Address to 2012 Local Government New Zealand Conference

It’s a great pleasure to be back with you to open the Local Government New Zealand conference, and to be here in beautiful Queenstown.

I’d like to acknowledge your President, Lawrence Yule, and your board members for their hard work. I enjoy a great working relationship with Lawrence and meet regularly with him and LGNZ chief executive Malcolm Alexander.

I’d also like to extend my personal thanks to Local Government Minister David Carter, who took up the portfolio earlier this year, in addition to his role as Primary Industries Minister.

David has worked hard in a short amount of time to gain a comprehensive understanding of the issues facing this sector and to build good relationships with your sector leaders.

The relationships we have with you in local government are very important to us, and David is firmly focused on taking them forward.

In May, I hosted the annual central-local government forum at Premier House in Wellington, my fourth such forum, and it was an interactive and productive meeting with plenty of free and frank discussion.

Many senior Cabinet Ministers, including Economic Development Minister Steven Joyce and Social Development Minister Paula Bennett, as well as Local Government Minister David Carter and Environment Minister Amy Adams, attended this forum, which demonstrates the esteem we hold for your sector and how much we value our relationship.

I also often meet with mayors when I am travelling around the country for various events, and it’s great to see so many familiar faces here today.

Today I want to talk to you about the importance of the relationship between central and local government. I’d also like to talk about the Better Local Government reforms the National-led Government announced earlier this year, and what we are aiming to achieve from these reforms.

Lastly, I want to briefly cover the progress we are making in our efforts to rebuild Canterbury, following the series of destructive earthquakes.

But before I do those things, I want to put this speech into the context of the Government’s overall priorities.

Some of you would have heard me talk about the National-led Government’s four key priorities for this term. They are driving our work programme and they are crucial to the future prosperity of this country.

To recap briefly, our first priority is to responsibly manage the Government’s finances.

We’re committed to returning the Government’s books to surplus in 2014/15 and that target is on track, despite recent events in Europe and the prospect of subdued world growth, or even recession.

Our second priority this term is to continue building a more competitive and productive economy.

Our plan to grow the economy is on track. Growth in New Zealand over the next three years is forecast to be higher than the US, the UK, Canada, Japan, and the Euro area. It’s also forecast to be similar to growth in Australia.

Our third key priority is to deliver better public services to New Zealanders within tight financial constraints. Recently I announced a set of challenging results and targets for the public sector to achieve over the next five years, which will help deliver on this.

Some of the targets are very aspirational – in fact, some of them will be extremely difficult to achieve. For example, we have set a target to reduce violent crime by 20 per cent by 2017, which means 7500 fewer violent crimes each year.

But we make no apologies for setting challenging targets – after all, the public deserves to get good results from the services they as taxpayers are funding.

Our fourth and final priority is to rebuild greater Christchurch, our second-largest city. I’ll talk a little bit more about the progress we are making there later.

As I said earlier, the relationship between central and local government is incredibly important. There are many areas where we work together productively. You are also responsible for administering many of the laws we write, such as the Resource Management Act.

We recognise your job is not an easy one and you face high expectations from your communities and from individuals. We also realise it’s simply not possible for you to meet everyone’s expectations – just as central government is unable to do the same.

The local government reforms we announced in March build on the second and third priorities I outlined earlier – that is, continuing to build a more productive and competitive economy and delivering better public services to New Zealanders.

New Zealand’s 78 councils make up 4 per cent of GDP, spending $7.5 billion of public money each year. And they manage $100 billion worth of assets.

They also perform a huge range of regulatory functions that affect households and businesses – from granting resource and building consents to issuing dog registrations.

Councils have a role to play in creating an environment that is conducive to sustained economic growth – just as central government does.

And just as central government does, local government also needs to work on delivering better services to New Zealanders within tight financial constraints.

Ratepayers and taxpayers alike require assurance that money is spent wisely, and on the services that matter to them, whether it is by local or central government.

The local government reforms we are progressing are about getting the balance right. There are many elements in the reforms where we are in agreement, and some which are perhaps more contentious.

The intention of these reforms is to provide clarity around the role of councils, stronger governance, improved efficiency, and more prudent financial management.

The reforms are being delivered in two phases.

The first phase involves refocusing the purpose of local government, introducing financial prudence requirements, strengthening council governance provisions and streamlining council reorganisation procedures.

Legislation was introduced into the House for these changes in late May and is currently before a Select Committee, where there are opportunities for local government and ratepayers alike to have their views heard.

We will listen to those submissions, and our aim is to work on delivering a sensible solution at the other end.

Our intention is to have the Bill passed before the end of the year.

The purpose of local government, as stated in the Local Government Act of 2002, created impractical expectations about what councils could achieve and confusion over proper roles with respect to central government and the private sector.

A balance is needed that provides greater clarity of councils’ role, but which recognises the diverse needs of local communities throughout New Zealand.

These reforms are designed to help keep rates affordable and debt at prudent levels by focusing councils on their core role, setting clear financial prudence requirements, and giving councils more tools to better manage costs.

Debt is a critical issue for us all.

When National came into office in 2008, the advice we had from the Treasury was that if we continued with the settings we inherited, net government debt was likely to reach 60 per cent of GDP by 2026.

