The Nation: Economy Debate

Press Release – The Nation

On The Nation: Economy Debate

Labour’s finance spokesman Grant Robertson says he’s not ruling out Capital Gains Tax in the first term, or taking on the Green Party policy of a top tax rate of 40% over $150,000, because both need to be looked at by Labour’s tax working group. But on the Greens policy he says he doesn’t think Labour would support it.

Robertson says Labour’s water tax could be about 1 or 2 cents for users taking a thousand litres, but again says the details won’t be worked out until after the election.

Meanwhile National’s finance spokesman Steven Joyce has ruled out charging farmers for water, saying only water bottlers will pay under National.

Robertson concedes that higher construction costs may mean Labour has to put more money into its Kiwibuild programme. But he says the initial cost will still be $2 billion and it will still build 100,000 affordable homes over 10 years.

Joyce says all all planned infrastructure is affordable and will be paid for from the consolidated fund and the national land transport fund.

Lisa Owen: For the first of our series of pre-election debates, National’s Steven Joyce and Labour’s Grant Robertson join me now. Good morning to you both.
Steven Joyce: Morning.
Grant Robertson: Good morning.
Mr Robertson, our economy, according to some, is going gang busters. We’re in surplus. We’ve got growth around 3%. Unemployment is tracking down. Inflation is stable. Why would people change?
Robertson: Look, some of those headline numbers do sound impressive, but you’ve got to go below them. On a per-person basis, in the last six months, the economy’s actually gone backwards. We had yesterday JBWere coming out and saying they’re really worried about the productivity of our economy. For the last four years, we haven’t actually improved our productivity. So, we’ve got more people in New Zealand; they’re working longer hours, but we’re not lifting the value of the economy. And that’s got to be the focus for us. How do we create good high-wage jobs into the future? We can’t just rely on there being more people. We can’t just rely on selling houses to each other to grow the economy.
Okay. He’s right, isn’t he? GDP per hour is in recession. For the last five years, we’ve built an economy that is based on construction – it’s a crisis economy – and people coming to the country.
Joyce: No, no, no. No, it’s not. And, in fact, if you look at those figures on productivity, both GDP per capita, which is one measure in GDP per hour worked, we’re growing and actually doing better than most of the developed world, so better than the UK, better than Europe. The whole developed world has struggled a bit with productivity, and nobody’s arguing that New Zealand’s productivity needs work where it needs to be longer term. But, in fact, productivity in New Zealand has grown faster in the last eight years than in the previous eight or nine years before that under the previous government that, you know, Grant’s party was part of. So what shows is that the long-term problem of New Zealand productivity is yet to be solved, but we’re actually heading in the right direction.
Robertson: No, we’re not. And, in fact, productivity in New Zealand over the last four years has been virtually zero.
Joyce: No, it’s not.
Robertson: Well, it’s not me saying that, Steven. It’s actually a range of commentators – JBWere; we had Brian Fallow yesterday. They’ve all noticed it. And New Zealanders notice it, Lisa, in their pay packets. It’s not keeping up with the costs, especially housing costs. So New Zealanders can hear these statistics, but their real lived experience is of the fact that they don’t feel that they’re getting ahead.
Joyce: Well, actually, again, you’ve got to look at the actual figures, and New Zealanders’ incomes– Well, nobody’s arguing that the nominal wages are going up as fast as they did under the previous government because inflation is much higher. But our actual real wages are going up faster than they were before. We’re currently growing wages, over the last seven years, at double the rate of inflation, so that’s good.
Robertson: What about this year, Steven? What about this year? What’s the balance between inflation and wages in the last year?
Joyce: As I said to you in the house the other day, in terms of calendar year–
Robertson: Not calendar year. Let’s go June to June. Come on. The experience people have got right now today. Inflation and wages – what are they?
Joyce: What I’m telling you is–
Robertson: 1.7%, 1.6%. There is absolutely no ability for people to get ahead under that situation.
It’s the first time since 2011, is it not, Mr Joyce, that inflation is outstripping wage growth?
Joyce: Just for one quarter, which was the–
Robertson: No. Year on year.
Joyce: For one quarter, which is the March quarter this year.
Joyce: Can I put it another way to you?
