The Finance Minister is defending her budget and growth agenda, despite a surplus being some years away.
The Government's books aren't set to return to surplus until 2029.
Nicola Willis says that surplus is coming despite disruption on the world stage.
She told Mike Hosking alongside spending cuts they're also investing to encourage businesses to grow.
Willis says the biggest risk to getting back into surplus would be a slow down in the economy.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
So the Finance Minister found a shedloader though from savings
and spread it about the place. A lot of it's
pre announced, of course, as it is these days, areas
like health and defense we already knew about. We don't
have a surplus though for years, and we are borrowing
yet more money. The Finance Minister, Nikola Willis is with
us a very good morning to you.
Speaker 2 (00:16):
Good morning.
Speaker 1 (00:17):
Make the surplus that you are promising by twenty twenty
nine under your dodgy measurement process. What if you're wrong,
that will be two terms of a national government that
couldn't deliver a single surplus. Is that a government that
knows how to run an economy.
Speaker 2 (00:32):
Well, it's really important to me that we do get
the books back in balance and back in surplus, and
that's our fiscal strategy. And what we've shown is despite
everything that's been happening internationally and the downgraded forecasts that
have resulted from that, we're still on track to get
that surplus. So I don't take economic recovery for granted.
That's why in this budget we've put that focus on
(00:54):
the investment boost policy to encourage businesses to keep investing.
That's why we're making a number of reforms for growth
because ultimately the biggest risk to surplus is if our
economy slows down, and so that's why we're really on
the side of driving activity in this economy.
Speaker 1 (01:11):
The means testing stuff. I've asked many people over the
years around doctors and why you're subsidizing my kids to
go to a doctor. I've got no idea. I don't
need your help. You've always explained that it's too difficult
to means test. How come suddenly we can means test
lots of stuff and that's apparently doable.
Speaker 2 (01:28):
Well, I do support means to stake here.
Speaker 1 (01:31):
I do too, but you've explained previously you can't do
it well.
Speaker 2 (01:34):
In some cases, in some particular areas, it may be challenging.
But in the couple of areas that we've chosen in
this budget, it's very straightforward. With Key we Saver, we're
simply not putting the government contribution, the government subsidy in
for those earning one hundred and eighty thousand dollars or more.
That's pretty simple to do via ID. And with the
Best Start Payment, which is a payment for people who
(01:55):
have babies, we're just lining that up with what the
regime already is for year two and three. There's always
been means testing there. It's just been only for the
year two and three of the payment and we're aligning
it a new one. So those are simple changes. Collectively,
they save hundreds of millions of dollars. I think everyone
just needs to remember right now than anything the government's
doing like that, we are borrowing to do it, and
(02:17):
that cannot go on forever. We have to make savings
if we want to invest in the things that we.
Speaker 1 (02:22):
All under your resume it is and that's that's part
of the problem. That forty six percent debt to GDP,
that's that's ruinous. We don't have enough room to move
should should something go wrong.
Speaker 2 (02:33):
Yeah, Well, what the projections show is that debt is
peeking a little bit lower than was being predicted a
few months ago at the half year update before Christmas,
but and then it is starting to come down in
the final year of our forecasts. We want to see
debt coming back down to forty percent of GDP because
we need a bit more of a buffer for a
(02:53):
rainy day.
Speaker 1 (02:54):
The box refrish for GDP. It wasn't that long ago
when Stephen joycelist off.
Speaker 2 (02:59):
It was nineteen that's right, And even after the GFC
and the christ Church earthquake, the highest debt got was
twenty five percent. So I think we just have to
try to context how much well, because I got left
with an absolute debt mountain by the last loot. That's
the reality of what's happened to here. Not only did
they leave an absolute debt mountain, more than one hundred
(03:19):
billion dollars more of debt with very little to show
for it, they left a structural deficit in the box,
which is they were structurally spending a lot more than
we were earning. And we're now having to pair that
back and correct it. And it's pretty hard work, but
we can do it, and we've put out a plan
that shows that we'll get there.
Speaker 1 (03:35):
Were you tempted to go harder?
Speaker 2 (03:39):
Well, I was always of the view that we should
look for as many savings as we could reasonably deliver,
because when you're borrowing to pay for the groceries, you
owe it. I think to New Zealanders to say, have
I raally tested whether we're getting value for money for everything?
