April 30, 2025 • 35 mins
After a tough few years for inflation, interest rates, and investor confidence, Nicola Willis is charged with not only repairing but expanding the economy. So how will our Minister of Finance and Economic Growth make that happen?
Get a preview of the upcoming Budget, and hear how the Minister plans to strike a balance between stimulating growth and managing spending.
How will we prioritise investment into key areas like health, education, and defense? How can we reduce NZ’s debt and attract international investing and lending? Can new trade agreements counteract the infamous Trump tariffs?
Plus, how the government plans to bring financial literacy into classrooms.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Someone said to me the other day, Oh, you know,
shouldn't you We be doing retaliatory tariffs, and you know
it's a bit like throwing a ping pong ball and
an elephant, isn't it. Hey, Look, I'd love to be
generous and spray the money down around. That would make
my job a lot easier, to be honest, But I'm
very aware of the context in which we're operating. I'm
thinking very hard about in an environment of instability, what
(00:21):
are the policies the government can pursue to give our
local businesses and entrepreneurs the nudge that says be confident
about investing.
Speaker 2 (00:34):
Cureder. Welcome to shed Lunch, brought to you by Shes's.
My name is Leighton Roberts, and today I'm joined by
the Minister of Finance, Nikola Willis. More than just managing
the country's purse string, the Minister has also been charged
with growing New Zealand's economy. She does this as Minister
for Economic Growth. So in this episode we dig into
the impact of the US tariffs and post on New Zealand,
(00:55):
the leavers, the government will be pulling to stimulate growth,
and what Kiwis can expel from the upcoming budget out
later this month. Before we get started, here's some important information.
Speaker 3 (01:06):
Investing involves the risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 2 (01:20):
Well, thank you so much for joining us, Miss Willis.
Speaker 1 (01:22):
Hey, look great to be here. I'm not particularly vain,
but it is raining hard and well income days find
that's the hair situation.
Speaker 2 (01:29):
Look fantastic, but outside is miserbral, so I'll definitely confirm that. Look,
let's get straight into a New Zealand economy and the
position that we're in at the moment. There are signs
now that possibly we're through the worst of it, starting
to see an upswing through twenty twenty five, and I'm
just really interested in your thoughts on this at the moment.
Speaker 1 (01:46):
Yeah, Look, New Zealand's come through such a tough time,
haven't we. Because post COVID we have very high inflation,
very high interest rates that slowed things down in the economy.
There's a lot of pain for businesses but also for
households who are still dealing with that higher cost base
that we've come through, but the road out is looking
really good. And I know that everyone is focused rightly
(02:09):
on global instability and what's happening in the world post
Trump's tariff announcements, and yeah, that's a headwind for New Zealand,
but we are on the growth trajectory. We will be
growing faster over the next few months than we have
over the past few months, and next year we're forecast
to be growing even faster. So this is a time
of opportunity for New Zealanders and I think we have
(02:30):
a lot to be feeling positive about in this economy.
Speaker 3 (02:32):
Yeah.
Speaker 2 (02:32):
Great. I always thinking about the last year. We heard
a lot about the sort of survived to twenty five,
and then that became thrive and twenty five and then
now I'm wondering if we're still there or for we're
thinking like it's sort of pick up six and twenty six.
But I'm just wondering we think we are timing wise
coming into the next year.
Speaker 1 (02:48):
Look, I think where we are as we are going
to be out the worst of it, and we are
now on the bit where the thriving starts to happen.
But I'm also really conscious that when people see that
instability internationally, they factor that in here at home. And
so when I'm thinking about what does the government need
to do in this moment to make sure that the
(03:10):
potential for really rapidly accelerating growth actually over the next
twelve and twenty four months, that that potential is fulfilled.
Our job, I think, is to make sure that we're
putting in place policies and actions that give people confidence,
in particular to invest because what you're seeing internationally as
people are pausing on the investment, New Zealand should position
(03:31):
ourselves as a safe haven for investment. We have stable democracy,
stable institutions, stable regulatory framework, a government that's fundamentally pro growth,
pro trade, pro international investment, and all of those things
position us well. We also have a constellation of trade agreements.
We've always been the warriors out there fighting for export markets,
(03:54):
and so on that context, I think that if I
was an international thinking where do I want to plant
my money, who do I want to be doing business with,
I'd be looking to New Zealand, and we have an
opportunity to lean into that.
Speaker 2 (04:06):
Yeah, small sample size here, but made me think we've
actually had some quite random emails come our way for
opportunity to trade the US market, but through a business
that's not in the US, so like sort of these
random opportunities and that might come from different countries, particularly
on the export space for a technology company like US,
but opportunities have never come from where you think going to.
Speaker 1 (04:28):
And I am hearing stories like that. I was speaking
with someone from Garage Project, you know, boutique beer maker
here and.
Speaker 2 (04:35):
Will there was botique beer, yeah, and.
Speaker 1 (04:37):
Great business and they said, look, they've just had one
of the largest orders they've ever had in from China,
who of course contemplating the reality that American craft beer
might not be such a great proposition anymore. So there
will be those niche opportunities and more sensitive though, because
there'll also be those exporters who are impacted.
Speaker 2 (04:54):
Yep, yep completely. I mean, we've got straight into it,
so we might as well cover it a little bit deeper.
But it's somewhat of a political curve for what I'd imagine,
which is the Trump's tariffs and very much to talk everywhere,
been posed here in New Zealand on more or less
every country. What do you think the actual impacts of
this and looking like what's in your map and radar
at the moment for dealing with these Yeah.
Speaker 1 (05:16):
Look, I think to some extent he did campaign on it,
so we knew it was coming, and actually to some
extent we what sort.
Speaker 2 (05:22):
Of number did you have in your mind?
Speaker 1 (05:24):
Well, I chose not to have a number. I mean,
it's not a predictable man, is he. I think the
key thing right now is the uncertainty, because what happened
on day one is different from what's now unfolding, and
we can expect there will be changes in the US
policy position, and likely the China policy position and that
of other countries over the next few weeks and months.
(05:46):
And I think that uncertainty, as much as anything else,
is what's making it really difficult globally, because what you're
seeing businesses and investors doing is just saying, hold up,
hold up, let's pause until we know what the lie
of the land is. So by consensus, economists internationally are saying,
come what May, there's going to be slower growth across
(06:08):
the world. That always has an impact on New Zealand.
Because we're an open trading economy. Our treasury is forecasting
that the growth that we were predicting back in December
will now be lower than we had thought, but it's
still growth is just not going to be as fast
as we were hoping it would be, and that's because
(06:29):
we will be buffeted by these ones that are coming internationally.
So when we grow slower, obviously that's harder in terms
of job creation and income creation. But fundamentally I always
have to worry about it too, because I'm the bean
counter in the government, and less growth means less revenue.
Less revenue makes it harder for me to balance the
(06:50):
books and make all the investments that we need to
make as a country. So we see our job as
really keeping a steady course, making sure we are doing
the investments needed, whether it's health, education, you know, the
defense force, which is becoming increasingly strategically important. And we
can do that by being careful about how we prioritize.
But fundamentally, the best way for me to make our
(07:13):
books healthier is to get that growth trajectory faster. So
I'm thinking very hard about in an environment of instability,
what are the policies that government can pursue to give
our local businesses and entrepreneurs the nudge that says, be
confident about investing, be confident about taking on the next market,
taking the next step, so that.
Speaker 2 (07:34):
The uncertainty, you know, it's always uncertain really right, if
you look back on history, we've never really been great forecasters.
It's not a fantastic human trait.
Speaker 1 (07:44):
But any one who watches the weather forecast knows that completely.
Speaker 2 (07:48):
And you know, we have a bit of a front
row seat to a lot of it, because markets tend
to reflect how people are feeling, and people don't like uncertainty,
and therefore markets don't and in their place, sir. And
then I was just I literally just read the article
from President Trump giving his one hundred day speech and
saying that he wants to be the pope. All right,
ye that specifically that would be the best job. All right, Well,
(08:10):
I'm just not going to take a guess on that anymore.