Joyce: It’s all the different way you quote statistics. New Zealand’s actual after-tax weekly wages is up higher than inflation over the last financial year because people are both working more, working different hours than before. And that’s part of the story about a growing economy is more time – effectively more working hours available for people to work, and that’s good because that’s their actual income.
Okay. I want to put it to you in a different way, then. The numbers, the headline numbers, are great for a number of people, but not for the people who are left behind. Do you accept that there are tens of thousands of New Zealanders who are being left behind?
Joyce: Well, they were being left behind because we had the GFC, and that was hard, but, actually, the numbers are–
Still being left behind, Mr Joyce.
Joyce: Well, if you look at the numbers of children and what is seen as the OECD measure of hardship, it’s dropped from 220,000 down to 130,000.
There’s still about 240,000 people in severe housing stress, though, isn’t there? And 85,000 kids who are severely materially deprived. Are you happy with those numbers?
Joyce: No. This is why we’ve put this family incomes package together, which is going to make the big difference. And now that we have a strong economy and we have our books back in surplus, the first thing we did was to say, actually, we need to do something about improving family incomes, and that’s changing the tax thresholds for low and middle income earners, increasing the accommodation supplement and increasing the Working for Families package for family tax credits. Now, that’s actually going to make a very significant difference. From 1 April next year, some families in west Auckland and south Auckland and the Hutt Valley, for example, will get up to $130, $140 a week extra, which is great.
Mr Robertson, he’s right; that families package is projected to push our growth up to about 3.8% by the time that package is rolled out. You want to take part of that away. You’re the Grinch who’s going to steal growth, aren’t you?
Robertson: Far from it. In fact, what we want to do is make sure that we get the money to the families who need it. So, under Labour’s package, every family earning $62,000 or less will be better off than under National’s package. What I don’t want is for Steven and me to get a $1000 tax cut when we’ve got families living in cars and garages, when we’ve got a health system that’s not coping. What we’re saying is we’ll get the money to the families in need, but we’ll get the money that Steven wants to give to us as tax cuts – to wealthy people like us – we’ll get that money, and we’ll make sure it’s invested in public services that have been run down.
Before I give you a right of reply, Mr Joyce, I just want to be clear, because that was a policy that was announced when you had a different leader. So you’re sticking to it 100% as it is?
Robertson: Absolutely 100%.
Joyce: Well, I think the difficulty with that is that, actually, Grant’s proposal is to pay people on the sort of incomes like him and me, if they have a baby, a baby bonus of $3000 over a year. So the difficulty with his idea that you should target it is, actually, he’s not proposing to target it.
Yeah, but you’ve got a $1000 tax cut in your pocket. You still haven’t told us what you’re going to spend it on.
Joyce: Well, it’s not actually about me – or about Grant, actually. It’s about those people who are on the median wage who are currently facing a 30-cent-in-the-dollar tax rate, and we have to change that. And the only way we change that is shifting the thresholds. Now, Grant’s allergic to actually reducing taxes and allergic to adjusting thresholds. He’s about increasing taxes. But I actually think it’s really–
Okay, let’s ask him. Are you allergic?
Robertson: What I’m allergic to is seeing our health system have $2 billion taken out of it over the last six years. What I’m allergic to is the fact that we’ve got more homeless people in New Zealand than we’ve ever seen before. I’m perfectly happy to have this election be about different priorities. My priorities, Labour’s priorities, are investing in housing and health and education and getting incomes lifted for the lowest income people in New Zealand. It’s not giving a tax cut worth $400 million to the top 10%.
Let’s look at your numbers, because I think this is important. All your projections are based on current growth projections, and those are based on high immigration numbers. Immigration is underpinning our economy, and you want to turn that tap right down. Where’s your extra money coming from?
Robertson: The budget that our numbers are based on, and, indeed, Steven’s budget, sees immigration returning to its long-run average within two years. So we’ve both got the same budget. We’re going to grow the economy.
It has not returned to its long-run projections for the past four years. What makes you think it’s going to do that now?
Robertson: I know. Because, actually, we’re proposing policies that will help manage the flow of immigration. The National government hasn’t done that. But bear in mind, Lisa, what we are saying is, we want to tweak the settings. Like every government everywhere in the world.
