 4 million people doesn’t need a pile of district plans 10 feet deep.” The common complaint was not much the final decision but the process of getting there, he said. Nick Smith said 4 key problems needed to be addressed: Costs, complexity, delays & uncertainty.


Among his suggestions:


Directly refer major applications to the Environment Court
A late consent should be a free consent
Applicants should have the right to refuse further information requests (to me, this amounts to going straight to a notified hearing, or perhaps to a mediated hearing)
Limit appeals to matters of law
Limit vexatious objections (this shouldn’t even be an issue – it’s not a matter of repairing the act so much as telling people they don’t have a right of infinite objection, something I’ve watched a long line of polite environment judges fail to do)
Scrap legal aid for environmental objectors
Put money into mediation services
Widen powers to reject vexatious & frivolous objections by widening powers of councils & the Environment Court and their powers to award costs.

Nick Smith will not be pleased by a comment this week from Auckland City’s deputy mayor, Bruce Hucker, that it’s the community, not the resource consent applicant, who’s the real customer. Extending the Hucker argument, the community has a right to prevent what it doesn’t like (he didn’t enter into questions of costs or funding or time), in direct conflict with the longstanding rule of planning that an applicant can do whatever he, she or it likes within the bounds of the rules, even if nobody else likes it.


Slogans in abundance


There is plenty to debate in the suggestions of Nick Smith & Cllr Hucker. Dr Newman proposals might have merit if accompanied by supporting argument, but in the state she presented them they’re more like silly slogans.


And talking of silly slogans, Rodney MP Lockwood Smith’s policy list contains plenty of them. First up, “Stop politically correct, wasteful spending” & “Cut compliance costs & red tape”.


Of course nobody wants “wasteful spending” – by whom? Of course nobody wants to pay more than needed to comply with rules. Preferably there are few rules, they’re simple and complying is both easy & cheap. Is that a policy or a slogan? It’s a slogan. The policy will tell you how it might be achieved, but the first of those 2 policy quotes carries a warning: The solution won’t be politically correct.


Much of the present government’s political correctness has been directed towards making our society more compassionate and some of it, in fairly draconian fashion, is aimed at improving the environment. Some simply follows trends in the western world, and some of these may be ephemeral and of little consequence.


But there are other features of political correctness which become embedded, become the natural order. Industries complain about the costs of cleaning their processes – they were happy to flush dangerous wastes out to sea. What brought about the change, and is there anybody who wants to see the oceans destroyed for the sake of some cost-saving by a business whose owner is prepared to pass the cost of damage on to others?


Do we accept poor-quality fuel & vehicles because they’re cheaper, though they also cause greater long-term environmental damage? Or do we look for more environmentally sound ways of travelling – better fuel which causes less damage, safer cars which reduce the expense of injuries? In time, these changes become politically acceptable.


It’s perhaps an unfortunate feature of the MMP political system that, with more segments of political policy being established as this or that party’s niche cause, other parties feel inclined to disagree with that party’s cause in its entirety. Under a 2-party system you can broadly align yourself while disagreeing with some facets of party thinking.


So, for example, National will incline towards rejecting everything the Greens espouse, even though – if they thought about it – there will be some Green policies which could be acceptable, or be refashioned into an acceptable form.


But what I have from National, in the form of Lockwood Smith’s policies questionnaire, is a bundle of slogans, many of them double-barrelled, so in agreeing with one half of the sentence you agree with the other.


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