But what he did say was that he's only just
getting started, and that sort of made me think, wow,
if this is just getting started. But so, how as
a government you do forecast and plan to that, and
what sort of mitigations you're putting in place towards this?
Given we can be reasonably one thing, we can be
quite confident on is that the uncertainty will continue.
Speaker 1 (08:28):
Yeah, So there's a couple of things first in terms
of the forecasts of what the global trajectory will look
like and therefore what it looks like at home to
some extent that stays outside of our control, because what
he does won't be influenced by what we do. Someone
said to me the other day, Oh, you know, shouldn't
(08:49):
you we be doing retaliatory tariffs, and you know, it's
a bit like throwing a ping pong ball and an elephant,
isn't it.
Speaker 2 (08:54):
And that's not.
Speaker 1 (08:55):
All that will do is harm consumers here at home
who will end up paying higher prices and business is
here at home. So instead, what we're thinking about as
to things, first of all, providing some stability in our
own for school settings, making sure that we're still on
track to get back to balanced books as a country,
because you can appreciate that when there's global market volatility.
(09:18):
Lenders on whom New Zealand is very dependent, we're currently
every Thursday afternoon, New Zealand issues around five hundred million
dollars worth of bonds. We need to look like a
good place to be lending to and investing so we've
made adjustments to our own position to make sure that
we're still on track to get back into balanced books territory.
(09:41):
We think that's quite important right now. The second thing
is just being clear that our exporters are going to
need us. So in the first instance, we have established
hotlines websites through the Ministry of Foreign Afairs and Trade
and through MZTE to make sure exporters can get the
information they need about what's a quickly changed environment. We've
(10:01):
got a thousand companies that we work really closely with
through MZTE, who we've been running seminars and really intense
support for, and we're going to keep that going. We
need to make sure that export is trying to get
information can get it. That's going to be really important
over the next little while. And then fundamentally strategically, New
Zealand has always been a country that has pushed for
(10:22):
a rules based trading system where countries trade with each other,
and we want to keep that role in the world,
so that means forging new free trade agreements is more
important than ever. You saw the Prime Minister kick off
the beginning of the year with a new arrangement with
the United Arab Emirates, so really pushing into those Middle
East markets. We've opened trade negotiations with India which are
(10:46):
continuing to progress well despite global turmoil, and I think
this is actually a time to double down on the
trade agreements we do have and make sure that we're
a good partner because that's how our exporters get access
for their products.
Speaker 2 (11:00):
Over the last this uncertainty of the last two weeks
has driven some of the highest training volumes we've actually
seen on the platform, which again investing reflects people's confidence
in the future. And so I think whilst is key,
we do tend to be quite good in conversation having
the negative part of it, like it's a nice way
just to have a bit of a winge with friends
(11:20):
and stuff like that, but how we act on mass
behind that can be quite different totally.
Speaker 1 (11:24):
Look that the A and Z Business Confidence Survey came
out today and instantly sort of stood out to me
was while people were generally less confident about the economy
than they were pre Trump, at the same time, some
of them were more confident about the conditions for their
own business. They were reporting high levels of confidence for
their business than they were for the economy as a whole,
but of course all the economy is is each individual
(11:48):
business added together. And so that gives me heart that
individual businesses are still confident about what the next few
months looks like for them. Yeah, I feel a part
of my job, the responsibility I have is to be
optimis stick and to remind people of the good things
going on because you know, for all of their own reasons,
our mainstream media will often emphasize conflict or crime or
(12:10):
negative things, and you don't often see stories of By
the way, did you know that this new business is
doing amazing stuff? Did you know that the Hawthorn Institute
is coming up with world leading scientific breakthroughs into algay
and seaweed with Nesley is their major major research partner
because they think they're the best in the world that
creating protein from the sea, Like, did we hear about that?
(12:33):
And I get to see these success stories all the time.
You know it picks peanut butter. I was there the
other day. There's a little business that started with a
fifty five year old who decided to make peanut butter
in a concrete mixer for the market, and he is
now making twenty five thousand jars of peanut butter a day.
So we need to tell these stories about ourselves because
(12:53):
we're awesome. I've just been at the Fintech Festival meeting
all these people who are taking a risk to run
a new financial business because they see opportunity. And I
see that opportunity, and I think we should talk ourselves
into that and not into the things that are hard. Yes,
there are challenges, of course there are, but let's also
highlight the positive.
Speaker 2 (13:12):
Coming back to these geo political situations where all as
businesses trying to make changes to our business and thinking
about that. You've made some early announcements on the budget
and just interested to hear how much of this change,
which has come very quickly over the last couple of weeks,
is playing into your thinking there and what New Zealanders
should start to expect for the budget in a month
(13:34):
or so.
Speaker 1 (13:34):
Yeah. Well, look, I feel quite a solemn durty in
this job to deliver responsible budgets because hey, look, I'd
love to be generous and spray the money down around.
That would make my job a lot easier, to be honest,
But I'm very aware of the context in which we're operating,
which is that New Zealand rightly took on debt during COVID.
(13:54):
We can have a debate about whether we took on
too much, but we now have dead at levels not
seen since the mid nineteen nineties, for context, where at
forty two percent government debt to the size of our economy.
Historically it's hovered between five and twenty five percent.
Speaker 2 (14:09):
Now the probably what do you think is like a
good level? Now what we'll we I'd.
Speaker 1 (14:12):
Like us to see come back down to forty and
then hover between twenty and forty over time, depending on
where we are in the side.
Speaker 2 (14:18):
Because we're still low globally, Is that right?
Speaker 1 (14:20):
Yeah, we are, and we should borrow for investments that
are going to drive our future productivity. Absolutely on board
for that. The problem that we always need to be
aware of is that if something major happens, you know,
big earthquake, big biosecurity incursion, we're then going to have
to go out to the world and borrow a lot more.
(14:41):
And there's a ceiling. Yeah, that's right, And there's a
ceiling at which we don't look as good as proposition.
And so it's about having enough headroom that when that
big event comes, we can borrow without getting into it's
basically I worry about the death spiral of a really
high interest bill on our debt. So, for context, right now,
spill is nine billion dollars a year on our debt,
(15:03):
up from hovering just around three previously. Nine billion hard
number to understand because it's so big. That is more
than the amount of funding we put into the defense force,
the prison service, the police and customs combined. All of
that's just context for the fact that I then say
(15:23):
the next thing, which is that right now we are
borrowing to pay for the grocery so we're not just
borrowing for assets. We're borrowing for our day to day spending.
There's a thirteen billion dollar deficit this year between what
we as a government are taking in in revenue and
other earnings and what we're spending to keep the economy going.
That's the right thing to do, because New Zealanders need
(15:44):
stability and their welfare supports and the funding for our
schools and hospitals. It just can't go on forever. Now
I've taken the gradual approach. Some people would say sort
that out immediately. I think that would create a lot
of pain for people, and it would actually create instability
in the economy. So we've set a that says we
will get the books back and balance by twenty twenty nine.
We think that's reasonable period of time to narrow that
(16:07):
gap between what we spend and earn, and that will
allow us to start paying down debt. Now, because of
the Trump stuff, the forecasts I've been receiving told me
you're now going to be off track to meet that
goal of getting the books back and balance unless you
make for change.
Speaker 2 (16:23):
The interest rate's been held up because of what listen,
new uncertainty or what is it that's driving Well.
Speaker 1 (16:28):
It's basically that because growth will be lower, we're forecasts
to be taking in less revenue, which has two effects.
One the deficit grows larger now and two we then
have to borrow more, which then creates a larger cost
there in terms of interest. So those effects on the
books mean in the absence of any reaction, I'd be
(16:49):
literally presenting a forecast to New Zealand that showed no
path to balanced books, and I don't think that's feasible,
both in terms of international lending but also in terms
of what's responsible. So we've said, look, we were planning
that our kind of our allowance, if you want to
call it, that would be two point four billion in
the coming for school year. Actually, we've gone and looked
(17:12):
really hard. We've found some more stuff we can reprioritize.