By up to 30,000 people.
Robertson: No, it’s by about 20,000.
The door is open for up to 30,000 on the numbers that you’ve got.
Robertson: Yeah, no, that’s right. But, in fact, what we’ve said is we’re looking to reduce it by between 20,000 and 25,000. What we’re saying is, as a country, we’ve got to invest in infrastructure and housing and making transport work. Look at what’s happened in Auckland this week. The Auckland Transport plan’s come back, and they need an extra billion dollars over the next four years.
All right. Let’s put that to Mr Joyce.
Robertson: Mr Joyce has not funded that.
Joyce: Well, hang on a second.
Robertson: You haven’t.
Joyce: I need to do a little fact check on some of this stuff.
You’ve been caught out by growing numbers.
Joyce: Hang on a second. Grant’s saying that health has been cut. That’s nonsense.
Robertson: Have you funded it?
Joyce: Can I just have a second? Increasing health from $11.8 billion when we came into office to $16.8 billion now is in no way a cut.
I just want to ask you, in real terms, are you saying that there’s been no loss in health funding?
Joyce: That’s right, and if you have a look at the numbers, just what we’ve put in this last budget is an additional nearly $4 billion in health, which just started six weeks ago on the 1st July this year, which is a massive increase. Actually, the largest increase in health spending in 11 years, and more than Grant’s proposed in his alternative budget to add next year.
Robertson: That’s not right.
Joyce: So to suggest that somehow neither party or one party doesn’t care about health is actually a little bit silly. In terms of the transport and the infrastructure, this government is investing the largest amount in infrastructure over the next four years that’s ever been done.
But you’ve been caught short, haven’t you, Mr Joyce?
Joyce: No, no, no. Can I just finish?
No, you have been caught short. The Auckland Alignment Project shows that you’ve been caught short. Growth has—
Joyce: No. Well, I’ll come to that in a second. So it’s 40% more than the last four years and double what it was a decade ago. In terms of the Auckland Transport Alignment Project, the government is lined up with Auckland Council on that. Interestingly, it doesn’t promote what Labour Party promotes. All the government agencies and the council agencies have got together and said—
Where’s your extra money coming from? Because you’ve got a $6 billion deficit in that budget, and you’re going to have to stump up with a considerable amount of it in a short period.
Joyce: Well, no. Let’s look at it. It’s a total of $26 billion expenditure over 10 years for both Auckland Council and government. $20 billion is actually funded right now. In terms of the additional six, that’s $600 million a year over the next 10 years between the New Zealand government and Auckland Council. I’m absolutely confident it will be—
Robertson: But, Steve—
You’ve had a good run. Mr Robertson.
Robertson: You’ve had a good go. What we saw this week is that you are now $1 billion short for the next four years.
Joyce: No.
Robertson: Yes, it did. And you said the day after the budget, ‘I’ve spent all the cash.’ Where’s the money coming from for the billion dollars that is missing in the next four years?
Joyce: Well, if you go and have a look at the budget, it will show you that some of those $32.5 billion have yet to be allocated, Grant.
Robertson: Right, but what misses out? Education? Health?
Joyce: No, no, no.
Robertson: Your capital expenditure is declining by 30% for education in the budget.
Joyce: That’s wrong.
Robertson: So you cannot spend this money over and over again, Steven. Where is the money coming from?
Joyce: No, but, hang on, that’s completely incorrect.
Very quickly, and we’re going to the break. Quick right of reply.
Joyce: $32.5 billion, nearly $5 billion in new schools over the next four years. That’s more than for decades.
Robertson: You’ve spent all the money, Steven.
Joyce: No, I haven’t.
Robertson: You said it the day after the budget.
We’ll keep delving around in the public purse after the break. No, I need to stop you. I’ll come back to you after the break.
If I can come to you, Mr Robertson, you’re going to issue, I think it’s about 1500 KiwiBuild visas. But we’ve got a shortfall in construction of about 56,000 people. So, for a guy who wants to be finance minister, your numbers aren’t adding up, are they?
