Speech: Address to the NZ Economics Forum
It’s great to be back at the New Zealand Economics Forum.
I would like to acknowledge everyone here today for your expertise and contribution, especially the Pro Vice-Chancellor, Head of the Waikato Management School, economists, students and experts alike.
A year has passed since I was last before you, and the challenges the New Zealand economy faced then still loom large today. The good news is these days I don’t just get to talk about those challenges, today, I’m part of a new government with a massive opportunity to do something about them.
Since being sworn in two and a half months ago the coalition Government has been working hard to rebuild confidence in the economy and to restore fiscal discipline.
This work is essential and urgent.
We have inherited an unhappy mix of high inflation, high interest rates, a contracting economy, and rising unemployment.
The government books have deteriorated, with deficits since 2019/20 and a return to a wafer-thin surplus not forecast until 2026/27.
That’s before we consider the litany of fiscal risks, cliffs and unfunded commitments our Government has inherited from the outgoing administration.
Since the Half Year Update before Christmas, data revisions and outturns have thrown yet more doubt on both the growth trajectory for the New Zealand economy and the fiscal situation. That will be of concern to workers, families and businesses alike.
We are conscious that any worsening forecasts could well lead to a further decline in government revenue projections and a correspondingly weaker set of government books for us to work with.
Monthly updates may well bounce around a bit, but our cautious view is that the emerging data suggests it is highly unlikely that the full set of forecasts in May will deliver any upside surprises when compared to the Half Year Update.
But as Finance Minister, I am embracing the adage that every challenge contains opportunity.
Opportunity for our Government to better protect taxpayers’ money and purchasing power, opportunity to deliver better results from public services and opportunity to create the conditions needed to unlock New Zealand’s untapped growth potential.
I will be releasing a Budget Policy Statement on the 27th of March – you can expect these priorities to be reflected there. We will also take that opportunity to set out in more detail our short-term fiscal intentions and longer-term fiscal objectives before delivering our first Budget on the 30th of May.
The work of better economic management is already very much underway.
In our first 100 days the coalition Government is acting decisively to deliver a stronger foundation for New Zealand’s future economic performance.
We are acutely conscious that it is the strength of our economy that will determine the standard of living available to New Zealanders, their job and business opportunities, their purchasing power and the quality of public services they can rely on.
New Zealand can’t become richer by simply taxing, spending, borrowing and regulating more, instead we must grow the productive capacity of our economy.
In recent years, careless economic management by government has had a profoundly negative impact on New Zealanders’ living standards. Kiwis have endured a prolonged cost of living crisis as high inflation, high housing costs and rising interest rates have eaten away at their purchasing power.
That’s why you’ve seen us move swiftly to refocus the Reserve Bank on a single inflation-busting mandate. Getting inflation back to target is the essential foundation for sustainable economy recovery.
Kiwi workers have also experienced a period during which government has been spending at historically elevated levels without delivering any corresponding improvement in the public services it delivers. New Zealanders are paying higher average rates of personal tax and have little to show for it.
Despite a more than 80 percent increase in annual government expenditure expected between 2017 and 2024, hospital waiting lists have lengthened, education results have declined, and violent crime has risen. Government debt has soared, largely through increased spending.
Our mini-Budget before Christmas delivered an initial $7.5b in operating savings and additional revenue, and all Ministers are working hard to stop low-value government programmes and go-nowhere projects, to reduce fiscal risks and drive resources out of back-office bureaucracy and into the frontline.
Stop-work notices on doomed projects like Lake Onslow and the Income Insurance Scheme have already freed up resources for better uses.
Extensive work is underway to ensure government agencies are driving maximum value for taxpayers’ money and minimising back-office spend with all agencies expected to deliver a savings dividend.
We are developing a set of better public service targets to measure our performance and drive progress.
At the same time, we are doing a health check on major government infrastructure projects to minimise the risk of the massive cost-blow outs and delays that have become far too common in recent years.
I view this programme of work as the bread and butter of responsible government.
It’s no different to what any household or business does when its finances come under strain. It’s necessary, in fact it should be routine, but in itself it will not deliver on our aspirations for the New Zealand economy.
Our ambitions are much bolder than simply delivering a better set of books. Instead, our goal is to make this a much wealthier country, where New Zealanders can earn more, live better and expect greater opportunities for our children and grandchildren.
We are not content to allow New Zealand to stagnate and slip further behind the rest of the world. We look at countries like Ireland, Singapore and Australia, and see that faster growth and greater prosperity are the essential ingredients for better living standards and choices. We want that for Kiwis, and we have every reason to believe it is possible.
But a new economic approach is needed.
We have so many of the raw ingredients already. Here we are, two major islands located in the fastest growing region of the world, with a stable democracy and peaceful borders, blessed with extensive natural resources that give us the capacity for abundant renewable energy and sustainable food production, populated by people hard-wired for creativity and innovation, with extensive trade connections and potential for more, home to entrepreneurs and established firms leading the world in pursuits ranging from digital effects and online accounting to rocket launching and infant-formula production.
There is so much going for us. And yet, New Zealand hasn’t been converting these strengths into the levels of productivity and success our country deserves.