We've juggled around the other tens of billions of government
spending that we do, and that collectively means that we
will only need an allowance of one point three billion,
so a bit less, and that as to effects one,
it just means that we're borrowing less than the short
term than we would otherwise be doing. But it's doable
(17:35):
because with the reprioritization, I can still look everyone in
the eye and say we've got enough to make the
investments we clearly need in our health services, that we
clearly need, in our schools, that we clearly need in
our defense force, in law and order. Also got enough
room to make a few modest measures to support businesses
(17:57):
to grow, which is going to be really important over
this period. So I've made room for that, and I've
made room for some very modest, targeted cost of loving measures,
so I can do all of that and spend less.
So that's the right thing to do. I'll still be
spending more next year than this year. I mean, this
is the context, right, it's just about how much more
we're spending next year.
Speaker 2 (18:18):
Actually, I hadn't actually observed that.
Speaker 1 (18:20):
Yeah, we'll be spending more next year and the year
after that and the year after that. So the trend
is always up because things like super anuation.
Speaker 2 (18:27):
Lie.
Speaker 1 (18:28):
Yeah, the trend is always up. Yeah, that's right, things
like superinnuation. That bill just grows by baliance over the
next few years, you know, So we will be spending more,
but it's just a question of how steep that spending
more line is.
Speaker 2 (18:39):
The defense size of the defense spend. Has that been
a bit of surprise to you, like it was that
presumably when you were going through the election process that
probably wasn't.
Speaker 1 (18:49):
Yeah, it's definitely become much more of a top of
mind consumed for everyone in the world. I think we've
all observed that the strategic environment is far less stable
than it was, and New Zealand really has to look
at it through two lens. One, we have really solemn
commitment to our Pacific partners, who, to quite an extent,
(19:10):
you know, our Pacific family, rely on us to be
the ones that are survailing their ocean space to be
there if there's a disaster and they need help. So
that matters, and it's become clear that our defense force,
without a lot more investment, is going to have reduced
capability to do those things. The second part of it
is we need to be a good partner, you know,
(19:32):
particularly to Australia who our only ally, but also the
other countries who realistically we defend on, We depend on,
defend on you depend on to not only defend us
if we need defending, but also to defend the values
(19:52):
that we collectively as a world share, and so you
know right now that's playing out in Ukraine. New Zealand
is helping by training troops and at the same time
we want to keep being able to do those.
Speaker 2 (20:06):
Things alongside the country's per strings or being counter I
think you put it before. You'll now also have the
economic growth portfolio, so the Minister of Economic Growth as well.
So I'm just interested. You know, it seems to me
like they could quite easily contradict a little bit, whilst
there's also a lot of alignment. But I'm interested in
(20:27):
how you see those portfolios as being different, and then
how you manage those differences.
Speaker 1 (20:31):
Yeah, Well, I'm really pleased that they're sitting with me
together because one of the frustrations I had when I
became Minister of Finance was I would spend quite a
lot of time have quite lengthy conversations with my officials
at the Treasury about ten million dollars here that we
could make in savings or twenty million dollars an efficiency
(20:53):
that we could do here. Those conversations are important, but
the most important thing is what are we doing to
earn more? Because when you earn more, your choices are easier,
and so I wanted much more of a focus on growth,
on what the government's role is in making sure that
actually businesses are investing, our creating jobs are growing faster,
(21:17):
and the government has a huge role and it goes
across basically everything we do if you think about it,
from how we educate people and upskill them, what we're
doing with research and science, the regulatory and competitive settings
that we set for businesses, how we support trade and
international investment, what we do in terms of infrastructure that
businesses rely on. So it spans a huge amount of work,
(21:40):
But ministers get into their own little silo working on
their thing, and what I wanted to ensure them what
the Prime Minister wanted to ensure is that in all
we do, we are still focused on will this help
the boat go faster? Will this support growth? And let's
really focus our gender in on that because New Zealand
needs growth for everyone to have the living standards we
(22:00):
desire over these next few years.
Speaker 2 (22:03):
Does that change who you like engaging with very much
on a day to day like you sort of Treasury
seem to me more about the sort of accounting side
of it, I suppose.
Speaker 1 (22:10):
And then.
Speaker 2 (22:12):
And for the people who support you and your team,
does it they sort of wear jill hats as well?
Speaker 1 (22:16):
Like?
Speaker 2 (22:16):
How does that work in a practical I.
Speaker 1 (22:18):
Want to be kind to my folk at the Treasury.
That's still very important to me and what we do
is very important, but there it has changed. So I've
had this amazing experience, which is that I have been
visiting businesses around the country and just literally getting in
on their factory floors talking to them about what they
want to see the government focused on from a growth perspective,
(22:40):
and I have absolutely loved that. Whether it's going to
see the guys who started here in Wellington and are
now making electric bikes that they send all over the world,
whether it's going and visiting the small small startups who
are thinking about our food industry and where they can
take it next, whether it's going and visiting a dairy
farmer who now is feeling pretty happy about the world.
(23:03):
Those business conversations are where a government policy gets real
because instead of it being theoretical, it's look, this is
the one thing that if you guys could change that rule,
it would help. And I've got my officials right there
with me, and they're empowered through my Economic Growth portfolio
to go and talk to the relevant government agency and say,
the Ministry of Economic Growth is really concerned about it.
(23:23):
Can we fix it? And we can a lot of
the time. So that's hugely empowering and I love it
for you.
Speaker 2 (23:30):
Personally, do you feel like there's a I guess hierarchy
of the jobs aside? Do you feel like you skew
towards a sort of front wheel on that and your
own thinking between the two portfolios?
Speaker 1 (23:41):
For me, as I said earlier, I'm an optimist. I'm
a positive mindset person and so that's the part of
my job that really spins my wheels in terms of
getting me excited about the future. I view the finance
role as having some really critical enablers. You know, if
we don't have stable inflation, interest rates are soaring, it's
(24:01):
very hard to get growth, and so good fiscal economic
management really matters. But I view it, almost particularly in
this moment in time, as a role where it's a responsibility,
it's a duty, whereas the growth role as much more
about possibility and free wheeling. And so I get to
(24:22):
indulge that side of myself.
Speaker 2 (24:24):
Nice. So it she's like the whole purpose of our
business to create financial impartment for everyone. So we do
a huge amount of thought of this, and we also
do a lot of serving. And one of the things
we've noticed, and I'll take any opportunity I can speak
with someone in covenment about it, but is the key
receiver settings and our surveys, for example, for the first
(24:46):
time showing appetite for our customers anyway to take a
hit today for something into the future. A couple of
questions here. Firstly, anything you think on that about the
sentiment of New Zealanders, which would be wider than our
customer base, who would more be more likely to follow
this closely, but then also any plans for the government
with a save a space specifically.
Speaker 1 (25:04):
Yeah. Look, I'm just going to first so very happy
to talk about keep we save it. Delighted too, But
first it's going to pick up on that point around
financial empowerment, because one of the things that I've observed
is the often quite large gap between New Zealanders who
have really great financial literacy and knowledge and understand compounding
interest rates, asset growth, dividends, returns, and those people can
(25:30):
then make really great financial decisions. And I'm sure a
lot of them are on your platform and are excited
about Chazy's. At the other end, there are some people
who are smart people. They're great people, but they went
brought up with those skills. It's not part of their
daily job, it's not part of their language. And I
worry about that gap because I truly believe that when
you have financial knowledge, you can make choices that secure
(25:51):
your future and your living standards. So I'm delighted. I
just have to say it on your show today that
the government has just announced that we are putting financial
literacy into all schools. Is a compulsory part of the curriculum. Yeah,
compulsory part of the curriculum and quite exciting because what
we've done is we've said everyone has to do it
up to year ten as part of the Social Studies curriculum.
