Address to 2013 Local Government New Zealand Conference

Thank you for inviting me to the Local Government New Zealand conference once again. It’s great to be here.

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 often meet mayors and councillors when I am travelling around New Zealand, and it’s great to see so many familiar faces here today. I’d especially like to acknowledge Hamilton Mayor, Julie Hardaker.

I’d also like to acknowledge my colleague the Local Government Minister, Chris Tremain, for his work helping to take the relationships with local government forward.

There is something else I’d also like to acknowledge today, and that is the role of local government during emergencies.

I speak to you today following the recent series of significant earthquakes in the upper end of the South Island and lower North Island.

Such events can be terrifying and draining for the residents in the affected communities, as the Canterbury earthquakes showed. It is at times like this that residents look to local government not just for resources and assistance, but leadership and reassurance.

I’d like to congratulate Wellington Mayor, Celia Wade-Brown, and other local government representatives in the affected districts, for their responses to this latest series of earthquakes.

I’d also like to publicly pay tribute to Christchurch’s out-going mayor Bob Parker. Bob showed great leadership in Christchurch during some exceptionally difficult circumstances and his commitment to the city during its darkest hours will be his legacy.

Thank you, Bob, for everything you have done.

The example he set, and the response from local government in recent days with the latest earthquakes, again underlines the importance of the leadership role local government plays not just during earthquakes, but during every other type of emergency like floods or heavy snowfalls.

Our four priorities

When I spoke at your last conference in Queenstown, I outlined the four priorities that the National-led Government is focused on this term. A year on, I can report that these priorities are still driving our work programme and they are central to the future prosperity of this country.

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

Taking on more debt has been appropriate to support the economy and cushion New Zealanders from major shocks like the recession, the global financial crisis and the Canterbury earthquakes.

But, as households around the country know, carrying substantial debt is neither comfortable nor financially prudent.

So we have committed to returning the Government’s books to surplus in 2014/15 and we are on track to achieve this.

We are also on track to reduce net government debt to 20 per cent of GDP by 2020.

And we are achieving this while still spending $5.1 billion on new initiatives over the next four years – funded, in part, by reprioritising existing spending.

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

The global economic outlook remains uncertain.

Despite this, New Zealand is in good shape, especially when you compare us with other developed countries. The economy grew 2.4 per cent last year, making us one of the faster-growing countries in the OECD.

Forecasts are for growth to continue at between 2 and 3 per cent a year. As business confidence increases, more jobs are being created, and wages are going up, which is good news for New Zealand families and communities.

Our third priority is to deliver better public services to New Zealanders within tight financial constraints. We are doing that across the board.

In particular, we have a four- to five-year programme of delivering in 10 specific target areas. Recently, we reported our progress to New Zealand. I’m pleased to say that in all 10 of our target areas, we’ve made progress.

Our fourth and final priority is to rebuild greater Christchurch, our second-largest city. This is the largest economic undertaking in New Zealand’s history, but it is progressing quickly, and that is great to see.

Better Local Government reforms

Last year when I spoke to you, we had just begun work on passing the Bill that enabled phase one of our Better Local Government reforms.

These reforms are designed to give you the tools to keep rates affordable, set clear financial prudence requirements, and give councils more tools to better manage costs.

We are putting a focus on stronger governance, improved efficiency, and better fiscal management at the local government level.

We are aware that LGNZ has been focused on improving governance with your members, too. I thank you for your contribution towards this. Your announcement of a partnership between LGNZ and the Institute of Directors on professional development training for elected representatives is a welcome step forward.

Changing the way you operate, and bringing a sharp focus on better leadership is not unique to local government. Governments at all levels across the world are being forced to reconsider what ‘business as usual’ means in this new global economic environment.

Living within our means is the way of the future. Businesses, households and families are taking notice of this new reality.

The first phase of Better Local Government reforms is helping local government to play its part in the belt-tightening that has been a reality for government, businesses, households and individuals over the past few years.

At the end of last year, these reforms passed into law.

The second phase of reform is now underway. There is an even bigger focus on efficiency, with the work done by the Efficiency Taskforce and the Local Government Infrastructure Expert Advisory Group. The recommendations from these two bodies have formed the basis for more policy decisions.

Further to this, the local government reorganisation reforms have enhanced the ability for councils to amalgamate, and are provoking a lot of discussion and activity in a number of communities.

Changes to structure can lead to better governance. As we can see with the Auckland city amalgamation, processes are streamlined, and efficiencies across Auckland have been found.

As I have said before, the Government will not force amalgamations. What we wanted with this reform was to make it easier for communities to achieve structural change if they decide that was the right move for their community.

No-one knows better than you the importance of your sector, and how much of a difference local government can make to New Zealand’s economic success. That’s why it is important we get these reforms right.

Reforming the RMA

In February, the Government released a discussion document that contained a comprehensive package of resource management reforms.

The way the current resource management processes are operating is costing us all in time, money and lost opportunities. The systems have become cumbersome, uncertain and highly litigious.

