December 16, 2024 • 11 mins
The Finance Minister isn't feeling too optimistic ahead of tomorrow's financial outlook update.
The Half Year Economic and Fiscal Update will give Kiwis more insight into financial and economic forecasts for the next few years - in comparison with last May's Budget.
Nicola Willis says the Government's inherited some very challenging economic conditions for their first year.
"Tomorrow, the Treasury will share their updated forecasts and we will share our response to that. What we've been consistent in saying is - this is a time when we need to be very careful with how we spend New Zealanders' money."
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Nikola Willis is the Finance Minister, and a big day tomorrow.
The half yearly Economic and Fiscal Update from the Treasury
will tell us basically the state of the books and
how New Zealand's accounts are looking going forward, and the
government will respond in a budget policy statement led by
Nikola Willis. Who's with me this evening. Good evening, minister,
good evening. Run not going to be good news tomorrow.
Speaker 2 (00:20):
Well, I think everyone knows that the government has inherited
very challenging economic conditions and that is being reflected in
the books as the Treasury unwind the overly optimistic forecasts
from a couple of years ago. So tomorrow the Treasury
will share their updated forecasts and we will share our
response to that. I think what we've been consistent in
(00:43):
saying is this is a time we need to be
very careful with how we spend New zealanders money. And
what we know is that things would be a lot
worse if we'd continued with the spending track we inherited
from the last government.
Speaker 1 (00:55):
How can you trust their overly optimistic forecasts.
Speaker 2 (01:00):
The Treasury have been doing since a couple of years
ago is revising some of the assumptions they made after COVID.
There's two key things. One they thought that we'd come
out of the current recession earlier and more vigorously than
we have. And the second is that they read into
a bit of a bounce back and productivity and text
(01:23):
to GDP extrapolated that forward, and they've then been progressively
having to unwind that. So the books that we're seeing
now have actually always been the case. It's just that
Treasury prior to the election was being overly optimistic in
the forecasts that they shared.
Speaker 1 (01:40):
Do you trust treasuries predictions? Now?
Speaker 2 (01:43):
Look? I do. Forecasts are forecasts, they move up and down.
There's all sorts of factors that can impact them. But
do I think that Treasury do all of the things
that they should be expected to do when you're doing
the forecasting? Yes? Does that mean we should test some
of the assumptions at them, compare them with other updates
from the Reserve Bank and others. Yes, of course we
(02:03):
should do that too.
Speaker 1 (02:05):
You were brutal on Grant Robertson for delaying surplus, delaying surplus,
delaying surplus. You're going to again delay surplus? Are you
embarrassed by that?
Speaker 2 (02:16):
Not at all. I was brutal on Grant Robertson because
despite their being escalating inflation, he decided to put his
foot down on the spending accelerator. You know, in Budget
twenty two he committed more than nine billion dollars of
additional spending every year, even while inflation was through the roof.
What we said we do was bring restraint back. We
(02:37):
have and what I know, beyond a shadow of a
doubt is if we continued the approach of the last
government was reckless spending, the economy would be in worse
shape right now, New Zealanders would be in worse shape,
and the books would be dreadful.
Speaker 1 (02:53):
Your delaying surplus again, will you commit to it? And
which means we're not going to get back to surplus
within your first term. Will you even promise to get
back to surplus in your second?
Speaker 2 (03:03):
Well, you're getting a bit ahead of yourself, Ryan, because
the updates will be delivered tomorrow and I will comment
in detail on those there. The government has had a
range of short term fiscal intentions and long term objectives,
and we remain committed to the task we've set for ourselves,
which is getting the books back in balance, getting getting
spending as a.
Speaker 1 (03:23):
Proportion you're committed to surplus, as.
Speaker 2 (03:25):
Is getting the books back in balance is a driving
goal for this government.
Speaker 1 (03:30):
Are you going to change the are you considering changing
the date by which you return the books to surplus?
Speaker 2 (03:36):
At the budget last year we indicated that we were
looking at the indicators used to describe what's known as
the operating balance colloquially referred to as the surplus that
has been measured a number of different ways over the years,
and we wanted to look at how it's currently made up,
particularly examining the role of self funded Crown entities including
(03:59):
aces SEE, who will have short term fluctuations but remain
long term funded. And so we'll be announcing the results
of that review tomorrow.