(26:12):
Fairly teachers are going to say what resources am I
meant to use? So we've done a peer up with
the Retirement Commission where they're providing a number of different
resources on their platform that link to different parts of
the curriculum, and I hope to see the people supporting
that increase over time, so everything from banker to sorted.
I know Chesy's does some work in this area, so
(26:32):
I'd love to see you involved on the platform. And
that means that teachers have the tools they need to
teach this stuff. And that's what we need to see
because the set ways to keipisaver, which is I think
as soon as people go on to that sordid website
and put the numbers in and see what happens when
(26:53):
you make a higher rate of contribution and see how
much that can grow your asset base at retirement, then
their minds really start to wear over and they start
to think, oh gosh, this is the compounding effect if
I save just a little bit more now can have
a massive impact on my quality of life when I'm older.
Exciting thing about key we Saver, I think, and it's
(27:14):
part of the scheme that some people criticize but I celebrate,
is that it's not just about retirement. There's a whole
cohort of people who use it now to save for
their first time because let's be honest, not everyone when
they first enter the workforce is going to prioritize what's
happening when they're sixty five. But a lot of people
are entering key we Saver thinking about how do I
(27:36):
save for that first home? And it's a great tool
for enabling that. So I'm a supporter of Kei Saver.
I want to see people's key we Saver balances grow
and I will have more to say about it in future.
Speaker 2 (27:50):
Cool. Well hold that thought even Yeah.
Speaker 1 (27:54):
Yeah, yeah, yeah, I've been working away on it. I've
been taking a lot of advice and hopefully when I'll
be back on the podcast talking about it.
Speaker 2 (28:02):
So you also have a portfolio called Social Investment, Yeah,
which many listeners might not be too familiar with, but.
Speaker 1 (28:10):
It's a prime Minister refers to it as your passion project.
Speaker 2 (28:13):
Right, So Firstly, why is it called social investment? And secondly,
how are you applying this new lens to affect how
you're leading the portfolios or your decisions that you're making
across the responsibilities that you have.
Speaker 1 (28:31):
So fundamentally, the way I think about social investment rather
than people use the phrase social welfare or social development
to describe the things that we rightly do as a
society to support people in need. The better thing is
if we make interventions and changes that stop the need
(28:51):
that we actually don't want people to have to be
dependent on government support and services into the future. We'd
much prefer them to have the issues and challenges in
their life resolved so that they can actually have independence
and choices. And I think of this through the lens
of an individual about how badly government does that sometimes.
I gave a speech last year about Jack. I want
(29:13):
you to imagine Jack. He's a young guy. He's living
in a house where there's family violence at home, there's
never really very much money. He stops going to school,
he gets in trouble with the law. Like there are
people like Jack out there, and it's very sad. Now
in Jack's life, the government is ever present. He is
probably engaging with the police. He's probably had a social
(29:36):
welfare worker. He's had someone from ordering a tamariki come
into his life. He's probably engaged with the local truancy service.
There's probably multiple community groups who have been contracted by
government to provide support to at risk youth like him.
There's people who are there to try and get him
into a job. There's lots of people and lots of
(29:56):
money going at Jack, but it ain't joined up and
it's not fundamentally breaking the cycle for him. So the
opportunity for government is to say, how can we better
use our dollars to make Jack's life actually better? And
my philosophical view, having worked in this area for a
long time and looked across the community, is often the
(30:18):
people who will make the biggest difference from Jack, for
Jack will be directly from his community, or it will
be a local non government provider that have been working
in that community for a very long time. When you
talk to those providers, they get often six seven, eight,
thirteen twenty one contracts from government, but it's impossible for
them because the contracts are focused on how many meetings
(30:39):
do you have, how many boxes have you ticked. They're
getting audited across all the contracts, and they say to us,
could you treat us like an investment. Could you come
to us and say these are the outcomes we want
for Jack and the people like him, and then give
us the space to innovate and do it properly. And
with the modern world of data, we can now do
that because we can track the progress that making. So
(31:00):
instead of old fashion multiple overlapping contracts, let's have one
contract and let's contract for outcomes. That's what social investment's about.
I went on a very long spiell.
Speaker 2 (31:09):
Didn't they contract for outcome? You came to get back together,
like is there a place for private capital play in
your thinking on this or is it just how you're
sort of managing from them?
Speaker 1 (31:21):
Yeah? Look there is in a few ways. I mean.
The first is that we have a big philanthropic sector
in New Zealand and there are real opportunities for us
to partner. Is government better with that sector to both
share the information we often have so that they know
both where the need is but also where investments can
make are making a big difference. Sometimes philanthropists are better
(31:43):
at doing the risky innovative things than we are. But
then they come up with something that they say, this
is really working like it is fundamentally a great investment,
and they want us to take it over so they
can fund the next innovative thing. And that's sometimes going
to make sense. But the other thing is, you know,
social bonds and those opportunities they can stand cap and
I'm interested in continuing to explore them. The challenge is
(32:03):
always proving that you're going to get a better outcome
that way than contracting with a provider who already exists directly.
So working through that policy challenge is something that I'm
taking advice on.
Speaker 2 (32:16):
So Lastly, a big driver for economic activity is confidence.
We've touched a little bit on that at the moment,
but confidence by business system vests consumers to spend flow
into each other a little bit. So with regards to
New Zealand economic sentiment, and my hope and my assumption
is that it will have approved and improved in twelve
months time, just intersting in what you think will have
(32:38):
been the main driver for that. When we look back
over the previous.
Speaker 1 (32:42):
Twelve months, it'll be people like you, Layton, It'll be
people like the people.
Speaker 2 (32:45):
Who listen, there's a lot of weight on my shoulders,
but I'll take it lock.
Speaker 1 (32:48):
But truly it will be It won't be that government
did this, think it will be individual businesses. Individual New
Zealander is saying, actually, right now, this is the time
I'm going to take another loan. I'm going to invest
in this idea that I've had. I'm going to take
this business. I'm going to expand it to a new market.
I am going to hire that new workforce to pursue
(33:10):
that new innovation. I am going to invest some money
in R and D that I reckon is going to
pay off. I'm going to do the next thing. And
so I genuinely think for this economy to have more
confidence than twelve months, we need to see momentum build
now by having individual firms, sectors, entrepreneurs saying let's actually
(33:31):
make the investment now to do that thing we know
could be brilliant. And there are so many things out
there that could be brilliant. So I want people investing
and doing it. And obviously every business will make its
own decisions. But when you do that, that is literally
where economic growth and confidence comes from.
Speaker 2 (33:48):
Nice completely such a mindset thing.
Speaker 1 (33:50):
So everyone listening to do it invest.
Speaker 2 (33:56):
So before we go, because we're like, firstly, appreciate, really
appreciate your time for sharing with us and unvestas today
and this access is another great thing about New Zealand.
So that's very much appreciated. But Budget days coming up
has some strange rituals associated with it. We've been told
that Sybil English used to eat a pie on budget Day.
(34:18):
We were just wondering if you had any particular snack
of choice.
Speaker 1 (34:22):
To because Grant Robertson used to have sausage rolls. So yeah,
that's the whole thing. It's like food related. Yeah. So
last year, what I had my kids do was bake
cookies for me and the Prime Minister so we could
have a little kind of morning tea coffee together. And
that was a really lovely thing actually, because my kids
came to watch the budget and they had some reflections
(34:44):
on my discussions of the ober garlic surplus, but mostly
they were reflected. Prime Minister really liked their biscuits. So
they have been thinking about what the next batch are
going to be for a year now, so I'm expecting
they're going to be pretty good. So that's one tradition,
and then I guess the other tradition that I really
like is obviously budgets, Like any great endeavor, involve hundreds,
(35:10):
if not thousands, of people working extremely hard. And I'm
lucky that I work with some of the most talented, wonderful, earnest,
hardworking people, and so on budget night, a small group
of them come together and we raise a glass to
celebrate the job done. So I'm looking forward to that great.
