'Paper thin' surplus, no ban on foreign house buyers - English on Budget 2014
Finance Minister Bill English says he's confident government books will reach a “paper-thin” surplus in 2014/15
Speaking to Patrick Gower on TV3's The Nation, Mr English also revealed Treasury investigated banning overseas buyers from the housing market.
But he said the government doesn’t intend to institute a ban.
Had a sniff
Mr Gower pointed out a Treasury document obtained by TV3 under the Official Information Act which, while heavily censored in its public form, says a ban on foreign ownership is "feasiblie."
"It’s' feasible' in the sense that it’s technically possible," Mr English said when presented with the document.
"The question is whether, in the long run, it’s desirable that we ban anyone from outside New Zealand from being able to buy things in New Zealand. We don’t believe that it is desirable ... We don’t intend to ban foreign buyers because we don’t think they’re a significant influence on the market."
Mr English also revealed auto-enrolment in KiwiSaver won’t be included in next month’s Budget
The Finance Minister says more Kiwis likely to get wage increases with an improving economy that’s growing at probably more than 3%
Cash hand-outs in the Budget “just aren’t possible on a large scale and they’re probably not a good idea if you’ve got other underlying problems like overpriced housing”, he said.
Asked if there be something direct for families, Mr English replied: “There’s a lot of demands on the public purse – families with babies, there’s also public services who feel like they’re under pressure, there’s groups other than families with babies in our community who feel like they’ve been underfunded or haven’t had the service they should have so there’s a lot of competition.”
RAW DATA: Patrick Gower interviews Finance Minister Bill English on The Nation
Bill English: ... Well, we’ll use those words in the Budget but look the focus of it is certainly to get us to surplus so we can start repaying debt but more importantly looking ahead, it’s about quality government spending. We’ve got some real issues out in the community, kids who don’t achieve enough at school, people who want to feel safer in their community and what we’re learning from a period of restraint is that more thoughtful approach to spending the money and high quality to get results. That it’s not really about the dollars – solving, having a safer community, better educational achievement is about getting alongside people and supporting them in a way that gets results and it’s not just about the headline dollars.
Paddy Gower: Sure, so on-going restraint continues and I want to take your Budget now essentially into Kiwis’ homes – essentially Joe and Jane Kiwi. What do they get from it? Because we look at wage increases essentially flat compared to inflation, in fact the Labour Cost Index says only 45% of Kiwis got a pay rise last year. When will those Kiwis start seeing some dividends from your type (of) fiscal management?
Well in the first place they’ll see it as they’re starting to see in in their workplaces and that is more of them are likely to get wage increases because the economy’s stronger and some of the surveys out recently have shown they’ve also got stronger job security because people have been through a long period of time where they’re uncertain (interrupted)
When will those wage increases come, when will those wage increases come?
Well that of course depends on their businesses, and their workplace but it’s more likely in an economy that’s now growing more than maybe 3 percent when it was growing at 1 or 2 percent. In fact in 2009 it was shrinking. So they (interrupted)
So what’s your message to bosses out there about pay rises?
Look the same as it’s always been and that is that they are responsible for it themselves not the Government, as to what people get paid. We make a contribution through Working For Families, interest free student loans and so on and secondly, that there probably is an expectation that where there’s productivity gains people in workplaces who’ve contributed to that would expect to see a share of it.
Yeah and should they expect to see it that’s the question isn’t it? Is it time for them to get a share of those gains?
Well look in theory of course yes. Of course the practicality is each workplace is a bit different. And that’s up to the people in that workplace to negotiate what their pay is going to be. In the broad sense though a growing economy, one of the better growing economies in the developed world, means it’s more likely both that productivity is increasing and that people will get higher wage rises.
So what’s your advice to people at home then? Household debt is starting to accelerate again, what are they meant to do, are they meant to pay off the mortgage, should they go and get a new car, what should they do now?