Speaker 1 (04:09):
There's not going to be any as Aischaviral puts it,
book cookery going on here.
Speaker 2 (04:15):
Absolutely not. It's actually in our interests to be as
open and transparent with New Zealanders as we can about
the state that New Zealand's finances are in, because what
this is about is how we can live within our
means and how we can ensure that we keep delivering
the frontline services that people deserve, that we're not over
taxing people and that we're not labeling the next generation
(04:38):
with excessive levels of debt. So we want New Zealanders
to understand the true size of the predicament we have inherited,
and we want them to have confidence that we are
managing through that effectively.
Speaker 1 (04:49):
Okay, just so I understand what you're saying. Are you
saying that you will not delay the surplus but rather
allow Crown companies to take on more debt?
Speaker 2 (04:57):
Is that No, that's not what I'm saying. What I'm
saying is that tomorrow I'll give you an update on
the forecasts across arrangement indicators, and I will also give
an update on our review of the Crown Operating Balance measure.
Speaker 1 (05:10):
You've got no FTA Withindia in sight, Seymour's red tape
seems to be looking at boos at hairdresses. Thus far,
tax cuts haven't boosted growth, Productivity is a bit buggered,
potentially another delayed surplus, and we haven't even taken into
account Trump's tariffs yet. Things looking less rosy than you
would have hoped.
Speaker 2 (05:29):
We have a government that is taking every step it
can to lean towards growth. Now, whether that's the fast
track legislation, getting big developments through, whether that's rewriting the
Resource Management Act so it's easier to build houses, getting
rid of some of the red tape in the Building Act,
whether that's the free trade agreements we've struck with the
UAE and the GCC, whether that's our commitment to saying
(05:51):
yes to more inward bound international investment. Upscilling kids so
they're not leaving school unable to read, write and do maths,
making sure our SONT system is more commercially plausible. All
of these initiatives are about improving the productive capacity of
the New Zealand economy. Now, no one promised that overnight
everything would be fixed, but we did promise that every
(06:13):
week we're in office, we will do things to make
this economy go faster, and we've been working at pace.
Speaker 1 (06:19):
You said last week that you were putting the banks
on notice, that the big Australian owned banks should be
listening to what you were saying and that they should
be changing their behavior. Have a listening.
Speaker 2 (06:29):
We're putting the major banks on notice. We expect them
to act on the Commerce Commission's recommendations.
Speaker 1 (06:37):
Have any of them got in touch with you since
then come with their tail between their legs.
Speaker 2 (06:42):
No, but I have noted the public statements of a
few have said had assured us that they're getting on
with it. That's what we need to see. I will
judge them by their actions, not their words. I want
to see switching services improved. I want to see open
banking accelerated. I want to see it easier for New
Zealanders to pair the terms of their home loans. I
want there to be easier access to bank accounts than
(07:05):
banking services for many people. So those are the tangible
actions we expect to see. And as I said last week,
they are on notice. They should get on with it.
Speaker 1 (07:12):
Will you resign if you don't get those results.
Speaker 2 (07:16):
I've long since departed from the idea of throwing a
resignation around. It's up to the banks to do their bit,
and as a government, we've been clear if they don't
do their bit, then we are prepared to regulate or
to use the other policy tools we have at our disposal.
Because it's not actually about me, is it, Ryan. It's
about Keywi getting a fair deal from their bank. The
(07:37):
banks shouldn't be taking us for a ride. We've had
the Commerce Commission report says it's not competitive. It says
there's things they can do to make it fairer. They
should do it.
Speaker 1 (07:46):
The problem is that you're not the first politician to
say that you're going to rain the banks in and
you're going to change their behavior. The banks keep laughing
from Sydney. Nothing changes. So we ask the politicians for
a bit of a guarantee to make sure that they're
a man of their word.
Speaker 2 (07:59):
I'll guarantee I keep taking action. I've already taken significant
actions that the last government didn't. I've got a financial
Policy remit which puts the emphasis back on competition for
the way the Reserve Bank does its job. I've made
very clear my expectations to the Reserve Bank that I
want them to be looking at, who can use the
word bank, the capital requirements for being a bank, access
to the exchange settlement system. I've also laid out our
(08:20):
plans to ensure key we Bank can get the capital
it needs to grow. And I'm monitoring this much more
closely than previous governments have. And I've put the banks
on not so you'll keep seeing action from us in
this space.