Now, after the changes we have made in Government, net debt is projected to be zero in 2026, despite the cost of the Canterbury earthquakes.

The fiscal challenge of the combination of a domestic recession, the impact of the Global Financial Crisis, and the cost of the Canterbury earthquakes, has been a real test for the country.

From the beginning of the recession, in early 2008, the New Zealand economy shrank 3.3 per cent in 18 months, and tax revenue fell 10 per cent.

As a Government, we absorbed much of the cost of the recession and the earthquakes on our balance sheet, thereby cushioning New Zealanders from the worst impacts.

But that money has to be paid back, so we have put a huge amount of effort into making savings and, in particular, into changing some of the long-term term drivers of government spending, so we can get back to surplus over the next few years and start getting our debt down again.

Central government has done its bit by tightening its belt.

Businesses, households, individuals and farms have also reined in debt, increased savings and made changes in response to the Global Financial Crisis.

Like everyone else, local government needs to do the same, and continue to do so as we move forward. And I am aware that, in some cases, that process has been started.

Some councils are already thinking outside the box and proactively working together to share resources, thereby cutting costs.

As I said earlier local government makes up an important part of the economy – around 4 per cent of GDP – so it has a big part to play.

Times are tight and ratepayers just can’t endure unaffordable rates rises. We are not telling you how to do your jobs, but we would urge you to think carefully about the capacity of your communities during these difficult financial times.

I know it’s not easy, and it’s tempting to think your council is an exception or faces special circumstances, but we all have to face up to making difficult choices.

The National-led Government has just delivered its second zero Budget in a row, which involved making a number of difficult choices, so it can be done.

Whether we like to accept it or not, the world is a different place.

We are in the middle of an economic crisis in Europe, which is one of the world’s most important economic blocs and a key market for New Zealand’s goods and services, despite the growth of Asia.

An illustration of the scale of the crisis is looking at unemployment. In Spain, the unemployment rate is currently around 25 per cent and in Greece it’s around 22 per cent.

That compares with an unemployment rate in New Zealand of 6.7 per cent.

The outlook for Europe remains uncertain. A European slow-down will impact heavily on the world’s other major economies, which in turn will impact on New Zealand’s economic success.

From New Zealand’s point of view, the crisis is not some isolated event on the other side of the world. We make up less than a quarter of one per cent of the global economy so we can’t help but be affected by events in the rest of the world.

That means we need to focus even more on continuing to ensure we have the right balance in our economic plan. This means controlling debt and managing spending on the one hand, and setting the conditions for competitive and sustainable growth on the other.

The first phase of our reforms will also deliver the capacity for councils to amalgamate, if they wish to.

I have made it quite clear the Government will not force any amalgamations but we want to enable communities to be able to genuinely debate whether it is the right move for their community or not.

The amalgamation and new structure in Auckland has worked well. It has reduced bureaucracy, cut costs and the creation of a single voice has given the Auckland Council the capacity to arguably do more.

Throughout this process, we need to continue to work together to get the best results for New Zealanders – because taxpayers and ratepayers deserve the best from their public services.

We want to help you be able to play your part in creating an environment conducive to sustained economic growth, in addition to your important role of ensuring safe and prosperous communities.

Our relationship should be one of working in partnership. We may not always agree, but being able to discuss our differences in a constructive way is the sign of a healthy relationship.

We need to continue to work together to achieve our common goals because in the end, we are all trying our best to build a stronger New Zealand.

Local Government New Zealand has already made a valuable contribution to this reform process and I thank you for that.

As I said, these reforms are about central and local government working together and much of the expertise in this room will feed into the process.

The second phase of our reforms involves a framework around central and local government regulatory roles, a review of development contributions and an investigation into efficient infrastructure provision.

It will also consider the report by the local government efficiency taskforce, which was announced in June and is chaired by Auckland environmental and public law specialist, Michael Holm.

This work will be fed into a second reform bill proposed for 2013.

Local Government Minister David Carter will talk to you more about the reforms during his address.

That brings me to the final topic I want to touch on today, which is the progress we are making in Canterbury.

Since the last Local Government conference in Wellington last year, good progress has been made on the rebuild and recovery.

By the end of last month, the Government had spent $2.45 billion of the $5.5 billion Canterbury Earthquake Recovery Fund on important rebuild and recovery initiatives in the wider region.

The infrastructure alliance is a great example of central and local government working in partnership with private businesses to rebuild the region’s horizontal infrastructure – that is, its roads and drinking, waste and storm water systems.

Several large corporate businesses have committed to investing in the future of Christchurch, including Foodstuffs, Progressive Enterprises, Kathmandu, Coca-Cola, and Harcourts. A new $20 million Latimer Hotel, and a $7 million 20-shop boutique mall are also in the process of being constructed in the city.

Our objective is to ensure Christchurch becomes an example for how recovery from a major natural disaster should work, and continues to be the economic powerhouse for the growing South Island economy.

We look forward to continuing to work closely with local government, not just in greater Christchurch, but across the country to strengthen New Zealand’s economic and social prospects.

Thank you.

Have a great conference.