Well look we’re a government who believes that households are capable of making their own decisions without a whole lot of advice from politicians and actually over the last four or five years they’ve made good decisions. They’ve been careful with their spending, they’ve been a bit careful with their debt. In fact even now it’s surprising in an economy growing at 3 percent, retail spending has been relatively flat. And I think from what I hear, people are going to be careful about increasing their debt.
But household debt, and you picked up on it there, is increasing again so are Kiwis, are Kiwi households really better off under a National government if that debt’s going up?
Well look it’s up to them to decide how much debt they carry. All I’m saying is when they’re being told by the Reserve Bank governor that interest rates could go up two percentage points then they need to be a bit careful about what extra debt they’re taking on. But bear in mind this is in the context of an economy that’s growing at around 3 percent-plus. That does give people a bit more confidence.
Now looking at this Budget a billion dollars of extra spending, there’s going to be something for babies isn’t there? Everybody knows that…
Well, there’s been a discussion about on-going support for families. Families have dealt with the last four or five years pretty effectively in our view, they’ve shown they’re resilient. Looking ahead people want to see at least some dividends of growth and you know the Government’s considering those decisions.
So those dividends as you call them will be for families with babies? I mean you’ve got six kids, what’s the best way of you know of divvying this up?
Look you’d have to see, you’ll just have to wait and see where the Budget actually comes out. We’ve got a concern, as well as you know the benefits of a growing economy, a real concern about what drives costs for families and one of those big costs which I think every family recognises is the cost of housing. It’s a big cost in New Zealand. It’s higher than it probably needs to be and we’re in a, you know, a bit of a complicated task working with councils in particular and government regulation to try and reduce that kind of costs ‘cause cash hand-outs, as I think, you know cash hand-outs just aren’t possible on a large scale and they’re probably not a good idea if you’ve got other underlying problems like over-priced housing.
So will there be something direct for families though, forget about housing, will there be something direct for families with babies?
You’ll just have to wait and see. I mean look there’s a lot of demands on the public purse – families with babies, there’s also public services who feel like they’re under pressure, there’s groups other than families with babies in our community who feel like they’ve been underfunded or haven’t had the service they should have so there’s a lot of competition.
Moving on though to super and the on-going costs of this – you have said previously if we hit surplus, you’ll look at auto-enrolment for KiwiSaver. Is that on the table now because we’re so close to surplus aren’t we?
Well it’s still on the table. We’ve (interrupted)
Will we see it on the table in this Budget?
In this Budget, no you won’t. In this Budget we will have a paper-thin surplus , I mean we’ll just have a surplus but that’s the beginning of a series of surpluses and that means we have choices. And there’s a lot of choices. We’ve got the New Zealand Super Fund to resume contributions, an auto-enrolment for KiwiSaver, paying off debt more quickly, something for households to help them along. Those are choices that New Zealand fortunately will have if we have a growing economy and we stick to being pretty careful about our spending.
Sure. The financial statements out this week, 1.1 billion dollar less tax take than expected - are you going to get that surplus in this Budget yes or no?
Yes we’ll get there but it’s a bit of a push
You’re going to definitely get to surplus?
Yes we’ll get to surplus but it’s ah you know it’ll be good to get that in the bag so we can move on because in a way focusing on that artificial number gives the impression that’s what really matters. Actually what really matters is whether Government is solving problems in our communities so we’ve got better communities and strengthening the economy so that we can get higher wages and more jobs.
Sure. Looking at this attack recently by the Prime Minister and others in the Government on the Labour-Green Government and their government spending pushing up interest rates – where is the evidence of that?
Oh I think there’s the evidence of the experience up to 2008, first mortgage rates (interrupted)
Yeah, experience today because you’ve been doing some work with the Treasury haven’t you. Will you front with that evidence?
So we’ve asked them about what kind of increases in Government spending could be put in place without putting more pressure on interest rates and yeah, we’ll be talking about that in the run-up to the Budget.
National of course has campaigned and you in particular on the economic record but under your watch we know that Government debt has risen since 2008, household debt has risen, interest rates are going up – can you really justify this good record based on those numbers?