And there were some big calls in this budget. No
one's saying it's easy. But I think think where we've
(04:00):
got to is the right balance, because for me it
is important we keep investing in education, we keep investing
in how those things matter to people, and they are
ultimately making a difference to the accoutry.
Speaker 1 (04:08):
Do you don't give me your normal answer, which is
this is what I've been told by Treasury. Do you
believe the growth forecasts of an average of two point
nine over the next four years.
Speaker 2 (04:16):
I do. I look at our exporters and how well
they are doing right now. I can see that continuing.
I have the benefit of visiting really cool businesses across
the country and seeing their prospects for the future. And
I look at New Zealand compared to lots of other
countries in the world. Right now, we're safe. We're secure,
we've got great farmers, we've got lots of trading relationships.
(04:38):
There's every reason we can succeed over these next few years.
But we do need a government that's on the side
of business, and we absolutely are.
Speaker 1 (04:45):
Are we structurally limited? Do you think at about see
two point ninety three is about what we do in
the good days. If we can manage that over the
next four years, that this is an export lead recovery.
All of that's great news. Are we structurally limited to
doing anything better than that without sort of smoking inflation?
Speaker 2 (05:03):
Yeah, well, look what Treasury says that we do come
up against productivity constraints when growth gets a bit higher
than that. And that's why we're doing this investment boost policy.
That's about acknowledging that one of the things that's held
us back traditionally is we've got low rates of capital intensity.
That is, our firms don't have as good a machinery
and technology as their international counterparts. How do we encourage
(05:25):
people to invest more in that, Well, we're giving them
a tax break for investing in assets. Those are the
sorts of things that over the years will make this
a more productive economy. But it's also things like having
better educated workers, having a better match up between business
and science, having resource consent laws that don't mean you
have to spend three years in court fighting to build something.
(05:45):
You know that stuff as waste for it gets in
the way of growth.
Speaker 1 (05:48):
The RB next week, are they going to come to
the party.
Speaker 2 (05:52):
I think they will. Obviously I'm not allowed to influence them,
but you don't need to talk to many economists to
hear that there's room for straits to ease further. Certainly,
treasuries forecasts show that our budget helps create that room.
And I look around the world and I think that
the uncertainty still is out there, So I think the
(06:13):
Reserve Bank still has room to go.
Speaker 1 (06:14):
What do you, well, you're not influencing the Reserve Bank.
They can make up their own mind. What's neutral? You reckon?
Is it two and a half? Well, the reason I
asked that is I think it's two and a half
to two seven five. And the reason I think that
is I think things are harder than a lot of
people understand.
Speaker 2 (06:30):
Yeah, well, I think the Reserve Bank thinks neutral is
a bit higher than that. But it'll be interesting to
see what they say next week. But I think the
key thing that we've seen recently is that interest rates
haven't necessarily transmitted through to people. You've still got a
lot of people who haven't gone on to a lower
rate yet, so we haven't had all the stimulatory effect
of the earlier cuts. So things should be flowing through
(06:52):
over the next few months and that'll be what the
reserve banks.
Speaker 1 (06:54):
Are and that for you then brings in the politics
of all of this, because you look at manufacturing, manufacturers
on the move, exports as we know, are on the move,
services isn't, and sentiment isn't and you need something to
switch Otherwise people come election, you are just going to
look at you and go, jeez, we're still in debt
and the place is still stuff. Let's give someone else
a crack.
Speaker 2 (07:14):
Yeah. Well, look, that's why I'm heartened by this forecast,
because what they show is growth really speeding up next year.
They show unemployment peaking the middle of this year and
then coming down again. They show a lot of job
creation happening. And when I'm out and about talking to businesses,
they say to me, look, the thing we need to
see is that the government's really on our side. That
investment boost tax policy. It's a very clear indication that
(07:36):
we are. We'll get our Resource Management Act replacement this year.
We're going to have a succession of things that I
think will and gender confidence and we'll build a sense
of momentum. I can't stop international events making people a
bit wobbly. That is the reality of things. A lot
of businesses look at the world and go, I'm not
sure I'm that confident right now, but I think that
(07:58):
every reason to be This is a much better place
to be doing business then lots of other parts of
the world.
Speaker 1 (08:02):
The under eighteen nineteen year olds who are unemployed. You're
going to mean to test the parents. When's that announcement coming,
and why wasn't it yesterday? And when it does come,
the reason it wasn't yesterday is people are going to squeal.
