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Twyford creates new housing & urban development ministry

Housing & Urban Development Minister Phil Twyford.

When the new Government allocated portfolios last October, Labour’s Phil Twyford won housing & urban development and the separate transport role.

On Friday, he announced that housing & urban development would get its own ministry, to be established on 1 August, operating from 1 October.

Initially, the Government will move functions from existing agencies, and will look at using funding from their existing operational budgets:

  • From the Ministry of Business, Innovation & Employment: the housing & urban policy functions, the KiwiBuild unit and the Community Housing Regulatory Authority
  • From the Ministry of Social Development: policy for emergency, transitional & public housing, and
  • From Treasury: monitoring of Housing NZ & the Tamaki Redevelopment Co Ltd.

The changes won’t affect where people go to for help with housing. The Ministry of Social Development will continue to assess people’s need for housing support and manage the public housing register.

The aim is for the new ministry to help deliver on the Government’s priorities of making housing more affordable & cities more liveable. Mr Twyford said: “Addressing the national housing crisis is one of the biggest challenges our government faces. The new ministry will provide the focus & capability in the public service to deliver our reform agenda.

“Too many New Zealanders are hurting because of their housing situation. Many are locked out of the Kiwi dream of home ownership. Others are homeless or suffering the health effects of poor quality housing.

“The new ministry will be the Government’s lead advisor on housing & urban development. It will provide across-the-board advice on housing issues, including responding to homelessness, ensuring affordable, warm, safe & dry rental housing in the private & public market, and the appropriate support for first-homebuyers.”

Mr Twyford said the new ministry would provide the Government with strong leadership & fresh thinking. It would also end the fragmented current approach caused by involving a number of agencies.

Then he rattled off 7 aims of the new government:

  • Ramping up efforts to house the homeless
  • Building affordable homes through KiwiBuild
  • Modernising & building more public housing
  • Reforming the tenancy laws to make life better for renters
  • Setting minimum standards to make rentals warm & dry
  • Adjusting the tax settings to discourage speculation, and
  • Setting up an urban development authority to lead largescale urban development projects.

In sum, he said: “The Ministry of Housing & Urban Development will help us deliver our bold & ambitious plan to build much-needed affordable housing, and create modern & liveable cities ready for the future.”

Earlier stories:
25 March 2018: Unitec land transfer kicks off KiwiBuild
23 May 2016: Is it really a faraway boundary that’s raising inner-city house prices?
8 November 2015: Twyford talks ideas which unitary plan & council funding review likely to resolve

Attribution: Ministerial release.

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Robertson introduces the new rules of play on economy

Finance Minister Grant Robertson laid out, in his first Budget, the new set of platitudes that will set the framework this government will work under.

He’d already done that in his December mini-budget, and the Labour Party had made clear in its election campaign that it wanted a change in emphases. The annual numbers game puts it in place.

The Opposition appeared to be still thinking under the old set, which amounted to exceedingly unbalanced largesse on one hand, extending to denial on the other.

In this brief summary on the Budget, I’ve ignored most of the numbers, emphasised the platitudes – you might call them the rules the new government will stand by – and pointed to 2 important economic factors for the property sector, migration & housing. At the foot, you can link to Treasury & Budget pages for more of the numbers detail.

Mr Robertson:

“We must make our economy more sustainable for future generations. This means caring for our environment as a core value, not as an after-thought. It means transitioning in a just & deliberate manner towards a low carbon economy.

“To transform the economy we have to be more productive. We have to work smarter, build our skills & resilience, explore new innovations and adapt to change. We cannot continue to rely on merely increasing our population, exporting raw commodities and an overheated housing market to drive economic growth.

“Our economy must be more inclusive, too. This means a society where everyone has an equal chance to fulfil their potential, to contribute, and to live meaningful, connected, healthy & fulfilling lives….”

Next, the how

“Our plan will grow & share our prosperity, so that our whole society is lifted up, and everyone has access to good quality healthcare, education, housing & other social services.

“That is why, in this Budget, the Government is prioritising those investments that will rebuild the critical social & physical infrastructure in New Zealand, and address the long-term challenges we face.

