In response to BILL ENGLISH interview
Time to welcome our top panel this morning. Dr Claire Robinson from the Massey University and Bernard Hickey from interest.co.nz and former Green MP Keith Locke. Well, welcome all of you, and very nice to see you again, Claire.
CLAIRE ROBINSON - Political Analyst
Thank you, Paul.
PAUL Pleasure. Balancing the books by 2014. He's very bullish about that still. Bernard.
BERNARD HICKEY - interest.co.nz
It's going to be tough, because the last few months we've seen a significant toughening of the situation with the Budget. In fact, they're already behind their forecasts so far this year. So it's going to be tough with the global economy struggling a bit, particularly in China, and in New Zealand, we really just haven't kicked on in the last few years. What we're going to need to the private sector to take up the baton. Because the government has been holding up the economy for the last couple of years, and for the next two to three years, it's going to pass it to the private sector. Will it take it up?
PAUL I notice he's been talking about a possible shortfall $450 million, yet the Prime Minister doesn't mention that much at all, Bernard.
BERNARD They're really banking on growth kicking in and the earthquake recovery and the growth in the rest of the world coming through, but so far, the last couple of years, we've always been disappointed on that, and that's the risk for the government.
KEITH LOCKE - Former Green Party MP
I think he's concentrating entirely on the expenditure side to eliminate the deficit, and he's rejecting all the things that might bring in more income for the government - capital gains tax, higher taxes on top earners, earthquake levy, financial transactions tax which Europeans have adopted now, more payment for commercial use of water, less giveaways in the ETS. There are a lot of things you could do on the income side that he is just rejecting completely. And I think the idea that just merging a few government departments and having some cuts and efficiencies-
PAUL That was very much a difference between the Key speech and the Shearer speech in that the Key speech is about efficiencies, and Shearer was talking about realigning the economy. We can talk a bit more about that later on. What do you think about the going into surplus?
CLAIRE Well, at the moment it's just rhetoric, so it's not going to be till we're closer to 2014/2015 that we're actually going to see whether it works or not. So for a government that has to be speaking up its ability to manage the economy, that's what it has to do. But I think closer to the time, obviously, we're going to see whether it's coming off or not.
PAUL He's become a very good television performer, much more than he used to be, Bill English. But I wonder is he an economic visionary, or is he a man who balances the books, Bernard?
BERNARD He's the guy behind the scenes managing the government's finances, as he should be, and Key is the guy up front. And he is right on top of it, and as you've seen in that interview, he knows where the government's going. The question is will the economy perform as the government wants it to? Will its bet on those tax cuts from last year actually pay off in the Budget over the next couple of years? So far, it doesn't look like it is, and that'll be the challenge in the next couple of years - can they keep it on track for that surplus?
PAUL What do you make of the Steven Joyce appointment politically? Does that mean Bill's now number three?
CLAIRE (LAUGHS) It's an interesting moment. The really interesting thing, actually, is the merger of the departments into the Ministry of Building Innovation and whatever it is - Business Innovation.
PAUL I wish I could be more excited about the department.
KEITH The whole idea that a big department is more efficient - it actually only adds more layers of democracy, and you mentioned there will be three of four ministers shuffling around in that ministry and having to consult each other, and that will be the same with the bureaucrats. And they'll lose the social dimension of some of the departments, like Labour and Immigration.
PAUL With the internet, you don't have to now, though, do you?
CLAIRE This new ministry, it's the solution to a problem that actually requires a different solution. The government's been frustrated that public servants aren't actually, you know, listening to what they want and doing what they want, so they think that the solution is to actually merge departments so they have more control over it. The problem is much more deeper and much more structural, and it's around the state sector reforms from the 1980s which created this managerial class, rather than a group of policy experts who can really drive change. So it's a much deeper issue that just merging departments.
PAUL I know one thinks with horror of the great bureaucracies in Russia and how efficient they are. (LAUGHS) Let's move on a little bit. That's great news on the borrowing, isn't it? 385. This time last year, we were borrowing $385 million a week. That's down to $110 million a week at the moment. Next year they think it will be $20 million a week. And Shane's point was that we're borrowing very cheap around the world at the moment. This could be a good time to really borrow for development.
BERNARD We'll, that's the thing, our credit rating was downgraded last year, and everything thought our interest rates were going to rise, but they actually fell. And all round the world, bond yields, except for in Greece and southern Europe, are actually falling or are very low. So you could make the argument that if the private sector isn't going to take up the baton being passed on by the government, then maybe the government needs to go back and keep borrowing more. Politically, that's difficult, though, because we're so ingrained in our thinking now to reduce debt.
PAUL We have developed a horror of debt.
KEITH And that's why it's so stupid to sell off the power companies because they could be used as a sort of economic driver, particularly in green energy projects and development and all that sort of thing.
PAUL But only 49% is being sold off. They could still do that, couldn't they?
KEITH Well, they're going to be striving for a profit more, with the private interests in it more geared for immediate profit, rather than long-term investment.
BERNARD And you could say that the cash returns from those state assets are actually going to be higher than it would cost to borrow the money at the moment.
PAUL Right-oh. Do they have a mandate for these asset sales?
CLAIRE Of course they do. I mean-
CLAIRE Once you become a government-
PAUL What better mandate can you get than from a general election?
CLAIRE Can I just point out that in terms of us as an MMP democracy and as a sophisticated PR, um, you know, we're going to get to the point where we have minority governments. So we're going to have governments that are formed by the groupings of a whole lot of minority parties like the Greens, and one day they're going to be happy to say, 'Yes, we are a minority government. We have the mandate to put forward our policies.'
KEITH I think any government has to take into account how many of the citizens as a whole support the measures they're taking. Just because on a number of issues they managed to get - what -47% I think was referred to, it doesn't mean to say
PAUL In defence of the government, you can't say they're being sneaky about it.
KEITH No, they haven't been sneaky, but it still doesn't mean they've got a mandate.
BERNARD I think, too, that they're a little bit surprised at how much debate there is now because we didn't really have it before the election. We were still watching the World Cup. I don't think the election debate around this was is robust as perhaps we are having now.
PAUL That's right. Let's move on quickly to Shane's final point in that interview, which is if there's a 51%, 49% split and say there's a Treaty settlement worth $50 million over a dam or the headwaters of a river or something like this. Bill English is convinced only the Crown has the obligation to settle that, not the private investors. Is that wise? Is he right?
KEITH Technically that's right, but morally, why shouldn't private interests in these companies also pay their share? Because I think it just shows the contradiction in the whole sale that when you've got something so tied up with the Treaty as power companies and use of power that you shouldn't just hock them off to private interests.
PAUL He didn't have a problem with that, though, did he? They've thought that through. Notice that.
BERNARD They have to separate it from the private part of it, otherwise they would struggle to sell it.
CLAIRE Who would take that on?
PAUL Section 9 only applies to the government. That's right. And then there was talk that the Grey Power and the CTU, with the help of the Greens, might be trying to get a referendum up on the asset sales.
KEITH Yeah, I think there's a fair chance. You've got to get about 400,000 signatures, but you've got some pretty big mass organisations there. If they all go around and sign up their friends and family and workmates and the Grey Power, the older people, then I think the government could be embarrassed if a referendum wins before they've completed the sales process.
PAUL We will leave it there.