Speaker 2 (08:15):
Well, it's a great policy, Mike, because I have talked
to parents myself who say it's pretty tough.
Speaker 1 (08:21):
But it depends, Nicola, don't play this game with me.
It depends when you where are you going to means
test the mat? Is it one eighty plus or is
it a lot lower? And a lot of parents are
going to go I can't afford to do that.
Speaker 2 (08:31):
Well, we only really want it to be an exceptional
circumstances that this policy doesn't apply, because our base expectation
is if you're a teenager, we expect agreement. If you
can't get a job, you should be in training or
an apprenticeship.
Speaker 1 (08:44):
You're talking to that's how much, Nicola, How much does
a parent have to earn before you ping them?
Speaker 2 (08:50):
Well, Cabinet will make those decisions.
Speaker 1 (08:52):
You haven't even made the decision.
Speaker 2 (08:54):
No, we haven't made that decision. The final design of
the policy is yet to be made. But what we
are clear about is that it will be very difficult
for those teenagers to access a benefit. It will only
be an exceptional circumstances where they genuinely can't rely on
their parents for support.
Speaker 1 (09:10):
Is it one the plus? Should it be one agy plus?
Speaker 2 (09:13):
Well, I actually think it should be less than that.
Kevnet will obviously have to deliberate.
Speaker 1 (09:17):
What we said. Do you think it's less than one
hundred thousand dollars?
Speaker 2 (09:20):
Well, I think basically any parent, it doesn't really matter
what their income situation is, doesn't want to have to
say to their kid, look, just live at home. It's fine.
Take take the doll take it. Take the benefit from
the government. They want to be able to say, look,
get out there, do some training, get a job, because
that's actually where your future lies. And we're aspirational for you.
(09:41):
We don't want you just taking a check from the government.
And actually that's not a nice recipe for anyone.
Speaker 1 (09:46):
No, it isn't. But that number is going to be political,
isn't it a nice suspect that's why you've not made
the decision yet.
Speaker 2 (09:52):
Well, no, it's not that. It's just that we were
clear that this was a reform that we wanted to progress,
but we needed to finalize some of the details and
look forward to announcing those in due course.
Speaker 1 (10:01):
Look forward to talking to you about it. Appreciate it,
Finance Minister Nikola Willis. For more from the Mic Asking Breakfast,
listen live to News Talks at B from six am weekdays,
or follow the podcast on iHeartRadio.
So the Finance Minister found a shedloader though from savings
and spread it about the place. A lot of it's
pre announced, of course, as it is these days, areas
like health and defense we already knew about. We don't
have a surplus though for years, and we are borrowing
yet more money. The Finance Minister, Nikola Willis is with
us a very good morning to you.
Speaker 2 (00:16):
Good morning.
Speaker 1 (00:17):
Make the surplus that you are promising by twenty twenty
nine under your dodgy measurement process. What if you're wrong,
that will be two terms of a national government that
couldn't deliver a single surplus. Is that a government that
knows how to run an economy.
Speaker 2 (00:32):
Well, it's really important to me that we do get
the books back in balance and back in surplus, and
that's our fiscal strategy. And what we've shown is despite
everything that's been happening internationally and the downgraded forecasts that
have resulted from that, we're still on track to get
that surplus. So I don't take economic recovery for granted.
That's why in this budget we've put that focus on
(00:54):
the investment boost policy to encourage businesses to keep investing.
That's why we're making a number of reforms for growth
because ultimately the biggest risk to surplus is if our
economy slows down, and so that's why we're really on
the side of driving activity in this economy.
Speaker 1 (01:11):
The means testing stuff. I've asked many people over the
years around doctors and why you're subsidizing my kids to
go to a doctor. I've got no idea. I don't
need your help. You've always explained that it's too difficult
to means test. How come suddenly we can means test
lots of stuff and that's apparently doable.
Speaker 2 (01:28):
Well, I do support means to stake here.
Speaker 1 (01:31):
I do too, but you've explained previously you can't do
it well.
Speaker 2 (01:34):
In some cases, in some particular areas, it may be challenging.
But in the couple of areas that we've chosen in
this budget, it's very straightforward. With Key we Saver, we're
simply not putting the government contribution, the government subsidy in
for those earning one hundred and eighty thousand dollars or more.