Robertson: Look, we want to make sure that we continue to get the workforce we need, and we do realise that’s going to require some immigration in terms of the construction industry. Those visas are actually linked to making sure that we have more apprentices. At the moment in New Zealand, we’ve actually seen a decline in the number of apprentices from when National took office. There was about 43,000 apprentices across the board. We need a lot more than that.
But your 1500 versus the shortfall on that construction industry is massive. That’s not enough, is it?
Robertson: And look, we have to start from where we are, Lisa. We want to train more young New Zealanders up. One of the really disturbing things that has happened in New Zealand is the growth in young people not in work, not in education, not in training. So we’ve got to put the two together. We recognise migration will continue to be an important part of making sure industries like construction work, but we’ve got to train young New Zealanders as well.
And I want to come to young New Zealanders shortly. But if you were being brave, you’d open up that immigration tap, wouldn’t you? Because we have a shortfall of tens of thousands of workers. You’re responding to dog whistle politics too.
Joyce: No, I think we’re sitting in about the right place. We’ve changed a few of the wage settings to make sure we get the right people amongst the numbers that are coming in. In terms of the construction workforce, it’s increased from about 180,000 to 250,000. We’ve got a record number of construction apprentices at the moment. Never had more than 11,000 before. In fact, up until about a year ago, we’d never had more than 9000.
You’ve still got a massive shortage of people, though. Don’t you?
Joyce: I agree. Pretty much what we did in Christchurch. You’ve got to have a combination of people in training — which we have; people returning to the construction workforce — which is happening. But, yes, you’re also expecting those to come back from Australia and further afield to work in construction, and that will continue—
What, Kiwis coming back?
Joyce: There’s a combination of those.
Because you’re still minus Kiwis going—
Joyce: No, we’re not, actually.
Yeah, you are.
Joyce: In net terms, over the last year—
To June of this year, you lost about 1200 Kiwis.
Joyce: Oh. As against, sort of, 40,000 back in the bad old days when they were all going over there to get a job.
But the point is, you’re not gaining.
Joyce: The strong New Zealand economy— Actually, the migration transfer between New Zealand and Australia is now virtually nil, and that’s great. Because now, instead of sending our kids to Queensland and New South Wales to work, they’re coming here to work, which is great.
Before we move on from this — KiwiBuild. When you costed it out — about four years ago, it would be now — it was $2 billion. But construction cost has gone up 30%, 40%. Have you re-costed it? Have you done your numbers?
Robertson: Yeah, we have. The initial amount of money we’re putting in is $2 billion. We’re committed to making the project work. If we need to put more money into it, we will.
You will, won’t you? You will. Because of that 30% to $40% increase, you will have to put more money in, won’t you?
Robertson: Bear in mind, one of the great things about a government coming in and actually building some houses is that we can build it scale, and that will bring the cost down. And the industry have told us it will.
But not 30% to %40, I wouldn’t have thought.
Robertson: Look, what we’re committed to do is building 100,000 homes over 10 years. We’re putting in an initial capital contribution of $2 billion, and that money gets recycled.
I understand totally how the policy works, but as a start-up fund, how much more are you going to have to put in because of that rising price?
Robertson: The $2 billion is the start-up fund.
You accept, though, that you’re going to have to chuck some more at it?
Robertson: If we have to, Lisa, we will.
Or is it going to be fewer houses? Which will it be?
Robertson: No, absolutely not. We need more houses. The shortfall in housing has grown significantly under National’s watch. Bear in mind, if we’d started this proposal in 2012 when we did it, we would have already built tens of thousands of houses. The government hasn’t.
But there’s no point looking back at that. So what are you putting aside? Because your numbers don’t marry up, then, if you’ve just told me you’re aware of the—
Robertson: No, they do. We’re putting that $2 billion in, and that will be the starting capital for the fund. But we’re committed to this. I can’t look into the future and tell you that.
Joyce: Can I just say that New Zealand is actually building 100,000 houses every—
Robertson: Affordable houses?
Joyce: Hang on a second. 100,000 houses every three years now. So Labour is saying they’d like to build 100,000 in ten?
Robertson: Affordable homes, Steven.
Joyce: We’re building two cities the size of Dunedin every three years in this country.
Robertson: Can I respond to that, Lisa?
Mr Roberson’s question is a legitimate one. How many of them are affordable?