Speaker 2 (35:25):
Well be so luck Thank you, thank you, thanks everyone
for tuning in. You can watch Shared Lunch on YouTube,
or follow the podcast on Apple, Spotify, or wherever you
get your podcasts. Leave us a rating in a comment
about what you'd like to hear about next. Enjoy the
rest of your week.
Someone said to me the other day, Oh, you know,
shouldn't you We be doing retaliatory tariffs, and you know
it's a bit like throwing a ping pong ball and
an elephant, isn't it. Hey, Look, I'd love to be
generous and spray the money down around. That would make
my job a lot easier, to be honest, But I'm
very aware of the context in which we're operating. I'm
thinking very hard about in an environment of instability, what
(00:21):
are the policies the government can pursue to give our
local businesses and entrepreneurs the nudge that says be confident
about investing.
Speaker 2 (00:34):
Cureder. Welcome to shed Lunch, brought to you by Shes's.
My name is Leighton Roberts, and today I'm joined by
the Minister of Finance, Nikola Willis. More than just managing
the country's purse string, the Minister has also been charged
with growing New Zealand's economy. She does this as Minister
for Economic Growth. So in this episode we dig into
the impact of the US tariffs and post on New Zealand,
(00:55):
the leavers, the government will be pulling to stimulate growth,
and what Kiwis can expel from the upcoming budget out
later this month. Before we get started, here's some important information.
Speaker 3 (01:06):
Investing involves the risk you might lose the money you
start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 2 (01:20):
Well, thank you so much for joining us, Miss Willis.
Speaker 1 (01:22):
Hey, look great to be here. I'm not particularly vain,
but it is raining hard and well income days find
that's the hair situation.
Speaker 2 (01:29):
Look fantastic, but outside is miserbral, so I'll definitely confirm that. Look,
let's get straight into a New Zealand economy and the
position that we're in at the moment. There are signs
now that possibly we're through the worst of it, starting
to see an upswing through twenty twenty five, and I'm
just really interested in your thoughts on this at the moment.
Speaker 1 (01:46):
Yeah, Look, New Zealand's come through such a tough time,
haven't we. Because post COVID we have very high inflation,
very high interest rates that slowed things down in the economy.
There's a lot of pain for businesses but also for
households who are still dealing with that higher cost base
that we've come through, but the road out is looking
really good. And I know that everyone is focused rightly
(02:09):
on global instability and what's happening in the world post
Trump's tariff announcements, and yeah, that's a headwind for New Zealand,
but we are on the growth trajectory. We will be
growing faster over the next few months than we have
over the past few months, and next year we're forecast
to be growing even faster. So this is a time
of opportunity for New Zealanders and I think we have
(02:30):
a lot to be feeling positive about in this economy.
Speaker 3 (02:32):
Yeah.
Speaker 2 (02:32):
Great. I always thinking about the last year. We heard
a lot about the sort of survived to twenty five,
and then that became thrive and twenty five and then
now I'm wondering if we're still there or for we're
thinking like it's sort of pick up six and twenty six.
But I'm just wondering we think we are timing wise
coming into the next year.
Speaker 1 (02:48):
Look, I think where we are as we are going
to be out the worst of it, and we are
now on the bit where the thriving starts to happen.
But I'm also really conscious that when people see that
instability internationally, they factor that in here at home. And
so when I'm thinking about what does the government need
to do in this moment to make sure that the
(03:10):
potential for really rapidly accelerating growth actually over the next
twelve and twenty four months, that that potential is fulfilled.
Our job, I think, is to make sure that we're
putting in place policies and actions that give people confidence,
in particular to invest because what you're seeing internationally as
people are pausing on the investment, New Zealand should position
(03:31):
ourselves as a safe haven for investment. We have stable democracy,
stable institutions, stable regulatory framework, a government that's fundamentally pro growth,
pro trade, pro international investment, and all of those things
position us well. We also have a constellation of trade agreements.
We've always been the warriors out there fighting for export markets,
(03:54):
and so on that context, I think that if I
was an international thinking where do I want to plant
my money, who do I want to be doing business with,
I'd be looking to New Zealand, and we have an
opportunity to lean into that.
Speaker 2 (04:06):
Yeah, small sample size here, but made me think we've
actually had some quite random emails come our way for
opportunity to trade the US market, but through a business
that's not in the US, so like sort of these
random opportunities and that might come from different countries, particularly
on the export space for a technology company like US,
but opportunities have never come from where you think going to.
Speaker 1 (04:28):
And I am hearing stories like that. I was speaking
with someone from Garage Project, you know, boutique beer maker
here and.
Speaker 2 (04:35):
Will there was botique beer, yeah, and.
Speaker 1 (04:37):
Great business and they said, look, they've just had one
of the largest orders they've ever had in from China,
who of course contemplating the reality that American craft beer
might not be such a great proposition anymore. So there
will be those niche opportunities and more sensitive though, because
there'll also be those exporters who are impacted.
Speaker 2 (04:54):
Yep, yep completely. I mean, we've got straight into it,
so we might as well cover it a little bit deeper.
But it's somewhat of a political curve for what I'd imagine,
which is the Trump's tariffs and very much to talk everywhere,
been posed here in New Zealand on more or less
every country. What do you think the actual impacts of
this and looking like what's in your map and radar
at the moment for dealing with these Yeah.
Speaker 1 (05:16):
Look, I think to some extent he did campaign on it,
so we knew it was coming, and actually to some
extent we what sort.
Speaker 2 (05:22):
Of number did you have in your mind?
Speaker 1 (05:24):
Well, I chose not to have a number. I mean,
it's not a predictable man, is he. I think the
key thing right now is the uncertainty, because what happened
on day one is different from what's now unfolding, and
we can expect there will be changes in the US
policy position, and likely the China policy position and that
of other countries over the next few weeks and months.
(05:46):
And I think that uncertainty, as much as anything else,
is what's making it really difficult globally, because what you're
seeing businesses and investors doing is just saying, hold up,
hold up, let's pause until we know what the lie
of the land is. So by consensus, economists internationally are saying,
come what May, there's going to be slower growth across
(06:08):
the world. That always has an impact on New Zealand.
Because we're an open trading economy. Our treasury is forecasting
that the growth that we were predicting back in December
will now be lower than we had thought, but it's
still growth is just not going to be as fast
as we were hoping it would be, and that's because
(06:29):
we will be buffeted by these ones that are coming internationally.
So when we grow slower, obviously that's harder in terms
of job creation and income creation. But fundamentally I always
have to worry about it too, because I'm the bean
counter in the government, and less growth means less revenue.
Less revenue makes it harder for me to balance the
(06:50):
books and make all the investments that we need to
make as a country. So we see our job as
really keeping a steady course, making sure we are doing
the investments needed, whether it's health, education, you know, the
defense force, which is becoming increasingly strategically important. And we
can do that by being careful about how we prioritize.
But fundamentally, the best way for me to make our
(07:13):
books healthier is to get that growth trajectory faster. So
I'm thinking very hard about in an environment of instability,
what are the policies that government can pursue to give
our local businesses and entrepreneurs the nudge that says, be
confident about investing, be confident about taking on the next market,
taking the next step, so that.
Speaker 2 (07:34):
The uncertainty, you know, it's always uncertain really right, if
you look back on history, we've never really been great forecasters.
It's not a fantastic human trait.
Speaker 1 (07:44):
But any one who watches the weather forecast knows that completely.
Speaker 2 (07:48):
And you know, we have a bit of a front
row seat to a lot of it, because markets tend
to reflect how people are feeling, and people don't like uncertainty,
and therefore markets don't and in their place, sir. And
then I was just I literally just read the article
from President Trump giving his one hundred day speech and
saying that he wants to be the pope. All right,
ye that specifically that would be the best job. All right, Well,
(08:10):
I'm just not going to take a guess on that anymore.
But what he did say was that he's only just
getting started, and that sort of made me think, wow,
if this is just getting started. But so, how as
a government you do forecast and plan to that, and
what sort of mitigations you're putting in place towards this?
