Finance Minister Grant Robertson doesn't see New Zealand heading for a recession next year, although he concedes that the finances to be outlined in next week's Budget will show a deterioration relative to the last fiscal update prior to Christmas.
Asked by a business audience in Wellington after giving a pre-Budget speech, about comments from BNZ head of research Stephen Toplis, that economic growth may stall next year Robertson said one of the strengths of NZ versus the rest of the world was the country's low unemployment. "That is the buffer".
"...The underpinnings of the economy are strong..."
Talking to journalists a short while later he conceded that the Budget financial figures would show a deterioration relative to the last update in December, but it would still be a "strong set of books".
While clearly there had been "major changes" in the global outlook since the start of the year, Robertson didn't see NZ heading for recession.
Robertson had earlier conceded the Government would now not be returning to surplus till the 2024-25 year, which is a year later than was outlined in the last update prior to Christmas.
In his speech itself, Robertson promised that Budget 2022 next week "will be about health".
He said the Budget, to be delivered on May 19, "will be about setting up a national health system that can meet the needs of our nation. It will be about setting up the infrastructure that will direct the attention of our health workforce to where the need for care is greatest, not to where the vagaries of our current structures direct them".
"To get this right, we also need the workers that our system needs. In addition to those that we train here, the green list process will prioritise and provide a residency pathway for a range of occupations that are in critical need – nurses, clinical psychologists, medical technicians and a range of specialist occupations.
"Getting the foundation of our health system right will require sustained investment. Budget 2022 will lay the groundwork for that change. Health will move toward a multi-year funding track, initially through a 2-year transitional investment in this year’s budget, before moving to 3 year budgets from 2024/25. This reform will provide the certainty that is needed for the system to plan for long-term health priorities."
In terms of the current economic conditions, Robertson said "what we must not do while dealing with the pressures of the here and now is put off dealing with long-term challenges".
"If we decided against reforming our health system, we would not see lower petrol prices; we would just have both high petrol prices and a health system that was not set up to meet our needs.
"Too often, the New Zealand economy has been run along those lines. Investment has been turned on and off in response to short term considerations, resulting in a long series of chain reactions delaying planning decisions, business case development, workforce recruitment and investment in sector capacity.
"I don’t believe that this approach has served our current needs. I certainly don’t think it is adequate for our future needs. Whether it is addressing our long-standing productivity gap with other advanced countries, addressing the housing crisis, or fixing our planning or three waters systems, a short term, hands off approach is not going to cut it."
Last week in an earlier pre-Budget speech, Robertson announced new fiscal rules for the budget, which include a debt ceiling of 30% of GDP and keeping surpluses within a band of zero to 2% of GDP.
As well, there will be a new debt measure that Robertson said would more closely align New Zealand with how debt is measured in other countries. It will include a wider range of both assets and liabilities, but will make the debt figure about 20 percentage points lower. The new measure will, for example, include the assets of the NZ Super Fund.
He also outlined the move to multi-year funding for some departmental budgets, including health.
The new debt measure rule effectively means the debt ceiling the Government has announced would be 50% under the old measure and 30% under the new.
The Budget documentation will continue to publish the old measure, for transparency and the ability to make historical comparisons.
Robertson said in his latest speech on Thursday that Budget 2022 "marks a move past the crisis Budgets of Covid to a new normal".
"We will bring the stability and certainty of fiscal rules, but also take the lessons of Covid to take on the big challenges and opportunities, and address the shortcomings and inequities of the old normal.
"My vision for our economic future can be summed up in one sentence. I want a high wage, low emissions economy that gives economic security in good times and bad.
"The building blocks to reach that goal are being put in place."
Robertson said next Monday the Government would release its Emissions Reduction Plan, and the funding to back that up through the first allocations from the Climate Emergency Response Fund.
"That fund has been created by recycling the revenue from the Emissions Trading Scheme directly to emissions reductions initiatives.
"Dealing with climate change is something that we need to get right, and get right now. We all know the environmental imperative that we are facing. But there is also real risk that if we were to drag our feet on emissions reduction, we face the possibility of the world moving on from the sorts of things that New Zealand is currently a world leader in producing."
Robertson said every country in the world would have to change the way in which it meets the needs of its people.
"This is a challenge, but also an extraordinary opportunity for New Zealand. There are areas such as hydrogen, renewable energy, wood processing and agritech where we can lead the world and create the high wage jobs we need.
"We will partner with businesses to support them in making the transition toward low-emissions technologies, and work with sectors with more hard-to-abate emissions to develop more sustainable ways of operating. We will also provide support to make lower-emissions alternatives accessible to a greater number of households.
"We can no longer put off meaningful action on climate change. The emissions reductions plans that we have created are ambitious but achievable, and will meet the task set in our emissions budgets."