Speaker 1 (08:33):
Okay, let's move on talk about revenue, would you rule
out any new revenue measures to try and balance the books.
Speaker 2 (08:40):
My first port of call is getting spending under control,
because when you look at what happened to the books
over recent years, the big thing that changed was the
amount of government spending is a proportion of the economy.
It leapt to levels well beyond what had been seen historically,
and we want to bend that back down and have
already delivered more than twenty three billion dollars of savings
towards that goal. I want to keep doing that because
(09:01):
we have to get our house and order on the
spending front. You can't just keep treating Kiwis like an
a AM. At the same time, I've been careful not
to rule out revenue measures in particular because we need
to make sure that the tech system is fear and
has integrity, and that's where we're looking in the charities area,
for example. But also because we acknowledge to meet the
(09:22):
infrastructure deficit New Zealand now faces, there will be new
revenue tools needed, and you saw, for example, Simmy and
Brown are announcing tolling measures last week. We are continuing
to think about how we fund infrastructure and that will
involve new revenue measures.
Speaker 1 (09:37):
Other than tolling.
Speaker 2 (09:39):
Yes, potentially value capture tools and other tools that are
used in other jurisdictions around the world.
Speaker 1 (09:44):
We are the tools well.
Speaker 2 (09:47):
Value capture, for example, is about saying, if a really
extraordinary motorway gets built by your piece of land, and
suddenly your piece of land goes up considerably in value
because it's a great place to build houses, then we
might look at how we could get some of that
upside game as a revenue source.
Speaker 1 (10:05):
All right, big day for you tomorrow, So I won't
keep you. We might actually see you back on the
show tomorrow. But if we don't, what have you got
plans for summer? A break of some type? I hope, yeah,
look I do.
Speaker 2 (10:19):
I'm really looking forward to having Christmas with my family,
my brother and sister, and then we take our kids
to a little beach where they do surf life saving
and we geekily read books and do puzzles and maybe
have a G and T or two. And I just
can't wait to spend some time with the Let's spend
some time with the kids and with my husband.
Speaker 1 (10:37):
It's going to be great, absolutely well deserved. Nicholas. Thank
you very much for being Hopefully you don't have to
get the ferry there it was, don't answer, don't answer,
lovely to have you on the program as always, Take
care and we might see tomorrow. For more from Heather
Duplessy Allen Drive, listen live to news Talks it'd be
(10:58):
from four pm weekdays, or follow the podcast on iHeartRadio
Nikola Willis is the Finance Minister, and a big day tomorrow.
The half yearly Economic and Fiscal Update from the Treasury
will tell us basically the state of the books and
how New Zealand's accounts are looking going forward, and the
government will respond in a budget policy statement led by
Nikola Willis. Who's with me this evening. Good evening, minister,
good evening. Run not going to be good news tomorrow.
Speaker 2 (00:20):
Well, I think everyone knows that the government has inherited
very challenging economic conditions and that is being reflected in
the books as the Treasury unwind the overly optimistic forecasts
from a couple of years ago. So tomorrow the Treasury
will share their updated forecasts and we will share our
response to that. I think what we've been consistent in
(00:43):
saying is this is a time we need to be
very careful with how we spend New zealanders money. And
what we know is that things would be a lot
worse if we'd continued with the spending track we inherited
from the last government.
Speaker 1 (00:55):
How can you trust their overly optimistic forecasts.
Speaker 2 (01:00):
The Treasury have been doing since a couple of years
ago is revising some of the assumptions they made after COVID.
There's two key things. One they thought that we'd come
out of the current recession earlier and more vigorously than
we have. And the second is that they read into
a bit of a bounce back and productivity and text
(01:23):
to GDP extrapolated that forward, and they've then been progressively
having to unwind that. So the books that we're seeing
now have actually always been the case. It's just that
Treasury prior to the election was being overly optimistic in
the forecasts that they shared.
Speaker 1 (01:40):
Do you trust treasuries predictions? Now?
Speaker 2 (01:43):
Look? I do. Forecasts are forecasts, they move up and down.
There's all sorts of factors that can impact them. But
do I think that Treasury do all of the things
that they should be expected to do when you're doing
the forecasting? Yes? Does that mean we should test some
of the assumptions at them, compare them with other updates
from the Reserve Bank and others. Yes, of course we
(02:03):
should do that too.