Given we can be reasonably one thing, we can be
quite confident on is that the uncertainty will continue.
Speaker 1 (08:28):
Yeah, So there's a couple of things first in terms
of the forecasts of what the global trajectory will look
like and therefore what it looks like at home to
some extent that stays outside of our control, because what
he does won't be influenced by what we do. Someone
said to me the other day, Oh, you know, shouldn't
(08:49):
you we be doing retaliatory tariffs, and you know, it's
a bit like throwing a ping pong ball and an elephant,
isn't it.
Speaker 2 (08:54):
And that's not.
Speaker 1 (08:55):
All that will do is harm consumers here at home
who will end up paying higher prices and business is
here at home. So instead, what we're thinking about as
to things, first of all, providing some stability in our
own for school settings, making sure that we're still on
track to get back to balanced books as a country,
because you can appreciate that when there's global market volatility.
(09:18):
Lenders on whom New Zealand is very dependent, we're currently
every Thursday afternoon, New Zealand issues around five hundred million
dollars worth of bonds. We need to look like a
good place to be lending to and investing so we've
made adjustments to our own position to make sure that
we're still on track to get back into balanced books territory.
(09:41):
We think that's quite important right now. The second thing
is just being clear that our exporters are going to
need us. So in the first instance, we have established
hotlines websites through the Ministry of Foreign Afairs and Trade
and through MZTE to make sure exporters can get the
information they need about what's a quickly changed environment. We've
(10:01):
got a thousand companies that we work really closely with
through MZTE, who we've been running seminars and really intense
support for, and we're going to keep that going. We
need to make sure that export is trying to get
information can get it. That's going to be really important
over the next little while. And then fundamentally strategically, New
Zealand has always been a country that has pushed for
(10:22):
a rules based trading system where countries trade with each other,
and we want to keep that role in the world,
so that means forging new free trade agreements is more
important than ever. You saw the Prime Minister kick off
the beginning of the year with a new arrangement with
the United Arab Emirates, so really pushing into those Middle
East markets. We've opened trade negotiations with India which are
(10:46):
continuing to progress well despite global turmoil, and I think
this is actually a time to double down on the
trade agreements we do have and make sure that we're
a good partner because that's how our exporters get access
for their products.
Speaker 2 (11:00):
Over the last this uncertainty of the last two weeks
has driven some of the highest training volumes we've actually
seen on the platform, which again investing reflects people's confidence
in the future. And so I think whilst is key,
we do tend to be quite good in conversation having
the negative part of it, like it's a nice way
just to have a bit of a winge with friends
(11:20):
and stuff like that, but how we act on mass
behind that can be quite different totally.
Speaker 1 (11:24):
Look that the A and Z Business Confidence Survey came
out today and instantly sort of stood out to me
was while people were generally less confident about the economy
than they were pre Trump, at the same time, some
of them were more confident about the conditions for their
own business. They were reporting high levels of confidence for
their business than they were for the economy as a whole,
but of course all the economy is is each individual
(11:48):
business added together. And so that gives me heart that
individual businesses are still confident about what the next few
months looks like for them. Yeah, I feel a part
of my job, the responsibility I have is to be
optimis stick and to remind people of the good things
going on because you know, for all of their own reasons,
our mainstream media will often emphasize conflict or crime or
(12:10):
negative things, and you don't often see stories of By
the way, did you know that this new business is
doing amazing stuff? Did you know that the Hawthorn Institute
is coming up with world leading scientific breakthroughs into algay
and seaweed with Nesley is their major major research partner
because they think they're the best in the world that
creating protein from the sea, Like, did we hear about that?
(12:33):
And I get to see these success stories all the time.
You know it picks peanut butter. I was there the
other day. There's a little business that started with a
fifty five year old who decided to make peanut butter
in a concrete mixer for the market, and he is
now making twenty five thousand jars of peanut butter a day.
So we need to tell these stories about ourselves because
(12:53):
we're awesome. I've just been at the Fintech Festival meeting
all these people who are taking a risk to run
a new financial business because they see opportunity. And I
see that opportunity, and I think we should talk ourselves
into that and not into the things that are hard. Yes,
there are challenges, of course there are, but let's also
highlight the positive.
Speaker 2 (13:12):
Coming back to these geo political situations where all as
businesses trying to make changes to our business and thinking
about that. You've made some early announcements on the budget
and just interested to hear how much of this change,
which has come very quickly over the last couple of weeks,
is playing into your thinking there and what New Zealanders
should start to expect for the budget in a month
(13:34):
or so.
Speaker 1 (13:34):
Yeah. Well, look, I feel quite a solemn durty in
this job to deliver responsible budgets because hey, look, I'd
love to be generous and spray the money down around.
That would make my job a lot easier, to be honest,
But I'm very aware of the context in which we're operating,
which is that New Zealand rightly took on debt during COVID.
(13:54):
We can have a debate about whether we took on
too much, but we now have dead at levels not
seen since the mid nineteen nineties, for context, where at
forty two percent government debt to the size of our economy.
Historically it's hovered between five and twenty five percent.
Speaker 2 (14:09):
Now the probably what do you think is like a
good level? Now what we'll we I'd.
Speaker 1 (14:12):
Like us to see come back down to forty and
then hover between twenty and forty over time, depending on
where we are in the side.
Speaker 2 (14:18):
Because we're still low globally, Is that right?
Speaker 1 (14:20):
Yeah, we are, and we should borrow for investments that
are going to drive our future productivity. Absolutely on board
for that. The problem that we always need to be
aware of is that if something major happens, you know,
big earthquake, big biosecurity incursion, we're then going to have
to go out to the world and borrow a lot more.
(14:41):
And there's a ceiling. Yeah, that's right, And there's a
ceiling at which we don't look as good as proposition.
And so it's about having enough headroom that when that
big event comes, we can borrow without getting into it's
basically I worry about the death spiral of a really
high interest bill on our debt. So, for context, right now,
spill is nine billion dollars a year on our debt,
(15:03):
up from hovering just around three previously. Nine billion hard
number to understand because it's so big. That is more
than the amount of funding we put into the defense force,
the prison service, the police and customs combined. All of
that's just context for the fact that I then say
(15:23):
the next thing, which is that right now we are
borrowing to pay for the grocery so we're not just
borrowing for assets. We're borrowing for our day to day spending.
There's a thirteen billion dollar deficit this year between what
we as a government are taking in in revenue and
other earnings and what we're spending to keep the economy going.
That's the right thing to do, because New Zealanders need
(15:44):
stability and their welfare supports and the funding for our
schools and hospitals. It just can't go on forever. Now
I've taken the gradual approach. Some people would say sort
that out immediately. I think that would create a lot
of pain for people, and it would actually create instability
in the economy. So we've set a that says we
will get the books back and balance by twenty twenty nine.
We think that's reasonable period of time to narrow that
(16:07):
gap between what we spend and earn, and that will
allow us to start paying down debt. Now, because of
the Trump stuff, the forecasts I've been receiving told me
you're now going to be off track to meet that
goal of getting the books back and balance unless you
make for change.
Speaker 2 (16:23):
The interest rate's been held up because of what listen,
new uncertainty or what is it that's driving Well.
Speaker 1 (16:28):
It's basically that because growth will be lower, we're forecasts
to be taking in less revenue, which has two effects.
One the deficit grows larger now and two we then
have to borrow more, which then creates a larger cost
there in terms of interest. So those effects on the
books mean in the absence of any reaction, I'd be
(16:49):
literally presenting a forecast to New Zealand that showed no
path to balanced books, and I don't think that's feasible,
both in terms of international lending but also in terms
of what's responsible. So we've said, look, we were planning
that our kind of our allowance, if you want to
call it, that would be two point four billion in
the coming for school year. Actually, we've gone and looked
(17:12):
really hard. We've found some more stuff we can reprioritize.