Robertson said the past couple of years had been "extraordinary" for everyone.
"As a country we should be proud of how we have responded. Now, we need to take that pride and the lessons we have learned and put them to work on shaping our new normal.
"Uncertainty and volatility are part of that new normal. But so is a New Zealand economy that is the envy of many in the world. We are in a strong position to weather the storm of global inflation and build that high wage, low emissions economy that provides economic security for all New Zealanders, in good times and tough times.
"At every Budget there is a balance to strike - to get the basics right, to do what is right for current and future generations and to secure a better tomorrow. It is a balance we have struck before, and on that I believe we will do so again."
86 Comments
"Robertson promises big spend up on health" aka Robertson takes money from up and down the country and plows it into Wellington-driven centralisation.
Also, I'm not sure my friends in Australia envy our low wages, high house prices, long hours and spiking living costs.
Spent billions keeping foreign tourism alive during the lockdown, billions more to kickstart it with borders reopening and yet more billions trying to offset the huge emissions the industry creates.
So much subsidy for a sector that has in the past predominantly created low-wage jobs and has driven up living costs in places where tourists often flock to.
Imagine having a real leader that would get up and say 'hey yes the data we are looking at shows clear signs that a recession is ahead of us but together we will work our way through it'.
As opposed to this weak denial and coverup, avoidance style of leadership that current persists around the world. Not just NZ.
Te Kooti,
You may be right, but be careful what you wish for. What do you expect from a Nat/ACT government? Do you really think that there would be a mass cull of government employees? That they will suddenly find the key to unleash major productivity gains?
If so, I think you will gravely disappointed.
What if we were to take into account 'real' inflation. You know, Land value was removed from the inflation calculation in 1996. What would it be now if that change in policy didn't happen? 15%-25%?
What about the gerrymandering of the UB figure (real unemployment 11.2%), when one hour of work is counted as employed even though you are still reliant on welfare? When also more than 359,000 people are reliant on welfare because the real job market is just a bunch of recruitment companies posting the same jobs that each of them is competing for?? Oh, and don't forget the old AI algorithm trick with applications for job listings.
Enough of this manufacturing of the 'numbers' and how about coming back to reality?
I've always had the theory bureaucracy will look after itself, i.e. you can have no input and it will continue, self sustained as is.
Therefore a party that campaigned on 1 issue, and promised to fix that 1 issue in the 3 years would be better than the vauge high skill high pay progressive bollocks we get served by everyone in competition for the top spot.
E.g. campaign to fix the tax brackets. or fix crime, or fix drinking water, or fix waterways, or fix domestic violence.
Just campaign on one of those items, but actually get it done ffs.
He said inflation was temporary. He then listed all the causes why inflation has happened, but none of these causes are temporary.
So how does he expect inflation to be temporary? All the causes are outside of his control (and blame).
Unless it's to do with his next point - immigration.
or pumping money into the housing ponzi at 0% - or a bloated wellington government departments - spin doctors , 200+ working groups at massive $$$ - moving 90,000 people from unemployment to longer term not work tested benefits - failing to invest in technology and productivity - the great reset and build back better ( for all of three weeks) its a long list --- $3.00 a litre and rising -- be fun to watch them take the subsidy of fuel !
I agree but grant isn't the one who will suffer it will be all the poor people. I see the nz dollar has gone down to 63 us cents the price of petrol well over $3 the price of desiel just under $3 . Interest rates are going up majorally and the government is going to do more spending to help inflation
So transparent. We can see right through you.
The vast majority of private sector employment in NZ is by SME's. Those SME's are mostly funded by debt over the business owners property. When the value of that property decreases and the cost of interest goes up. The owners will shed staff to protect their assets from the banks. The demand destruction loop will mean their businesses can survive with less employees.
This is going to be the hardest winter for many New Zealanders since the early 1990s. I really fear that we're about go through a nation-defining period that government is ill-equipped to deal with, nor will they acknowledge until it's too late for them to move to do something about it.
This is the way. This is Nick Smith in 2017 - nearing the end of National's nine years in parliament - blaming Labour for all housing problems. Watch for more of the same from each party.
The one thing they both seem too unwilling to do is take drastic necessary action, in the style of 1980s Labour.
Oh dear. All National have to do is keep their mouths shut, let Act gather in the ratbag "Rightwing" votes, and their coalition will fly in next year. The economy over the next year and a half is already showing, and will continue to show the gross ineptitude of our present government. It will be painful but also extremely entertaining.
Grant Robertson will not achieve his vision of an economic future that can be summed up in one sentence - "I want a high wage, low emissions economy that gives economic security in good times and bad" - until he acknowledges the huge exploitation by the anti-competitive unearned income gainers sections of NZ's economy. Whether that be in housing (urban developable land supply), supermarkets (food), building materials, infrastructure provision, banking (financial products), electricity (energy) etc. He needs to acknowledge that successive governments have poorly regulated, poorly taxed and has poor competition policies (Commerce Commission etc) that has favoured those with market power.