“At the same time, we are committed to living within our means, and having a buffer to deal with the risks & shocks that can come upon a small country sitting on the faultlines of the Pacific….

“We must manage the country’s finances responsibly for the sake of future generations. This Budget delivers an operating surplus for 2017/18 of $3.1 billion, rising in 2018/19 to $3.7 billion, with surpluses reaching an estimated $7.3 billion by 2022.

“These surpluses allow us to reduce debt. The Budget responsibility rules commit us to reducing the level of net core Crown debt to 20% of GDP within 5 years of taking office….

“We are also delivering on our Budget responsibility rules by keeping government expenditure below 30% of GDP. Core Crown expenses are expected to track at about 28% of GDP each year through to 2022….

The funding switch

“Altogether, this means that over the next 4 years we have about $24 billion more than the previous government had planned to invest in infrastructure & social services, so we can repair the deficits that are undermining our economy & communities. This will lay the foundations for our economic & social transformation.”


“This government is determined to take action on the housing crisis & the scourge of homelessness which has emerged in this country.

“In December’s mini-Budget we allocated $2.1 billion for our ambitious KiwiBuild programme to deliver 100,000 long-overdue affordable houses built across the country, including 50,000 in Auckland over the next 10 years.

“Budget 2018 commits more than $1 billion in new funding to go towards housing, including $369 million in new capital funding.

The different priorities of this government are never clearer than in housing. One of our first actions was to stop the state house sell-off.

“Today, I am announcing that this government is taking serious action to increase the supply of public housing by investing $234.4 million in operating funding for Housing NZ & community housing providers. This will provide more than 6000 homes over the next 4 years.

“We are working with councils to deliver more houses. For instance, the Tamaki Regeneration Co, which is jointly owned by the Government & Auckland Council, will be given another $300 million to provide about 700 state houses, as well as another 1400 houses in Tamaki for the open market.

“These will be new, warm & dry houses. Too many of our homes are cold & damp, leading to preventable diseases. A new programme to make Kiwi homes healthier will provide $143 million to go towards grants for those on lower incomes to insulate & heat their homes. Investing in warmer homes simply makes sense….”

The homeless

“In this Budget, our government will support more than 1400 of New Zealand’s most vulnerable homeless people & families through the Housing First programme over the next 4 years.

“Housing First supports people who have been homeless for a long time or who face multiple & complex issues. We recognise it is much easier for people to address issues like mental health, or drug addiction, once they are housed.

“This programme aims to end homelessness for people, not just manage it.

All these plans announced today, as well as the Families Package, will help to lift children out of poverty.”

Sustainable economic development

“We are focused on playing our part to support generating prosperity & sustainable economic development.

“To that end, we are prioritising infrastructure….

“This Budget formally establishes the $1 billion/year Provincial Growth Fund to support growth in the regions, as outlined in the coalition agreement between Labour & NZ First.

“This fund represents the single biggest investment in the regions of New Zealand in our lifetimes. It aims to enhance economic development opportunities, create sustainable jobs, contribute to community wellbeing, lift the productivity potential of regions and help meet New Zealand’s climate change targets.

“This year the Provincial Growth Fund will be made up of $684.2 million of operating expenditure & $315.8 million of capital expenditure. This includes significant investment in the One Billion Trees programme and support for regional rail projects.

“The Budget also sets aside funding for the establishment of the NZ Forestry Service. Our investment in forestry will help us to deal with climate change, lift our economy and provide employment….

“It is possible & necessary for New Zealand to transition to our goal of a net zero emissions economy by 2050. This will require some major changes, but we can do this if we work together.

The new economy

“This Government also sees the opportunity that this transition provides. Budget 2018 sets aside $100 million of new capital funding for the Green Investment Fund to kickstart investment in assets & technology to reduce carbon emissions.

“This fund, which is the result of the confidence & supply agreement between Labour & the Green Party, will help a just transition to a more sustainable economy that will ultimately create jobs in new, clean industries….

The regional equation

“Work is underway on developing lists of regional skills & labour shortages. We want an immigration system that really works for New Zealand. We want to match migrant skills to the regions & industries where they are needed most. We want to ensure that any genuine skill shortages are filled, with immigration levels that are sustainable….”