That's pretty simple to do via ID. And with the
Best Start Payment, which is a payment for people who
(01:55):
have babies, we're just lining that up with what the
regime already is for year two and three. There's always
been means testing there. It's just been only for the
year two and three of the payment and we're aligning
it a new one. So those are simple changes. Collectively,
they save hundreds of millions of dollars. I think everyone
just needs to remember right now than anything the government's
doing like that, we are borrowing to do it, and
(02:17):
that cannot go on forever. We have to make savings
if we want to invest in the things that we.
Speaker 1 (02:22):
All under your resume it is and that's that's part
of the problem. That forty six percent debt to GDP,
that's that's ruinous. We don't have enough room to move
should should something go wrong.
Speaker 2 (02:33):
Yeah, Well, what the projections show is that debt is
peeking a little bit lower than was being predicted a
few months ago at the half year update before Christmas,
but and then it is starting to come down in
the final year of our forecasts. We want to see
debt coming back down to forty percent of GDP because
we need a bit more of a buffer for a
(02:53):
rainy day.
Speaker 1 (02:54):
The box refrish for GDP. It wasn't that long ago
when Stephen joycelist off.
Speaker 2 (02:59):
It was nineteen that's right, And even after the GFC
and the christ Church earthquake, the highest debt got was
twenty five percent. So I think we just have to
try to context how much well, because I got left
with an absolute debt mountain by the last loot. That's
the reality of what's happened to here. Not only did
they leave an absolute debt mountain, more than one hundred
(03:19):
billion dollars more of debt with very little to show
for it, they left a structural deficit in the box,
which is they were structurally spending a lot more than
we were earning. And we're now having to pair that
back and correct it. And it's pretty hard work, but
we can do it, and we've put out a plan
that shows that we'll get there.
Speaker 1 (03:35):
Were you tempted to go harder?
Speaker 2 (03:39):
Well, I was always of the view that we should
look for as many savings as we could reasonably deliver,
because when you're borrowing to pay for the groceries, you
owe it. I think to New Zealanders to say, have
I raally tested whether we're getting value for money for everything?
And there were some big calls in this budget. No
one's saying it's easy. But I think think where we've
(04:00):
got to is the right balance, because for me it
is important we keep investing in education, we keep investing
in how those things matter to people, and they are
ultimately making a difference to the accoutry.
Speaker 1 (04:08):
Do you don't give me your normal answer, which is
this is what I've been told by Treasury. Do you
believe the growth forecasts of an average of two point
nine over the next four years.
Speaker 2 (04:16):
I do. I look at our exporters and how well
they are doing right now. I can see that continuing.
I have the benefit of visiting really cool businesses across
the country and seeing their prospects for the future. And
I look at New Zealand compared to lots of other
countries in the world. Right now, we're safe. We're secure,
we've got great farmers, we've got lots of trading relationships.
(04:38):
There's every reason we can succeed over these next few years.
But we do need a government that's on the side
of business, and we absolutely are.
Speaker 1 (04:45):
Are we structurally limited? Do you think at about see
two point ninety three is about what we do in
the good days. If we can manage that over the
next four years, that this is an export lead recovery.
All of that's great news. Are we structurally limited to
doing anything better than that without sort of smoking inflation?
Speaker 2 (05:03):
Yeah, well, look what Treasury says that we do come
up against productivity constraints when growth gets a bit higher
than that. And that's why we're doing this investment boost policy.
That's about acknowledging that one of the things that's held
us back traditionally is we've got low rates of capital intensity.
That is, our firms don't have as good a machinery
and technology as their international counterparts. How do we encourage
(05:25):
people to invest more in that, Well, we're giving them
a tax break for investing in assets. Those are the
sorts of things that over the years will make this
a more productive economy. But it's also things like having
better educated workers, having a better match up between business
and science, having resource consent laws that don't mean you
have to spend three years in court fighting to build something.
(05:45):
You know that stuff as waste for it gets in
the way of growth.
Speaker 1 (05:48):
The RB next week, are they going to come to
the party.
Speaker 2 (05:52):
I think they will. Obviously I'm not allowed to influence them,
but you don't need to talk to many economists to
hear that there's room for straits to ease further. Certainly,
treasuries forecasts show that our budget helps create that room.
And I look around the world and I think that
the uncertainty still is out there, So I think the
(06:13):
Reserve Bank still has room to go.
Speaker 1 (06:14):
What do you, well, you're not influencing the Reserve Bank.
They can make up their own mind. What's neutral? You reckon?