Speaker 1 (02:05):
You were brutal on Grant Robertson for delaying surplus, delaying surplus,
delaying surplus. You're going to again delay surplus? Are you
embarrassed by that?
Speaker 2 (02:16):
Not at all. I was brutal on Grant Robertson because
despite their being escalating inflation, he decided to put his
foot down on the spending accelerator. You know, in Budget
twenty two he committed more than nine billion dollars of
additional spending every year, even while inflation was through the roof.
What we said we do was bring restraint back. We
(02:37):
have and what I know, beyond a shadow of a
doubt is if we continued the approach of the last
government was reckless spending, the economy would be in worse
shape right now, New Zealanders would be in worse shape,
and the books would be dreadful.
Speaker 1 (02:53):
Your delaying surplus again, will you commit to it? And
which means we're not going to get back to surplus
within your first term. Will you even promise to get
back to surplus in your second?
Speaker 2 (03:03):
Well, you're getting a bit ahead of yourself, Ryan, because
the updates will be delivered tomorrow and I will comment
in detail on those there. The government has had a
range of short term fiscal intentions and long term objectives,
and we remain committed to the task we've set for ourselves,
which is getting the books back in balance, getting getting
spending as a.
Speaker 1 (03:23):
Proportion you're committed to surplus, as.
Speaker 2 (03:25):
Is getting the books back in balance is a driving
goal for this government.
Speaker 1 (03:30):
Are you going to change the are you considering changing
the date by which you return the books to surplus?
Speaker 2 (03:36):
At the budget last year we indicated that we were
looking at the indicators used to describe what's known as
the operating balance colloquially referred to as the surplus that
has been measured a number of different ways over the years,
and we wanted to look at how it's currently made up,
particularly examining the role of self funded Crown entities including
(03:59):
aces SEE, who will have short term fluctuations but remain
long term funded. And so we'll be announcing the results
of that review tomorrow.
Speaker 1 (04:09):
There's not going to be any as Aischaviral puts it,
book cookery going on here.
Speaker 2 (04:15):
Absolutely not. It's actually in our interests to be as
open and transparent with New Zealanders as we can about
the state that New Zealand's finances are in, because what
this is about is how we can live within our
means and how we can ensure that we keep delivering
the frontline services that people deserve, that we're not over
taxing people and that we're not labeling the next generation
(04:38):
with excessive levels of debt. So we want New Zealanders
to understand the true size of the predicament we have inherited,
and we want them to have confidence that we are
managing through that effectively.
Speaker 1 (04:49):
Okay, just so I understand what you're saying. Are you
saying that you will not delay the surplus but rather
allow Crown companies to take on more debt?
Speaker 2 (04:57):
Is that No, that's not what I'm saying. What I'm
saying is that tomorrow I'll give you an update on
the forecasts across arrangement indicators, and I will also give
an update on our review of the Crown Operating Balance measure.
Speaker 1 (05:10):
You've got no FTA Withindia in sight, Seymour's red tape
seems to be looking at boos at hairdresses. Thus far,
tax cuts haven't boosted growth, Productivity is a bit buggered,
potentially another delayed surplus, and we haven't even taken into
account Trump's tariffs yet. Things looking less rosy than you
would have hoped.
Speaker 2 (05:29):
We have a government that is taking every step it
can to lean towards growth. Now, whether that's the fast
track legislation, getting big developments through, whether that's rewriting the
Resource Management Act so it's easier to build houses, getting
rid of some of the red tape in the Building Act,
whether that's the free trade agreements we've struck with the
UAE and the GCC, whether that's our commitment to saying
(05:51):
yes to more inward bound international investment. Upscilling kids so
they're not leaving school unable to read, write and do maths,
making sure our SONT system is more commercially plausible. All
of these initiatives are about improving the productive capacity of
the New Zealand economy. Now, no one promised that overnight
everything would be fixed, but we did promise that every
(06:13):
week we're in office, we will do things to make
this economy go faster, and we've been working at pace.
Speaker 1 (06:19):
You said last week that you were putting the banks
on notice, that the big Australian owned banks should be
listening to what you were saying and that they should
be changing their behavior. Have a listening.
Speaker 2 (06:29):
We're putting the major banks on notice. We expect them
to act on the Commerce Commission's recommendations.
Speaker 1 (06:37):
Have any of them got in touch with you since
then come with their tail between their legs.
