Remarks made to Mood of the Boardroom 2018Finance
There definitely has been a big change since I was up here last year.
It is important to note that New Zealanders did vote for a change. They voted for the change in direction that we have by bringing the three parties together that now form the Government. And they were asking us to address those big issues around housing, around child poverty, around making sure we were protecting our environment better, and around supporting our regions.
That is what the Government has been focussed on since coming in, and delivering on the changes that we promised to do.
It’s really important to remind ourselves that New Zealand is still in solid shape economically and in terms of our business environment. We’re still at the top of the ease of doing business index; the fundamentals of our economy remain sound; we are still at the top of the transparency international ratings around our freedom from corruption; we have a relatively stable financial system.
These things are important to me as the Minister of Finance, and ones that we will continue to keep our eye on.
Just as is taking the approach that we have around fiscal management. And I’m not sure that I totally agree with the idea that my colleagues are banging down the door demanding that I get rid of those rules. The Government, and the Cabinet as a whole, are absolutely committed to them. Because we understand the legacy that we have of managing the books carefully for a small, open economy, susceptible to the shocks of the world – both natural and economic. And I will not take my eye off the ball from that at any point. In fact, a critical part of our wellbeing as a nation is ensuring that we continue to operate under careful fiscal management.
We do have net debt tracking down towards 20% of GDP, as we promised. We did produce a Budget which has a strong surplus in it for this year, and growing surpluses. We do have unemployment tracking down towards 4%. Inflation is relatively stable, tracking towards 2% - the middle of the range. We saw excellent GDP growth for the last quarter – the best quarter in two years; 15 of 16 sectors growing well.
So there is good data out there in the real economy.
I’ve just spent a couple of days on the road with Kim Campbell (EMA). What I learned as we went through Whangarei and Rotorua, is that there remains good work being done in the regions. So we do have a situation where the economy is sound.
But of course it’s not without challenges, and I’m acutely aware of the importance of us establishing and strengthening our international ties. We can no longer rely on any one market, and nor should we. We must diversify what we send to the world and where we send it. That’s why we were not only proud to put the CPTPP in place, but also get across the start line with the European Union FTA – an agreement that I think will be very significant for New Zealand over the coming years.
That focus is absolutely critical for us in terms of developing our international connections.
I’m aware from speaking to business people in this room both this morning and on previous days, that there is a growing concern around what is happening in China – tightening of credit, the order books not filling up from there. That’s a message to all of us that we must continue to diversify the markets that we’re exporting to.
In the time remaining I want to focus on where we are heading. And I want to make one comment first about the question of the ‘less hui and more doey’. The first thing is to say that, the reason we’re undertaking the reviews we are is because this Government wants to face up to some really big challenges in our society – be it on mental health, be it on NCEA or the education system, be it on making sure we have a more modern monetary policy or a tax system that’s fit for the middle part of the 21st Century. These are not reviews for reviews’ sake; these are reviews to create the institutions and the policies that will allow our economy to thrive through the middle part of the 21st Century. And we want to work with you on it.
Christopher Luxon is leading the Prime Minister’s Business Advisory Council and we’ll make some announcements very soon about the terms of reference and the membership. You can read about Christopher’s thinking up to this point in the [Mood of the Boardroom] document.
We want to work across the business sector to build on the work we’re doing to create that economy that can face up to the rapid changes of the future of work. We’ve established our Future of Work Forum with business and unions to address the very issues that are in this report. Making sure that technology is adopted, making sure that we have the skills and the training in our workforce for the 21st Century. We’re piloting a project right now with the New Zealand Manufacturers Network on a skills shift to start to retrain a whole workforce in a whole industry – because that’s how we’ll make sure we remain a profitable country and one where people can achieve their potential.
We also do have an economic plan. It (Our Plan) is a document that outlines the direction we’re going in:
- A more productive economy, built on research and development, a higher-skilled population, better international connections, and strong investment in infrastructure. We’ve made progress on all of those things in the year that we’ve been in Government.
- A more sustainable economy. And I do want to give some credit to James Shaw for the work that he’s been leading in building a political and business consensus around our shift to a lower-carbon economy. This will only work if we’re all together on that.
- And a more inclusive economy, where we do invest in the regions and we do give people, wherever they’re from, a chance to participate in our society and achieve their potential.
More productive, more sustainable, more inclusive. That’s the economy that will lift our living standards and will contribute to wellbeing. That is the economy that I’m happy to be leading at the moment.
What we’re focussing on is the plan for the foundations for a 21st Century economy. Our first Budget was very much about that – it was about making sure we kept to those Budget Responsibility Rules and made big and significant investments in the areas that the public wanted us to do so – health, education, housing – and reducing child poverty. We’ve done that and will keep working on those issues.
But the future focus is around how do we lift the living standards and wellbeing of New Zealanders? And that means, for me, the four I’s:
Getting the institutions right – that’s why we’re doing the Tax Working Group review, that’s why we’re doing the Reserve Bank changes, that’s why we’re creating the new infrastructure entity that New Zealand needs to get a clearer pipeline and pathway for our building industry and those critical infrastructure assets
The second I is investment: Making sure that we are getting investment going to the right parts of the economy. That’s the Tax Working Group. It’s also the creation of new financing and funding mechanisms like Special Purpose Vehicles.
It’s making sure we lift the role of savings and invest in infrastructure – world-class infrastructure for this city and for the regions of New Zealand.
And it is on innovation: We have to be able to grasp the future of work positively.
We’ve done a lot already from the transport plan, to KiwiBuild, to the child poverty reduction measures. But we acknowledge there’s a lot more to do, and we look forward to working with you over the coming years to make that happen.