Understand the differentiation: Wellbeing to replace GDP focus

“Next year we will be the first nation in the world to deliver a Wellbeing Budget reporting our annual progress against a range of measures that highlight the health & wellbeing of our people, our environment & our communities. We will use the living standards framework developed by the NZ Treasury to help develop our Budget, and to measure our success.”

  • That’s the end of my excerpts from Mr Robertson’s speech to Parliament yesterday. Below, some points on the key issues of migration & housing.


One key figure in Treasury’s economic & fiscal update is the migration projection, which previously showed a steep decline from a net inflow of 70,000/year now to 15,000/year in 3 years. The projected decline in yesterday’s update would reduce the net inflow to 25,000/year at June 2021.


Look at this statement to see how distorted economic measurements can be. Along with graphs showing its forecasts, Treasury provided a pithy statement of position for the Budget release. For housing, debt & gross domestic product (GDP), it said: “The growth in the housing market has seen household debt increase. In 2017, household debt reached 168% of household disposable income. If incomes don’t rise or interest rates rise sharply, then paying off mortgages could be difficult for some. If this happens, then people may spend less, or buy or build fewer houses, reducing GDP.”

The bottom line is GDP; acting rationally can reduce it.

It’s almost with surprise that the Treasury note reports that household debt has increased, even though interest rates have been at all-time lows. Why? Because buyers of houses buy to the limit of their outgoings and, as the debt component is lower, they can buy a more expensive house.

Those facts are factors of politics & misgovernance. The misgovernance has come in allowing – promoting – record immigration without creating a receiving economy that encourages dispersal of new arrivals. Hence, avoidable Auckland traffic congestion and pressure that forced house prices to spiral upward.

The new government has stated policies to grow regional development and reduce immigration – which another Treasury note says will plummet in a natural cyclical change anyway.

The Treasury note on housing also comments that there’s a shortage of skilled labour to build houses. Migration to Australia topped 53,000/year in 2012 (net outflow to Australia then was about 40,000/year) but has since slid to zero.

Assuming cyclical norms, the outflow will resume and rise steeply. In that case, a clamp on immigration will cause economic disruption. The better course is to provide a welcoming environment that’s spread around the country instead of being singularly focused on Auckland, encouraging immigrants to look at more options for a new life, and encouraging prospective emigrants to reconsider.

Treasury, 17 May 2018: Budget economic & fiscal update 2018 (BEFU)
Budget at a glance 2018
Fiscal strategy report

Attribution: Budget speech & documents.

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Collins raises scare about “road tax” diversion, but government fund already $½ billion in red

Former Cabinet Minister Judith Collins, now the National Opposition’s transport spokesperson, raised a scare this week that the new government would divert National Land Transport Fund money from major road projects to rail.

2 things she neglected to mention:

1, while the fund’s income comes largely (but not entirely) from road users, it has always referred to its “land transport” programme rather than to “roads”.

2, it will be a long time before the fund has any money to spend on anything. Its annual reports for the last 2 years disclose that the fund’s liabilities exceeded its assets by $497 million at June 2016, rising to a $528 million deficit at June 2017.

It had budgeted for a $40 million surplus at June 2017.

The fund’s 3 biggest spends in the last financial year were on the accelerated Auckland transport programme ($236 million), public-private partnerships (for highway development, $557 million) & Tauranga’s eastern link toll road ($107 million).

The fund’s income is derived from “all revenue from fuel excise duty, road user charges, motor vehicle registration & licensing fees, revenues from Crown appropriations, management of Crown land interest, and tolling”.

The fund uses this income to manage the funding of the road policing programme, the national land transport programme & activities such as transport planning.

The fund’s last annual report says: “The National Land Transport Fund has a negative general funds balance due to the programmes that were accelerated and current funding was sourced from the Crown. The funding received has been recognised as long-term payables, which are not due until 2-27 years from balance date.

“The fund has the option to slow down expenditure on the national land transport programme, or utilise the short-term borrowing facility of $250 million if required to meet obligations as they fall due in the short term.”

Congestion issues

Auckland – a region where traffic grinds to a halt daily – has a serious, and growing, campaign to get more people to commute by rail, reducing road traffic, but it still has to work out how to handle freight much more efficiently.