Our coalition Government is determined to turn that around. We want our country to be seen as a haven for talent, capital and innovation. Open for business and hungry for investment. The make-it-happen capital of the Asia Pacific.
To achieve that aspiration, we must fix a huge array of policies that have made New Zealand an increasingly difficult place in which to build and make things, to hire people, to invest, innovate and do business.
Work is underway across government to tune-up New Zealand’s growth engine, by removing go-slow regulations, lifting education standards, growing export opportunities, attracting investment, encouraging innovation, and building the transport connections, energy generation, housing and modern infrastructure needed to support a faster growing economy.
We’ve made it easier to hire someone new by bringing back 90-day trials for large employers.
Our Minister for Regulation has been given a new mandate to seek and destroy productivity-sapping red tape, with a wide-ranging brief to remove and reform the heavy regulatory blanket that has increasingly smothered New Zealand’s entrepreneurial spirit.
Our Prime Minister, Foreign, Trade and Defence Ministers have been actively nurturing our international relationships and opening the doors to new trade opportunities. We want to see New Zealand made products and services reaching more consumers around the world.
We’ve removed the byzantine, so-called Fair Pay Agreements regime which threatened to impose mandatory one-size-fits all union-driven employment contracts across entire industries.
We’re bringing the basics back to our schools with requirements that each school teach at least an hour of reading, writing and maths every day. And we’ve brought in a cellphone ban to ensure kids can focus on learning.
We’ve removed the ute tax and will soon remove the Auckland regional fuel tax.
We’ve restored a two-year brightline test for the sale of residential properties, removing the capital gains tax by stealth that the previous government introduced through its 10-year rule.
We’ve repealed the extraordinary threat to growth and development posed by Labour’s RMA 2.0.
We are on track to implement further resource management reform to make it easier to consent major projects, attract investment and encourage housing development.
That includes introducing a fast-track consenting process so that New Zealand can welcome in major development projects with less time wasted in hearings, appeals, and lawyers’ offices.
This work is absolutely critical to speeding up investment in much-needed energy generation, reduce emissions and deliver on our climate change commitments, deliver better transport connections, large-scale housing developments and more.
We’ve been delighted to see that our pro-growth agenda has already injected optimism into the economy, with businesses reporting higher levels of confidence about the future than seen in many years.
We will keep working at pace to deliver change.
As we move beyond our first 100 days, I will convene a group of economic Ministers charged with driving progress, working closely with businesses to ensure our work is making it easier for the people we serve and to ensure the world knows that New Zealand is well and truly open for business.
I am excited about this work and the potential it has to open up a new chapter in the New Zealand story. I look forward to hearing the views of our economic and business leaders about the areas you want highlighted for rapid reform. It’s time to be bold, to remove barriers and embrace ambition.
Before I close my remarks today though I want to share with you my commitment to another area of work that I see as crucial to unlocking New Zealand’s potential. That is social investment.
For me, the ultimate purpose of a strong economy is to deliver better for people, to improve their choices, opportunities and the quality of their everyday lives.
Not just for the lucky few, but to lift the prospects of all.
But as we meet here today, we know that there are groups of New Zealanders who remain locked out of the opportunities a modern economy should bring. Kiwis whose human potential is going unrealised, whose lives may have veered off track and who we all wish better for.
I’m thinking for example of the growing numbers of young people not attending school regularly and entering adult life without basic competency in reading, writing and maths.
I’m thinking about the children that bounce from shattered home lives to state care and too often into gangs and eventually the criminal justice system.
I’m thinking about those who start on a youth benefit, and who, according to the latest official analysis are expected to spend an average of 24 years of their working life on an unemployment benefit.
Successive Governments have invested heavily to try and turn these lives around. Good intentions have abounded, but results have been patchy. We can do better, and we must. That’s why I’m passionate about social investment.
For me, social investment is about using data, evidence and modern analytics to invest in earlier and better intervention that can effectively break cycles of disadvantage, dependence and despair. It’s about moving beyond good intentions towards hard evidence about what works. Improving these peoples’ lives is not only a sign of a decent country, it’s a recipe for safer communities and a stronger economy.
But to invest better we need to get much more systematic about what we invest in and how we measure our results. In my social investment portfolio, I will be leading work to ensure all government investment decisions can be informed by better data, evidence and impact analysis.
That means being prepared to stop well-intentioned programmes that aren’t working so we can power-up the work that does. It means putting power in the hands of communities, where Government agencies have too often failed.
And it means being hard-headed about getting people off welfare and into work and getting kids to school.
I share this today at this economics forum because I see too much untapped human potential in New Zealand. The past six years have conclusively proven that spending more, talking about wellbeing and setting out good intentions are simply not enough to shift the dial. A more rigorous approach is needed and our Government will deliver it.
In closing, let me reiterate my view that the year ahead for the New Zealand economy may well be a slow grind. It will take some time to banish inflation and to welcome back lower interest rates and stronger growth.
But with better policy choices we can build a much stronger economy in the years to come.
New Zealanders have elected a government with a clear mandate to bring discipline to public spending and to change the growth trajectory for our economy. We’re excited about the opportunity, and I look forward to working with you all to welcome in a bolder, more ambitious new chapter for our great country.