Joyce: Well, there’s a range, right across the board. In fact, if you look at, for example, the Housing Infrastructure Fund, which is just freeing up the big Peacocke subdivision in Hamilton. There’ll be a significant number of those that are affordable. If you look around parts of South Auckland with the very big investments that are being made around Drury and Paerata and Pukekohe, some of those will be—
Robertson: 5% of houses built in the last ten years have been affordable homes. Our KiwiBuild fund is for first-home buyers. Are you guaranteeing any houses for first-home buyers?
Joyce: Well, first of all, I can tell you—
Robertson: Are you guaranteeing any? Answer the question.
Joyce: Hang on a second, you’re not the interviewer. Can I tell you that the numbers of first-home buyers is actually staying up. So there’s been talk in the last few days about—
Robertson: So no guarantee?
That’s great, but also, can I ask you — how many are you guaranteeing are going to be affordable?
Joyce: I’m going to guarantee that first-home buyers will continue to get the opportunity to participate in the New Zealand housing market as they are today.
Right, okay. Let’s move on, then.
Robertson: In other words, not.
Joyce: As I said, a proportion of borrowers for home buying, first-home buyers are increasing.
All right, well, let’s talk about how we could damp down the market. Capital gains tax — are you ruling it out in the first term absolutely, if you’re in in the first term?
Robertson: We’ve got a tax working group. I can’t pre-empt what they’re going to come back and decide.
So you can’t rule it out? Could come in the first term?
Robertson: I can’t pre-empt what that group says, but here’s the important point — right now today we have something called the bright-line test that the National Party brought in. It says that if you sell a house that’s not your family home within two years, you’ll pay tax on it. Steven has a form of capital gains tax.
I’ll give you the chance to talk about your policy, Mr Robertson. So a capital gains tax is still on the table? You’re not taking it off?
Robertson: What we’re going to the election with is a commitment that if you sell a property that is not your family home within five years, you’ll be taxed for that.
Joyce: I think there’s a problem there for the Labour Party, because they’re dodgy on tax. They’re refusing to say about the capital gains, they’ve mentioned a water tax last week, but they won’t tell us how much it is, and then, of course, they’ve got a regional fuel tax they won’t talk about where it goes beyond Auckland.
Robertson: I’m very happy to talk about that.
Well, let’s run through the tax list, as Mr Joyce raises it. So top tax rate — can you rule out lining yourselves up with the Greens and having 40 cents over 150 grand? Are you going to go for that?
Robertson: No, I don’t think we will be going for that, but what we will do—
So you’re ruling it out?
Robertson: Let me finish. What we will—
No, that’s really important.
Robertson: I’m going to answer the question, Lisa. You’ve got to let me do that.
All right, answer away.
Robertson: What we’re saying is for every single thing that we commit to spending on, we will have the revenue for that. Jacinda has come in and she’s said, ‘I want you to take another look at some of the projects we’ve got. How do we make sure in housing and education we deliver?’ We will be very clear that Steven has the same issue that I do. On the 23rd of August, the pre-election fiscal update comes out. You could ask Steven the same question about whether there would be more tax cuts. We will have a full package after the 23rd of August.
But you are not ruling out raising that tax rate.
Robertson: I’m not ruling it in; I’m not ruling it out. What I’m saying is we will fund every single promise we make, and that’s the responsible thing to do. Our budget’s been fully costed.
What about your water levy? What’s that going to be?
Robertson: The water levy? Look, what we’ve said there is for every thousand litres of water that’s used in irrigation, perhaps one or two cents.
One or two cents. There you go, Mr Joyce. That’s not going to make a huge difference, is it?
Joyce: This is the problem is that he’s not telling.
Robertson: One or two cents, Steven. How big a difference?
Joyce: Well, hang on. Don’t ask me; ask the farmers, because I’ve seen some figures that even at those levels, you’re talking about 50,000 a year per farm. So I think it’s beholden on the Labour Party to actually come a bit more clean on their tax stuff, because they’re being very dodgy.
Robertson: We’ve been completely upfront.