Is it two and a half? Well, the reason I
asked that is I think it's two and a half
to two seven five. And the reason I think that
is I think things are harder than a lot of
people understand.
Speaker 2 (06:30):
Yeah, well, I think the Reserve Bank thinks neutral is
a bit higher than that. But it'll be interesting to
see what they say next week. But I think the
key thing that we've seen recently is that interest rates
haven't necessarily transmitted through to people. You've still got a
lot of people who haven't gone on to a lower
rate yet, so we haven't had all the stimulatory effect
of the earlier cuts. So things should be flowing through
(06:52):
over the next few months and that'll be what the
reserve banks.
Speaker 1 (06:54):
Are and that for you then brings in the politics
of all of this, because you look at manufacturing, manufacturers
on the move, exports as we know, are on the move,
services isn't, and sentiment isn't and you need something to
switch Otherwise people come election, you are just going to
look at you and go, jeez, we're still in debt
and the place is still stuff. Let's give someone else
a crack.
Speaker 2 (07:14):
Yeah. Well, look, that's why I'm heartened by this forecast,
because what they show is growth really speeding up next year.
They show unemployment peaking the middle of this year and
then coming down again. They show a lot of job
creation happening. And when I'm out and about talking to businesses,
they say to me, look, the thing we need to
see is that the government's really on our side. That
investment boost tax policy. It's a very clear indication that
(07:36):
we are. We'll get our Resource Management Act replacement this year.
We're going to have a succession of things that I
think will and gender confidence and we'll build a sense
of momentum. I can't stop international events making people a
bit wobbly. That is the reality of things. A lot
of businesses look at the world and go, I'm not
sure I'm that confident right now, but I think that
(07:58):
every reason to be This is a much better place
to be doing business then lots of other parts of
the world.
Speaker 1 (08:02):
The under eighteen nineteen year olds who are unemployed. You're
going to mean to test the parents. When's that announcement coming,
and why wasn't it yesterday? And when it does come,
the reason it wasn't yesterday is people are going to squeal.
Speaker 2 (08:15):
Well, it's a great policy, Mike, because I have talked
to parents myself who say it's pretty tough.
Speaker 1 (08:21):
But it depends, Nicola, don't play this game with me.
It depends when you where are you going to means
test the mat? Is it one eighty plus or is
it a lot lower? And a lot of parents are
going to go I can't afford to do that.
Speaker 2 (08:31):
Well, we only really want it to be an exceptional
circumstances that this policy doesn't apply, because our base expectation
is if you're a teenager, we expect agreement. If you
can't get a job, you should be in training or
an apprenticeship.
Speaker 1 (08:44):
You're talking to that's how much, Nicola, How much does
a parent have to earn before you ping them?
Speaker 2 (08:50):
Well, Cabinet will make those decisions.
Speaker 1 (08:52):
You haven't even made the decision.
Speaker 2 (08:54):
No, we haven't made that decision. The final design of
the policy is yet to be made. But what we
are clear about is that it will be very difficult
for those teenagers to access a benefit. It will only
be an exceptional circumstances where they genuinely can't rely on
their parents for support.
Speaker 1 (09:10):
Is it one the plus? Should it be one agy plus?
Speaker 2 (09:13):
Well, I actually think it should be less than that.
Kevnet will obviously have to deliberate.
Speaker 1 (09:17):
What we said. Do you think it's less than one
hundred thousand dollars?
Speaker 2 (09:20):
Well, I think basically any parent, it doesn't really matter
what their income situation is, doesn't want to have to
say to their kid, look, just live at home. It's fine.
Take take the doll take it. Take the benefit from
the government. They want to be able to say, look,
get out there, do some training, get a job, because
that's actually where your future lies. And we're aspirational for you.
(09:41):
We don't want you just taking a check from the government.
And actually that's not a nice recipe for anyone.
Speaker 1 (09:46):
No, it isn't. But that number is going to be political,
isn't it a nice suspect that's why you've not made
the decision yet.
Speaker 2 (09:52):
Well, no, it's not that. It's just that we were
clear that this was a reform that we wanted to progress,
but we needed to finalize some of the details and
look forward to announcing those in due course.
Speaker 1 (10:01):
Look forward to talking to you about it. Appreciate it,
Finance Minister Nikola Willis. For more from the Mic Asking Breakfast,
listen live to News Talks at B from six am weekdays,
or follow the podcast on iHeartRadio.
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