We've juggled around the other tens of billions of government
spending that we do, and that collectively means that we
will only need an allowance of one point three billion,
so a bit less, and that as to effects one,
it just means that we're borrowing less than the short
term than we would otherwise be doing. But it's doable
(17:35):
because with the reprioritization, I can still look everyone in
the eye and say we've got enough to make the
investments we clearly need in our health services, that we
clearly need, in our schools, that we clearly need in
our defense force, in law and order. Also got enough
room to make a few modest measures to support businesses
(17:57):
to grow, which is going to be really important over
this period. So I've made room for that, and I've
made room for some very modest, targeted cost of loving measures,
so I can do all of that and spend less.
So that's the right thing to do. I'll still be
spending more next year than this year. I mean, this
is the context, right, it's just about how much more
we're spending next year.
Speaker 2 (18:18):
Actually, I hadn't actually observed that.
Speaker 1 (18:20):
Yeah, we'll be spending more next year and the year
after that and the year after that. So the trend
is always up because things like super anuation.
Speaker 2 (18:27):
Lie.
Speaker 1 (18:28):
Yeah, the trend is always up. Yeah, that's right, things
like superinnuation. That bill just grows by baliance over the
next few years, you know, So we will be spending more,
but it's just a question of how steep that spending
more line is.
Speaker 2 (18:39):
The defense size of the defense spend. Has that been
a bit of surprise to you, like it was that
presumably when you were going through the election process that
probably wasn't.
Speaker 1 (18:49):
Yeah, it's definitely become much more of a top of
mind consumed for everyone in the world. I think we've
all observed that the strategic environment is far less stable
than it was, and New Zealand really has to look
at it through two lens. One, we have really solemn
commitment to our Pacific partners, who, to quite an extent,
(19:10):
you know, our Pacific family, rely on us to be
the ones that are survailing their ocean space to be
there if there's a disaster and they need help. So
that matters, and it's become clear that our defense force,
without a lot more investment, is going to have reduced
capability to do those things. The second part of it
is we need to be a good partner, you know,
(19:32):
particularly to Australia who our only ally, but also the
other countries who realistically we defend on, We depend on,
defend on you depend on to not only defend us
if we need defending, but also to defend the values
(19:52):
that we collectively as a world share, and so you
know right now that's playing out in Ukraine. New Zealand
is helping by training troops and at the same time
we want to keep being able to do those.
Speaker 2 (20:06):
Things alongside the country's per strings or being counter I
think you put it before. You'll now also have the
economic growth portfolio, so the Minister of Economic Growth as well.
So I'm just interested. You know, it seems to me
like they could quite easily contradict a little bit, whilst
there's also a lot of alignment. But I'm interested in
(20:27):
how you see those portfolios as being different, and then
how you manage those differences.
Speaker 1 (20:31):
Yeah, Well, I'm really pleased that they're sitting with me
together because one of the frustrations I had when I
became Minister of Finance was I would spend quite a
lot of time have quite lengthy conversations with my officials
at the Treasury about ten million dollars here that we
could make in savings or twenty million dollars an efficiency
(20:53):
that we could do here. Those conversations are important, but
the most important thing is what are we doing to
earn more? Because when you earn more, your choices are easier,
and so I wanted much more of a focus on growth,
on what the government's role is in making sure that
actually businesses are investing, our creating jobs are growing faster,
(21:17):
and the government has a huge role and it goes
across basically everything we do if you think about it,
from how we educate people and upskill them, what we're
doing with research and science, the regulatory and competitive settings
that we set for businesses, how we support trade and
international investment, what we do in terms of infrastructure that
businesses rely on. So it spans a huge amount of work,
(21:40):
But ministers get into their own little silo working on
their thing, and what I wanted to ensure them what
the Prime Minister wanted to ensure is that in all
we do, we are still focused on will this help
the boat go faster? Will this support growth? And let's
really focus our gender in on that because New Zealand
needs growth for everyone to have the living standards we
(22:00):
desire over these next few years.
Speaker 2 (22:03):
Does that change who you like engaging with very much
on a day to day like you sort of Treasury
seem to me more about the sort of accounting side
of it, I suppose.
Speaker 1 (22:10):
And then.
Speaker 2 (22:12):
And for the people who support you and your team,
does it they sort of wear jill hats as well?
Speaker 1 (22:16):
Like?
Speaker 2 (22:16):
How does that work in a practical I.
Speaker 1 (22:18):
Want to be kind to my folk at the Treasury.
That's still very important to me and what we do
is very important, but there it has changed. So I've
had this amazing experience, which is that I have been
visiting businesses around the country and just literally getting in
on their factory floors talking to them about what they
want to see the government focused on from a growth perspective,
(22:40):
and I have absolutely loved that. Whether it's going to
see the guys who started here in Wellington and are
now making electric bikes that they send all over the world,
whether it's going and visiting the small small startups who
are thinking about our food industry and where they can
take it next, whether it's going and visiting a dairy
farmer who now is feeling pretty happy about the world.
(23:03):
Those business conversations are where a government policy gets real
because instead of it being theoretical, it's look, this is
the one thing that if you guys could change that rule,
it would help. And I've got my officials right there
with me, and they're empowered through my Economic Growth portfolio
to go and talk to the relevant government agency and say,
the Ministry of Economic Growth is really concerned about it.
(23:23):
Can we fix it? And we can a lot of
the time. So that's hugely empowering and I love it
for you.
Speaker 2 (23:30):
Personally, do you feel like there's a I guess hierarchy
of the jobs aside? Do you feel like you skew
towards a sort of front wheel on that and your
own thinking between the two portfolios?
Speaker 1 (23:41):
For me, as I said earlier, I'm an optimist. I'm
a positive mindset person and so that's the part of
my job that really spins my wheels in terms of
getting me excited about the future. I view the finance
role as having some really critical enablers. You know, if
we don't have stable inflation, interest rates are soaring, it's
(24:01):
very hard to get growth, and so good fiscal economic
management really matters. But I view it, almost particularly in
this moment in time, as a role where it's a responsibility,
it's a duty, whereas the growth role as much more
about possibility and free wheeling. And so I get to
(24:22):
indulge that side of myself.
Speaker 2 (24:24):
Nice. So it she's like the whole purpose of our
business to create financial impartment for everyone. So we do
a huge amount of thought of this, and we also
do a lot of serving. And one of the things
we've noticed, and I'll take any opportunity I can speak
with someone in covenment about it, but is the key
receiver settings and our surveys, for example, for the first
(24:46):
time showing appetite for our customers anyway to take a
hit today for something into the future. A couple of
questions here. Firstly, anything you think on that about the
sentiment of New Zealanders, which would be wider than our
customer base, who would more be more likely to follow
this closely, but then also any plans for the government
with a save a space specifically.
Speaker 1 (25:04):
Yeah. Look, I'm just going to first so very happy
to talk about keep we save it. Delighted too, But
first it's going to pick up on that point around
financial empowerment, because one of the things that I've observed
is the often quite large gap between New Zealanders who
have really great financial literacy and knowledge and understand compounding
interest rates, asset growth, dividends, returns, and those people can
(25:30):
then make really great financial decisions. And I'm sure a
lot of them are on your platform and are excited
about Chazy's. At the other end, there are some people
who are smart people. They're great people, but they went
brought up with those skills. It's not part of their
daily job, it's not part of their language. And I
worry about that gap because I truly believe that when
you have financial knowledge, you can make choices that secure
(25:51):
your future and your living standards. So I'm delighted. I
just have to say it on your show today that
the government has just announced that we are putting financial
literacy into all schools. Is a compulsory part of the curriculum. Yeah,
compulsory part of the curriculum and quite exciting because what
we've done is we've said everyone has to do it
up to year ten as part of the Social Studies curriculum.
(26:12):
Fairly teachers are going to say what resources am I
meant to use? So we've done a peer up with
the Retirement Commission where they're providing a number of different
resources on their platform that link to different parts of
the curriculum, and I hope to see the people supporting
that increase over time, so everything from banker to sorted.