Well look it’s, you’ve just got to look at the evidence in the economy. New Zealanders, in their households and their businesses, have adapted very well to what were quite difficult circumstances and the Government’s been there to support them doing it. The real issue is now whether we can sustain that growth so that people can see consistent wage increases year after year for instance which they haven’t had for the last five or six years. So you know, we’ll be campaigning as much on delivering a sustainable economy in the future as on a record, which I think most people agree is reasonably good. The opposition doesn’t but this is, you know, we’re looking ahead on the basis of a record that is pretty good.
But you say you’re a safe pair of hands yet we’ve got higher interest rates, more debt – that’s exactly what you’re accusing the opposition of doing…
Well I think it’s pretty straightforward there. The debt arises from the fact we had a recession and a major earthquake and we’ve said for the last three or four years the key issue here is to start paying it down when times get better and that’s pretty logical, people understand that and with interest rates, look, interest rates going up from the lowest in 50 years was inevitable. It’s our job to make sure they don’t go up any further than they need to.
Sure. Stephen Joyce recently put out a press release. I want to read it to you, damning Labour as planning quote: subsidised loans, expensive tax concessions and preferential treatment”, right? You know, but what about you guys, a 30 million dollar subsidy for Rio Tinto, tax concessions, check, you got those for the Hollywood studios, preferential treatment – Sky City – I mean you’re hardly ones to preach are you?
Well we don’t shy away from making some pragmatic decisions like (interrupted)
And populist decisions
Well you can argue about whether they’re popular, they’ve been (interrupted)
They’ve been criticised for all sorts of reasons but the alternative would be the criticism that the Government, you know, is rigidly right-wing and leaves everyone out there on their own. I mean that’s not the nature of this Government. This Government supports people where we believe Government support is going to have a decisive impact and actually part of the strength of this Government has been the ability to make some of those pragmatic decisions without messing up the way the market works and without messing up the incentives New Zealanders face.
Winston Peters – he was on this programme and one thing he made out was that a bottom line for him in joining a government was buying back the power companies. Will you buy back the power companies under any circumstances?
No, we won’t be buying back the power companies. I mean Winston’s had a number of bottom lines over recent weeks which just tells you he thinks he’s going to be in the game.
Well another one of them is a ban on foreign buyers or non-resident buyers. Would you go there?
No, we won’t go to a ban on non – he’s not even sure whether it’s non-resident or foreigners, just because it matters we have a lot of New Zealanders overseas (interrupted)
Yes, just take non-residents, take non-residents – would you ever go there?
Well no, that would effectively ban a whole lot of New Zealanders, who are New Zealand citizens, from being able to buy property in their own country. I mean we certainly wouldn’t go there.
I mean I want to show you this. This is a paper prepared for you by the Treasury, we got it under the Official Information Act, it shows you were personally briefed in July last year on a ban on non-residents and in fact it calls restrictions on overseas buyers as feasible. It’s still feasible isn’t it?
Well there are restrictions now which apply to what’s called sensitive land and that includes farms and also other (interrupted)
Sure, this is about the residential market and it shows – I mean – you considered a ban didn’t you?
No, we didn’t consider a ban. I mean, it’s feasible to do it right, in the sense that it’s technically possible. The question is whether in the long run, it’s desirable that we ban anyone from outside New Zealand from being able to buy things in New Zealand. We don’t believe that it is desirable.
And on that, and finally, do we need a register so that we can go away and have some facts about foreign buyers, non-resident buyers in the residential market. Is that something your Government could look at?
We’ll we’re not looking at it because we don’t intend to ban foreign buyers and we don’t intend to ban foreign buyers because we don’t think they’re a significant influence on the market although you can always hear an anecdote about how –
But no register to settle this once and for all?
Yes, no, well you know, it will show that there are two or three houses in every hundred being bought by Chinese residents, so what do you do about that? And our answer would be ‘that’s not a big problem’.
That seems like a good place to leave it minister, thank you very much