Joyce: You haven’t, actually. So you’ve got a water tax that you won’t tell anybody—
Robertson: How are you paying for Auckland’s roads? How are you paying for Auckland’s roads? We’ve told New Zealanders how we’ll pay for Auckland’s roads, because Aucklanders know that they’ve got to contribute to this. They know that we’ve got to make sure—
Okay, well, let’s give Mr Joyce 15 seconds to tell us how you’re paying for Auckland’s roads.
Joyce: As we have, we’ve funded the Waterview Tunnel, we’ve funded electrification…
I’m asking you about things that haven’t been built and paid for.
Joyce: …through the consolidated fund and the national land transport fund we will pay for all the investment and we’ll be clear about what it is, just as we have been for the last eight or nine years. And when we came into office—
People want you to be clear about it before they cast their vote.
Joyce: No, don’t worry about that. That’s absolutely the case, and, in fact, last weekend we said $260 million funded from the consolidated fund to increase rail electrification, Papakura to Pukekohe.
Okay, well, that’s a good point, isn’t it, Mr Robertson? They did announce $267-odd million worth of transport projects, and they aren’t taking an extra 10 cents of Aucklanders to do it. And they’re not leaving the door open for the council to put another tax on as well.
Robertson: We’ve been completely honest and upfront about this, and we heard it this week from the Auckland Council. There is now for the next four years, a $1 billion shortfall in the plan that the government has signed up to for Auckland transport. We’ve been honest. We’ve said we’ll fund it partly by the government paying and partly by Aucklanders, who know that they’ve got to pay their fair share of this. But I want to say this to Steven as well about water. The government has asked a panel within the Ministry for the Environment to look at a commercial charge on bottled water. Are you ruling that out, Steven?
Joyce: No, we’re not ruling it out on bottled water, but—
Robertson: Right, so how different is that?
Joyce: Well, we won’t be charging the farmers, the horticulturalists—
Robertson: So you’re going to have a completely unfair charge?
Joyce: You asked me. The farmers and the horticulturalists and the winemakers will not be paying a water tax under the National Party. You could be just as clear today and rule it out yourself.
Robertson: No, what we’re saying is that, actually, we need to clean up our rivers, and we’re going to put the money in. Nick Smith $100 million a year for 23 years. You haven’t funded that.
We’re running out of time. We need to get through some things. There has been significant criticism over the past few weeks about the level of welfare that people get. Your government’s been very clear that there needs to be a balance between a safety net and incentivising people into work. So is it okay for people to go cold and hungry as long as it incentivises them?
Joyce: No, it’s not, and, actually, MSD is very careful to provide not only the benefits but also—
Are you saying there aren’t people going cold and hungry on welfare?
Joyce: There’s temporary additional support available for people at the time. Don’t forget, this is the government that has increased benefits in real terms for the first time in 43 years.
So you think you’re doing okay with welfare?
Joyce: We think we’re doing better, and, actually, with the additional income we’re getting through a strong economy, we’re also investing more with the family incomes package from 1 April next year, which takes around 135,000 children who are in hard— you know, below that 50% line from the OECD, it takes them off that as a result of that one package.
Mr Robertson, can I get a quick answer from you on whether the KiwSaver kick-start, whether you’re still committed to bringing that back under Labour.
Robertson: We won’t be campaigning on that at this election.
Does that mean it’s a goneburger, then?
Robertson: No, what we’re saying is we want to see every New Zealander into KiwiSaver. What’s happened at the moment is it’s been a hugely successful scheme, but it’s the lowest income New Zealanders who aren’t in it. What we want to do is bring them in as wages rise and then we’ll be able to have what really is a universal scheme.
Joyce: You could shift the tax thresholds, and then they’d actually have some additional income which they could pay into KiwiSaver.
I’ve got time for one more question, and this is it. I want a quick answer from both of you. You’re both potentially looking at Winston Peters as a coalition partner. Who’s going to put up $1 billion for Northport? Who’s going to commit to it now? Anyone?
Joyce: No, I don’t think we’ll be— Northport itself doesn’t want $1 billion from the government. It just wants the opportunity to use its container terminal—
Very quickly, Mr Robertson.
Robertson: I’m not committing to that today, but I am committing to actual regional development across New Zealand.
All right, we’ll leave it there. It’s been great to talk to you both this morning.

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