The biggest proposal for improving freight movement, the East-West Link through Penrose & Onehunga, won consent from a board of inquiry in November, confirmed by its report & final decision on 21 December. But, by then, the incoming government had canned the project.

Collins on Labour’s “pet” obsession

Ms Collins said in a release on Monday the new government’s transport minister, Phil Twyford, “has confirmed the government is considering diverting taxes paid by motorists who want better roads to rail instead, while insisting to media this won’t happen.

“This is an important principle, adhered to by successive governments, ensuring the specific taxes paid by motorists are invested in newer, safer & better roads – helping keep New Zealanders connected & safe. Road users pay taxes which are directly returned to them.

“But this now appears under threat, because of the Labour Party’s obsession with light rail in Auckland. Mr Twyford has written to stakeholders saying a number of changes to the government policy statement (GPS) on land transport are being considered. Among the proposals is ‘exploring how rail investment is incorporated within the GPS & the National Land Transport Fund’.

“This is in spite of his office telling media last week that funding for road upgrades would not be redirected to rail.

“In his rush to erroneously claim that a number of roading projects aren’t under threat because of the Government’s obsession with Auckland rail, Mr Twyford has been saying different things to different people.

“This desperate grab for more taxes is the result of this free-spending government realising how much it’s going to cost to build its pet rail line from Auckland’s cbd to the airport – so it’s looking to divert funding from regional roads as a result.

“The National Land Transport Fund is paid for by road users to be invested in improving New Zealand’s roading network and it should remain that way. The Government needs to check its priorities and ensure the taxes paid by road users are invested back in the roads they are using.

“Last week, National launched a series of petitions aimed at saving those regional roads that the Government is looking to slash funding for. Given this duplicity from the Government, I want to again encourage everyone to sign the petitions to save our roads,” Ms Collins said.

Twyford signalled his intention

Mr Twyford wrote in a column for Contractor magazine last week: “To achieve our vision for transport, change is necessary. I am interested in how we can best use existing funding tools – like the National Land Transport Fund & the Government Policy Statement (GPS) – to support a more multi-modal approach.

“The traditional way in which we finance & fund infrastructure needs to change if we are going to address the multiple challenges of urban growth, replacing ageing assets, meeting higher environmental standards & improving resilience. We believe we need to be smarter about how we use the Government’s balance sheet.”

Mr Twyford wrote that the challenges of population & freight growth in the “golden triangle” of Auckland-Bay of Plenty-Waikato “will not be solved solely by investment in the roading network. All modes can be complementary to each other.

“For example, the Government is committed to implementing a rapid transit system for Auckland, which will include light rail from the cbd to the airport and to west Auckland. Such an investment will not only make it easier for people to get around town, but it will also free up our roading network to improve freight efficiency.”

The National petitions

National MPs began launching their petitions a fortnight ago.

Whangarei & Northland MPs Shane Reti & Matt King’s petition calls for the Auckland-Whangarei 4-lane “road of national significance” to proceed as the previous government planned it.

In Auckland’s eastern suburbs, MPs Jami-Lee Ross (Botany), Simeon Brown (Pakuranga) & Denise Lee (Maungakiekie) launched their petition to support the East-West Link.

They commented: “After a decade of planning & $50 million of investigative spending, you would expect that there was a clear direction on the project. This project has been through a fine-toothed procedural process like no other. It is supported by council, iwi, and has been approved by the Environmental Protection Agency’s board of inquiry.

“The current gridlock is a major barrier to commerce. This is making it difficult for people getting access to their basic daily goods. It is quite literally the bread & butter of transport projects.”

Contractor, 15 January 2018: Infrastructure & transport
National Party petitions: Save our regional highway projects

Attribution: National Party releases, Contractor.

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Access matters most

On this website, access is the most important consideration. The real estate catchcry, “Location, location, location,” relies on your ability to get there.

In Auckland, a 30-minute car journey can take 90 minutes, but estimating timeframes is also hazardous at pretty much any time of day.

The Government resolutely opposed rail innovation until the super-city’s first mayor, Len Brown, won the support to proceed with the city rail link and forged ahead, notwithstanding the funding gap as the Government sat on the sidelines. Eventually, this year, the Government signed up.