For instance - LVT would clearly be the best wealth tax for NZ because in addition to redistributing wealth it would also help the transition to a high wage and low emissions economy. Economists have long acknowledged it is one of the most effective and least distorting taxes. David Parker obviously wants a wealth tax but does his finance minister have the ability to explain to the public the benefits of one?
As Tom Pullar-Strecker wrote
"If we instead continue to rely so heavily on taxing wages and salaries to pay for public services, are we discouraging rank and file employees from giving their best?
These questions involve trade-offs about which people will legitimately have different points of view.
Labour needs to dive in and embrace the rough and tumble of what would be a bruising debate, or else it may as well again just walk away.
It will need to inspire people about what a ‘fairer’ society could look like.
What’s far from clear is whether its most senior ministers, Ardern and Finance Minister Grant Robertson in particular, intend to do that, or whether they have just given Parker a corner of scrubland in which to play."
https://www.stuff.co.nz/business/opinion-analysis/128553951/now-it-has-…
... I want Robbo to spend $ 200 million on a gondola across the harbour ... OMG , how much fun would that be ... brilliant idea ...
More gondolas ! .... I've got a fever in my head , and the only thing to fix it is more gondolas ... or cowbells , cowbells are good , too ...
Even for you GBH that was an off the point tangential reply. I don't know whether gondolas are a good urban transit option or not. Though it would be a lot cheaper than a bridge or tunnel - so there is that. But Robbo has never commented on gondolas, a private company not the govt wants to build one across Auckland's Waitamata harbour, and my previous comment wasn't about the merits or otherwise of gondolas.
165 billion in New Mortgages since March 2020 to 513 thousand borrowers. Every day hundreds of those loans roll over onto a new fixed rates at least 2% higher than previous. Total sales for 2020-2021 156000 properties. Hundreds of thousands of people took the opportunity presented by low interest rates and easy credit availability to buy their first home, upgrade their home, refinance their mortgage, buy an investment property. Even crazy stuff like borrowing against their home to fund a business. Until late 2021 this was being done with the expectation (backed up by RBNZ pronouncements) that interest rates would stay low for a long time. Inflation was transitory and nothing to worry about. Just for good measure we had the Prime Minister on the Podium of Truth saying that house prices were going up a bit fast but in the long term moderate property inflation was a good thing.
According to the figures, 60% of those mortgages rolled over in 2022. People have had plenty of time to break and refix or just plain refix at 3 to 5 years terms to bridge what is clearly coming. Anybody refixing at 1 to 2 years now is taking a very big risk. Its sink or swim time.
I think it is all a brave face - it is what all politicians do when in power. They have access to better stats and analysis than we do, but what is the upside for them being a DGM? Here are some downsides: It might be self fulfilling, people will blame him for it, the majority would rather vote for someone telling them good news about their future.
Do you remember John Key or Bill English say anything negative about the state of the economy once in power? I sure don't, they were telling us everything was going fine under their watch and we were on the cusp of a brighter future. If only we vote National in one more time.
"This is a challenge, but also an extraordinary opportunity for New Zealand. There are areas such as hydrogen, renewable energy, wood processing and agritech where we can lead the world and create the high wage jobs we need." - Grant Robertson.
This triggers my engineer brain, but here's what's wrong with this. Hydrogen is a terrible and dangerous method for storing energy. It also requires a complex process of Hydrolysis, to produce the hydrogen to store inside a Hydrate tank inside a vehicle, which must be closely temperature controlled and requires complex equipment to maintain/replace/repair. It doesn't have the advantages that Electric Vehicles have (Lithium Ion Battery tech + home charging infrastructure + cost savings over petrol and hydrogen) while at the same time not being able to safely store or transport the stuff. Also the technology has been around for decades and never took off for exactly this reason.
Elon Musk himself wrote his Senior Thesis at Wharton about the financial case for Ultracapacitors vs Hydrogen powered Vehicles and concluded Hydrogen was infinitely less viable than Electric Vehicles.
Obviously the government is drinking this nonsense in because they have zero scientists or engineers in their ranks who will advise why it is retarded.
I've long suspected that there is an enthusiast - like Tamminen was to California/Arnie - inside MBIE, and others fell for the hype. Now too tied to the concept to let go. Also, it's a great Fossil-industry angle; build the infrastructure then, oh, we can run it on gas..... Vaping for energy.
Squishy - The Honda clarity is sold in California and Hawaii were there is availability of refilling stations. One enterprising Garage in Hawaii has its own commercially available Hydroliser - the gas is used in fuel cells. I also note both places have abundant sunshine for solar to power the hydroliser - NZ is pretty sunny as well.