Delays and uncertainties from the RMA means potential new jobs are not being created, houses are more expensive and communities have no idea what to expect in their neighbourhood.

Fundamentally, the second set of RMA reforms are about providing greater confidence for businesses to grow and create jobs. The RMA reforms will bring greater certainty for communities to plan for their area’s needs, and strong environmental outcomes as our communities grow and change.

Government heard hundreds of submissions and held more than 50 meetings throughout the country on these reforms. The Government expects to be in a position to progress the resource management reforms in the next month.

Housing

An issue I would like to address in particular with you today is housing.

Housing is a very important issue. We all know the rising cost of housing is a great concern in Auckland and, to a lesser degree, Christchurch. We also know it is an issue around the country.

The Government’s view is that we can improve the supply side of the housing market so that housing becomes more affordable.

That is why we are looking at establishing Housing Accords, in partnership with local government, to create special housing areas.

The first of these Accords is with Auckland, and what it does is give Auckland Council the tools it needs to get on and consent thousands more sections.

Housing Accords aim to streamline the planning and consenting process and get central and local government working more closely together on housing development.

We’ve set targets within the Auckland Accord to ensure the city’s housing supply and affordability issues are addressed. As a result of the Auckland Accord, we are targeting 39,000 new homes over the next three years, which is a significant increase in the number of homes currently being built in Auckland.

I want to turn now to recent debate on the Reserve Bank’s proposal for loan to value ratios (LVRs) for residential mortgages.

I have made my thoughts clear – first home buyers are a priority for the Government – that remains my view.

It is worth however, putting some context around the actions the Reserve Bank is considering.

Absent of any other alternative, then rapidly increasing house prices may see the Reserve Bank raising interest rates, which will affect everyone - all mortgage holders and businesses, whereever they are in the country, as well as the Government.

That is certainly not in the best interests of first home buyers.

And higher interest rates would put upwards pressure on the Kiwi dollar, which would hurt exporters.

Even with LVRs introduced, interest rates may ultimately rise anyway, but the intention with these loan to value ratios is to provide the Reserve Bank with other tools to dampen demand.

Housing bubbles overseas, like in the US where subprime mortgages were hugely popular, had in the end a very negative impact on the American economy.

It left US banks and many homeowners very exposed and it had a dramatic negative flow-on impact, as we all saw.

So it’s an issue that has to be taken seriously here in New Zealand.

If it is left unchecked some buyers could find themselves substantially overexposed in an overvalued market. And we all know what happens if those values start to fall.

So, this issue is of serious concern. I remain of the view that all tools have to be considered. Demand-side issues are largely the purview of the RBNZ, which is independent, and they will in the end have to make a decision.

The Government is keen to see all New Zealanders have the opportunity to buy a house.

Part of the mix is ensuring the economic fundamentals are right, people can get a job, and there is enough land supply. And affordable interest rates are part of the mix, too.

So this is a debate about getting the balance right between ensuring poeple have the opportunity to buy a home, and ensuring we don’t have problems with the banking system - with all the negative economic impacts that would entail.

The New Zealand cycle trail

Turning now to another great example of a partnership between central and local government is the New Zealand Cycle Trail, which is almost 90 per cent complete.

Eleven Great Rides are now open, with nine more planned before the end of the year.

Over the past five years, 318,000 cycling tourists have visited New Zealand, providing a significant boost for regional tourism.

The trails would not be possible without the support of local government, regional tourism organisations and local businesses. $30 million raised in co-funding arrangements demonstrates the significant commitment of communities to their local trails.

I know that those involved in several trails have recently held workshops to plan how to maximise the returns to their region now that the construction phase is nearing completion. Thinking outside the square will enable local trails to create revenue and increase the economic benefits to their regions.

Every trail that has opened so far has led to spin-off benefits for the local community. New cafes, cycle transfer businesses, and growing demand for accommodation nearby cycle trials is great for our local communities.

Local elections

I’d like to turn briefly to the local elections coming up in October. To those who are standing again for election, I wish you the best of luck on October 12. And to those who are not standing for re-election, thank you for your service to your communities.

I want to say that the work you do, and the services that are provided by the organisations you represent, are important. Your communities rely on you.

It’s vital that when the opportunity comes along for the public to exercise their right to vote for their elected representatives, they take the time to do so.

Voter turnout at the local body elections in 2007 was the lowest turnout since the restructuring of local government in 1989. In 2010, voter turnout improved slightly to 47.5 per cent.

It would be great to see that turnout improve again at this election and I encourage New Zealanders to have their say.

Conclusion

It’s important for New Zealand’s future economic success that we work well together. I believe our relationship is in good heart, and I know that you are not afraid to tell me your thoughts on central government’s programme.

While central and local government have different core functions, both are facing similar challenges. And those involved in both are committed to leaving New Zealand in better shape than when we found it.

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

I appreciate the work you do, and the challenges you face. We are committed to supporting you.

We look forward to continuing to work closely with local government across New Zealand.

Thank you and enjoy the rest of your conference.