Cars have quickly filled the extra lanes on a short patch of the Northern Motorway and will quickly fill the Waterview tunnel & North-western Motorway expansions.

As I wrote 6 years ago about travelling on the western, industrial side of the isthmus: “Occasionally I stray into Neilson St, Onehunga, and quickly realise it was a mistake. There’s no need to be quick about the realisation, of course, because it’s going to be a while before you can escape.”

Construction of the East-West Link, the State Highway 1-20 road route through that western area, is before a board of inquiry, Mill Rd between Papakura & the southern edge of Flat Bush at Redoubt Rd & into Murphys Rd is becoming a more significant arterial and is now the subject of upscale talk, but the arrival of still more congestion isn’t being beaten.

Now, it seems, the third track on rail’s main trunk line will be built, and perhaps the fourth track as well.

Labour’s new candidate for prime minister, Jacinda Ardern, upped the ante yesterday when she said Labour would build light rail between the city centre & airport within a decade, extending to West Auckland in the same timeframe and later to the North Shore.

She would introduce a regional fuel tax, infrastructure bonds & targeted rates.

National’s finance minister, Steven Joyce, again ruled out a regional tax, which he’s previously argued is inefficient. So, too, is doing nothing while Auckland’s population grows by about 50,000/year, with 10-year projections from Statistics NZ of 29,000/year (medium) to 35,000/year (high).

A party in power for 9 years has no room for innovative policy without the audience asking why these policies weren’t already in place and, while both National & Labour issued transport policies yesterday, Miss Ardern had to have the front running.

We are set up, then, for a serious battle of wits over primary infrastructure & housing in Auckland – and the skilful politicians will at least appease the rest of the country, if not produce some sound economic offerings, so the election doesn’t just become about Auckland.

For the voter who thinks more about policy than party allegiance – and these voters, I think, are likely to decide who comes to govern – there are questions not just about policies but about strategies, and particularly funding methods.

Among those questions today:

  • Why has it taken so long to introduce new central government funding for extra housing infrastructure support?
  • Why has the Government steadfastly opposed new forms of tax, or a greater sharing of tax to support regional initiatives & infrastructure?
  • Why have key Auckland transport decisions been delayed so long in the face of record immigration?
  • Why is a board of inquiry examining one proposed section of transport infrastructure – the East-West Link – in isolation from other components such as the third & fourth sections of main trunk rail track and the future port location & consequent transport links?

Those are questions which are obviously aimed at the incumbent government. Other parties have released policies on some of these issues.

Labour has a policy to build, or finance the building of, an extra 10,000 houses/year and Miss Ardern talked yesterday of using a regional fuel tax.

The key transport – access – decisions need further input from all claimants for the government benches. The central issue is integrated decision-making, and the absence of such integration has long been a feature of central government (including bureaucrats) versus Auckland.

Attribution: Party speeches & release.

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The English programme is for steady growth

Bill English, completing his second month as Prime Minister, opened Parliament yesterday with a statement that was long on boring. The word ‘continue’ cropped up throughout his speech.

And that’s neither odd nor bad. A prime minister who’s just finished 8 years as deputy and also as finance minister is hardly going to tell you he’s been doing a bad job and is going to change everything.

Nevertheless, I read through it in case something had moved out of line. One thing I’d hoped might have moved a little closer to action was the Resource Management Act reform programme. It was down the end of the speech and is still a work in progress. That’s perhaps for the best, because it needs work to remove some of the unnecessary turmoil some changes were going to make.

Mr English said economic growth was expected to average about 3%/year over the next 5 years, “supporting more jobs, reducing unemployment and allowing incomes to rise faster than inflation.

“Unemployment is forecast to drop to 4.3% by 2020-21. Over the same period another 140,000 jobs are expected to be created and the average wage is forecast to increase by a further $7000 to $66,000.

“The Government’s overall fiscal strategy remains unchanged – getting on top of spending and paying off debt in the good times so that the Government can support New Zealand communities through future challenges.

“The operating allowance remains at $1.5 billion for each of the next 4 Budgets. The capital allowance has been increased to $3 billion in Budget 2017 and to $2 billion in future budgets to provide for a number of high quality infrastructure & investment projects.