Von M
You are right about hydrogen with todays technology but I note Toyota/Honda and GM continue to experiment with hydrogen as a fuel and ina fuel cell so they may some technology breakthrough that will make it practical. On the other hand I am seeing significant improvements in batteries, in storage and charge rate but not in energy density and until there is both Electric capacity and chargers electric vehicles will remain limited in use beyond commuting.
I remember when Gordon Brown in the UK decided to sell the nation's Gold. He published auction dates and flooded the market on specific days, Ensuring he got the lowest possible return.
The message is that people can be intelligent, strategic and executive. However the role of finance minister is none of these things and these people are not suddenly gifted skills the day they take office. Successive decisions by both Robertson and Orr have shown that they are incompetent. Fine for sailing the boat on a mild day, and an absolute disaster in a storm.
I have a degree in commerce. and decades experience in commercial roles. Robbo has a degree in political sci fi and decades running university debating groups.
I was joking the other day at dinner that technically i'm more qualified to run a finance portfolio than our finance minister? Not that thats saying much...
But i'm not a politician of course so would never get elected... I'm sure he knows best...
It is quite staggering how many virologists,epidemiologists & public health experts on Interest.Co must have used the downtime during covid to re-train as economists.
What brain drain? They are all in here.
Does anyone really believe Nicola Willis is the answer?
Crazy Dave & Luxury Luxon would have had the country on its knees reeling from Delta.
All these moaners were happy to have their snouts in the trough when the government kept there businesses,their jobs and their health in good shape.
People like Hosking have just made it their cause celebre to try and find fault with everything this government does.With his listening numbers,he has to take credit for getting into peoples heads every day with negativity,all because he is throwing his toys out of the cot because the Prime Minister doesn't give him any oxygen,he is on a personal crusade against the government.
He has lost all balance,just become a contrarian misogynist shock jock.
Must admit that I was starting to worry about minor things like the NZ economy, health system, crime, cost of living, housing access, education standards, etc. until I read today that Hipkins is to go on an overseas trip to North and South America to promote New Zealand as a destination for overseas students. Thank goodness the government has it's priorities sorted! Do they see these overseas students as the savior for NZ's many woes?
Quite frankly, when you get Cabinet Ministers going on overseas junkets for totally dubious reasons you know that even they see the writing is on the wall come next election.
I don't think it it totally dubious as you suggest. Before covid we had 120k international students a year. I think we are just coming off a mandated cap of 5k now. That's a lot of cash not flowing into our economy:
"Before the pandemic, the international student sector was worth almost $5 billion a year, making it New Zealand’s fifth largest source of export revenue."
https://i.stuff.co.nz/national/education/128073659/call-to-end-cap-on-n…
Yes, but most of those overseas student numbers would be coming back into New Zealand anyway now that the border is opening up again. That should happen whether Hipkins makes a grand tour of North and South America or not and especially so given the now highly depreciated NZ dollar which will make study here even more attractive for them. Anyway, I would have thought that the majority of our overseas student numbers would be coming from the Asian region. Anyway, I still think it is simply a way of giving Hipkins a bit of a holiday after being one of the more overworked Ministers due to the rest being so inept they have had to be kept hidden in the background.
I must admit to being decidedly 'dubious' about claims for the bonanza of foreign exchange flowing from the education industry,....or for that matter the claim that tourism is a significant source of same. For example the late Sir Paul Callaghan stated that... "if we wanted to be poor, promote tourism." I am inclined to believe him rather than those involved in the tourism industry. Ditto our educationalists who face a dire future if we don't ramp up the number of foreign students post covid.
I would like to see a good, non partisan analysis of foreign students,...okay they pay high fees, presumably in offshore funds, but how many graduate and leave rather than seeking residency,...how many get involved in part time work, (of what nature, prostitution?), what is the cost of providing accomodation, lecture facilities, student health issues, how many of the seeming horde of our freshly minted young "professors" are part of the cost of foreign student tuition, ...& so on. I would imagine these young students are extremely active in 'networking' to find ways to take every advantage to use our various systems; not that I would blame them,.... just dubious that our many manifold sources of government assistance are nimble enough to stay ahead of the gaming?
I am sure there are benefits, perhaps enduring positive links to NZ...provided their experiences where positive! But is there any objective cost/benefit analysis from neutral (non educational, non governmental) sources?
The issue is the education sector was a major scam, aimed at providing residency rather than useful qualifications. The exception being real students doing PhD etc
From someone in the industry, it was all a mutually agreeable con. Impossible to fail the course in an IT "certificate ", as it would get in the way of pumping gas, and poor business for the private training establishment.
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