I know Chesy's does some work in this area, so
(26:32):
I'd love to see you involved on the platform. And
that means that teachers have the tools they need to
teach this stuff. And that's what we need to see
because the set ways to keipisaver, which is I think
as soon as people go on to that sordid website
and put the numbers in and see what happens when
(26:53):
you make a higher rate of contribution and see how
much that can grow your asset base at retirement, then
their minds really start to wear over and they start
to think, oh gosh, this is the compounding effect if
I save just a little bit more now can have
a massive impact on my quality of life when I'm older.
Exciting thing about key we Saver, I think, and it's
(27:14):
part of the scheme that some people criticize but I celebrate,
is that it's not just about retirement. There's a whole
cohort of people who use it now to save for
their first time because let's be honest, not everyone when
they first enter the workforce is going to prioritize what's
happening when they're sixty five. But a lot of people
are entering key we Saver thinking about how do I
(27:36):
save for that first home? And it's a great tool
for enabling that. So I'm a supporter of Kei Saver.
I want to see people's key we Saver balances grow
and I will have more to say about it in future.
Speaker 2 (27:50):
Cool. Well hold that thought even Yeah.
Speaker 1 (27:54):
Yeah, yeah, yeah, I've been working away on it. I've
been taking a lot of advice and hopefully when I'll
be back on the podcast talking about it.
Speaker 2 (28:02):
So you also have a portfolio called Social Investment, Yeah,
which many listeners might not be too familiar with, but.
Speaker 1 (28:10):
It's a prime Minister refers to it as your passion project.
Speaker 2 (28:13):
Right, So Firstly, why is it called social investment? And secondly,
how are you applying this new lens to affect how
you're leading the portfolios or your decisions that you're making
across the responsibilities that you have.
Speaker 1 (28:31):
So fundamentally, the way I think about social investment rather
than people use the phrase social welfare or social development
to describe the things that we rightly do as a
society to support people in need. The better thing is
if we make interventions and changes that stop the need
(28:51):
that we actually don't want people to have to be
dependent on government support and services into the future. We'd
much prefer them to have the issues and challenges in
their life resolved so that they can actually have independence
and choices. And I think of this through the lens
of an individual about how badly government does that sometimes.
I gave a speech last year about Jack. I want
(29:13):
you to imagine Jack. He's a young guy. He's living
in a house where there's family violence at home, there's
never really very much money. He stops going to school,
he gets in trouble with the law. Like there are
people like Jack out there, and it's very sad. Now
in Jack's life, the government is ever present. He is
probably engaging with the police. He's probably had a social
(29:36):
welfare worker. He's had someone from ordering a tamariki come
into his life. He's probably engaged with the local truancy service.
There's probably multiple community groups who have been contracted by
government to provide support to at risk youth like him.
There's people who are there to try and get him
into a job. There's lots of people and lots of
(29:56):
money going at Jack, but it ain't joined up and
it's not fundamentally breaking the cycle for him. So the
opportunity for government is to say, how can we better
use our dollars to make Jack's life actually better? And
my philosophical view, having worked in this area for a
long time and looked across the community, is often the
(30:18):
people who will make the biggest difference from Jack, for
Jack will be directly from his community, or it will
be a local non government provider that have been working
in that community for a very long time. When you
talk to those providers, they get often six seven, eight,
thirteen twenty one contracts from government, but it's impossible for
them because the contracts are focused on how many meetings
(30:39):
do you have, how many boxes have you ticked. They're
getting audited across all the contracts, and they say to us,
could you treat us like an investment. Could you come
to us and say these are the outcomes we want
for Jack and the people like him, and then give
us the space to innovate and do it properly. And
with the modern world of data, we can now do
that because we can track the progress that making. So
(31:00):
instead of old fashion multiple overlapping contracts, let's have one
contract and let's contract for outcomes. That's what social investment's about.
I went on a very long spiell.
Speaker 2 (31:09):
Didn't they contract for outcome? You came to get back together,
like is there a place for private capital play in
your thinking on this or is it just how you're
sort of managing from them?
Speaker 1 (31:21):
Yeah? Look there is in a few ways. I mean.
The first is that we have a big philanthropic sector
in New Zealand and there are real opportunities for us
to partner. Is government better with that sector to both
share the information we often have so that they know
both where the need is but also where investments can
make are making a big difference. Sometimes philanthropists are better
(31:43):
at doing the risky innovative things than we are. But
then they come up with something that they say, this
is really working like it is fundamentally a great investment,
and they want us to take it over so they
can fund the next innovative thing. And that's sometimes going
to make sense. But the other thing is, you know,
social bonds and those opportunities they can stand cap and
I'm interested in continuing to explore them. The challenge is
(32:03):
always proving that you're going to get a better outcome
that way than contracting with a provider who already exists directly.
So working through that policy challenge is something that I'm
taking advice on.
Speaker 2 (32:16):
So Lastly, a big driver for economic activity is confidence.
We've touched a little bit on that at the moment,
but confidence by business system vests consumers to spend flow
into each other a little bit. So with regards to
New Zealand economic sentiment, and my hope and my assumption
is that it will have approved and improved in twelve
months time, just intersting in what you think will have
(32:38):
been the main driver for that. When we look back
over the previous.
Speaker 1 (32:42):
Twelve months, it'll be people like you, Layton, It'll be
people like the people.
Speaker 2 (32:45):
Who listen, there's a lot of weight on my shoulders,
but I'll take it lock.
Speaker 1 (32:48):
But truly it will be It won't be that government
did this, think it will be individual businesses. Individual New
Zealander is saying, actually, right now, this is the time
I'm going to take another loan. I'm going to invest
in this idea that I've had. I'm going to take
this business. I'm going to expand it to a new market.
I am going to hire that new workforce to pursue
(33:10):
that new innovation. I am going to invest some money
in R and D that I reckon is going to
pay off. I'm going to do the next thing. And
so I genuinely think for this economy to have more
confidence than twelve months, we need to see momentum build
now by having individual firms, sectors, entrepreneurs saying let's actually
(33:31):
make the investment now to do that thing we know
could be brilliant. And there are so many things out
there that could be brilliant. So I want people investing
and doing it. And obviously every business will make its
own decisions. But when you do that, that is literally
where economic growth and confidence comes from.
Speaker 2 (33:48):
Nice completely such a mindset thing.
Speaker 1 (33:50):
So everyone listening to do it invest.
Speaker 2 (33:56):
So before we go, because we're like, firstly, appreciate, really
appreciate your time for sharing with us and unvestas today
and this access is another great thing about New Zealand.
So that's very much appreciated. But Budget days coming up
has some strange rituals associated with it. We've been told
that Sybil English used to eat a pie on budget Day.
(34:18):
We were just wondering if you had any particular snack
of choice.
Speaker 1 (34:22):
To because Grant Robertson used to have sausage rolls. So yeah,
that's the whole thing. It's like food related. Yeah. So
last year, what I had my kids do was bake
cookies for me and the Prime Minister so we could
have a little kind of morning tea coffee together. And
that was a really lovely thing actually, because my kids
came to watch the budget and they had some reflections
(34:44):
on my discussions of the ober garlic surplus, but mostly
they were reflected. Prime Minister really liked their biscuits. So
they have been thinking about what the next batch are
going to be for a year now, so I'm expecting
they're going to be pretty good. So that's one tradition,
and then I guess the other tradition that I really
like is obviously budgets, Like any great endeavor, involve hundreds,
(35:10):
if not thousands, of people working extremely hard. And I'm
lucky that I work with some of the most talented, wonderful, earnest,
hardworking people, and so on budget night, a small group
of them come together and we raise a glass to
celebrate the job done. So I'm looking forward to that great.
Speaker 2 (35:25):
Well be so luck Thank you, thank you, thanks everyone
for tuning in. You can watch Shared Lunch on YouTube,
or follow the podcast on Apple, Spotify, or wherever you
get your podcasts. Leave us a rating in a comment
about what you'd like to hear about next. Enjoy the
rest of your week.
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