Speaker 2 (06:42):
No, but I have noted the public statements of a
few have said had assured us that they're getting on
with it. That's what we need to see. I will
judge them by their actions, not their words. I want
to see switching services improved. I want to see open
banking accelerated. I want to see it easier for New
Zealanders to pair the terms of their home loans. I
want there to be easier access to bank accounts than
(07:05):
banking services for many people. So those are the tangible
actions we expect to see. And as I said last week,
they are on notice. They should get on with it.
Speaker 1 (07:12):
Will you resign if you don't get those results.
Speaker 2 (07:16):
I've long since departed from the idea of throwing a
resignation around. It's up to the banks to do their bit,
and as a government, we've been clear if they don't
do their bit, then we are prepared to regulate or
to use the other policy tools we have at our disposal.
Because it's not actually about me, is it, Ryan. It's
about Keywi getting a fair deal from their bank. The
(07:37):
banks shouldn't be taking us for a ride. We've had
the Commerce Commission report says it's not competitive. It says
there's things they can do to make it fairer. They
should do it.
Speaker 1 (07:46):
The problem is that you're not the first politician to
say that you're going to rain the banks in and
you're going to change their behavior. The banks keep laughing
from Sydney. Nothing changes. So we ask the politicians for
a bit of a guarantee to make sure that they're
a man of their word.
Speaker 2 (07:59):
I'll guarantee I keep taking action. I've already taken significant
actions that the last government didn't. I've got a financial
Policy remit which puts the emphasis back on competition for
the way the Reserve Bank does its job. I've made
very clear my expectations to the Reserve Bank that I
want them to be looking at, who can use the
word bank, the capital requirements for being a bank, access
to the exchange settlement system. I've also laid out our
(08:20):
plans to ensure key we Bank can get the capital
it needs to grow. And I'm monitoring this much more
closely than previous governments have. And I've put the banks
on not so you'll keep seeing action from us in
this space.
Speaker 1 (08:33):
Okay, let's move on talk about revenue, would you rule
out any new revenue measures to try and balance the books.
Speaker 2 (08:40):
My first port of call is getting spending under control,
because when you look at what happened to the books
over recent years, the big thing that changed was the
amount of government spending is a proportion of the economy.
It leapt to levels well beyond what had been seen historically,
and we want to bend that back down and have
already delivered more than twenty three billion dollars of savings
towards that goal. I want to keep doing that because
(09:01):
we have to get our house and order on the
spending front. You can't just keep treating Kiwis like an
a AM. At the same time, I've been careful not
to rule out revenue measures in particular because we need
to make sure that the tech system is fear and
has integrity, and that's where we're looking in the charities area,
for example. But also because we acknowledge to meet the
(09:22):
infrastructure deficit New Zealand now faces, there will be new
revenue tools needed, and you saw, for example, Simmy and
Brown are announcing tolling measures last week. We are continuing
to think about how we fund infrastructure and that will
involve new revenue measures.
Speaker 1 (09:37):
Other than tolling.
Speaker 2 (09:39):
Yes, potentially value capture tools and other tools that are
used in other jurisdictions around the world.
Speaker 1 (09:44):
We are the tools well.
Speaker 2 (09:47):
Value capture, for example, is about saying, if a really
extraordinary motorway gets built by your piece of land, and
suddenly your piece of land goes up considerably in value
because it's a great place to build houses, then we
might look at how we could get some of that
upside game as a revenue source.
Speaker 1 (10:05):
All right, big day for you tomorrow, So I won't
keep you. We might actually see you back on the
show tomorrow. But if we don't, what have you got
plans for summer? A break of some type? I hope, yeah,
look I do.
Speaker 2 (10:19):
I'm really looking forward to having Christmas with my family,
my brother and sister, and then we take our kids
to a little beach where they do surf life saving
and we geekily read books and do puzzles and maybe
have a G and T or two. And I just
can't wait to spend some time with the Let's spend
some time with the kids and with my husband.
Speaker 1 (10:37):
It's going to be great, absolutely well deserved. Nicholas. Thank
you very much for being Hopefully you don't have to
get the ferry there it was, don't answer, don't answer,
lovely to have you on the program as always, Take
care and we might see tomorrow. For more from Heather
Duplessy Allen Drive, listen live to news Talks it'd be
(10:58):
from four pm weekdays, or follow the podcast on iHeartRadio
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