“Treasury’s latest forecasts of the operating balance before gains & losses (OBEGAL) is for a $473 million surplus this year, rising to $8.5 billion in 2020-21.

“Net debt is expected to fall to 18.8% of gdp by 2020-21, with contributions to the NZ Superannuation Fund forecast to restart the same year.”

Among projects for the year (there are others, in case you think the most important one has been omitted – check the link below):

“The Government will continue work on improving the quality of our rivers & lakes, and progress work on a fair & equitable allocation system for water & discharges.

“The Government will encourage petroleum & mineral exploration while adhering to strong environmental & safety provisions. Investment in data acquisition projects such as aeromagnetic surveys will continue, ensuring aeromagnetic data on around 30% of New Zealand’s land surface will be available by mid-2018.

“The Government will continue to promote competition in the electricity market to help keep downward pressure on power prices. It will also continue to promote renewable energy, with a target of reaching 90% renewable energy by 2025, up from 81% in 2015. Work will be progressed on setting renewable energy targets beyond electricity.

“Investment in modern infrastructure is a priority for the Government. Capital spending over the next 5 years is forecast to total $32.1 billion, compared to $18.4 billion over the last 5 years, with major investments in transport, schools, hospitals, defence & housing.

“The Government will continue construction of the remaining 5 roads of national significance, and accelerate a package of regionally important state highway projects under the accelerated regional roading

“Housing will remain a key focus for the Government this year, and work will continue to increase the supply of land for housing.

“Legislation to reform the Resource Management Act will be progressed, to reduce costs & delays for homeowners & businesses, and the Government will also proceed with reform of the Building Act.

“The Productivity Commission will deliver its final report on the urban planning system. This will consider options for the long-term replacement of planning legislation.

“The Government will work with Auckland Council to ensure the successful implementation of the city’s unitary plan. Additional special housing areas will be established, and more underutilised Crown land will be made available to support an increase in residential building.

“The Government is reforming the social housing sector to grow supply and get better outcomes for people & families most in need of housing assistance.

“The Government will build & fund additional social & emergency housing places, having last year provided permanent funding to the emergency housing sector for the first time.

“The social housing reform programme will progress, with the transfer of up to 2500 Housing NZ properties in Christchurch to community housing providers. The reforms aim to drive more diverse ownership of social housing, engaging providers who can support tenants with additional social services, and redevelop social housing to better match tenants’ needs.

“The Government will progress the advanced survey & title services project, which will significantly improve the quality & range of survey & title services provided by Land Information NZ.

Legislation to amend the Local Government Act will be progressed, allowing local authorities to create more shared services across regions, particularly for core infrastructure such as transport, water & sewerage.

“The Government will continue to review New Zealand’s immigration settings to ensure they support economic growth and provide employers with access to the international labour market to fill labour needs that cannot be met domestically. A new global impact visa will be piloted to attract up to 400 young technology entrepreneurs.

“The Government will implement initiatives to contribute to its goal of raising Government investment in research & development to 0.8% of gdp, including the rollout of the $250 million/year strategic science investment fund.

“2 new regional research institutes will be established in Marlborough & Alexandra, and a second round of regional research institute funding applications will be completed, supporting 1-3 additional institutes.

“The Government will continue to resolve historical Treaty of Waitangi claims, and intends for all willing & able iwi to have settled or have an agreement in principle by the end of 2017.”

Prime Minister’s statement, 7 February 2017

Attribution: Speechnotes.

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English explains his thinking

Prime Minister Bill English used a Rotary Club address in Auckland yesterday for his first election campaign offer, a big lift in police numbers & resources.

The package would amount to $503 million and includes adding 1125 more staff to the police force over 4 years, 880 of them sworn officers; an increase in cash & assets seized from gangs & organised crime, up from $230 million to $400 million over 4 years; and $115 million for rehabilitation & reintegration programmes.

The National proposal, the first promise heading into the 23 September general election, comes 4 months after Labour leader Andrew Little berated the Government for holding police income down to 14% since it was elected in 2008, compared to a 25% rise in costs over that period arising from immigration & inflation. Labour proposed lifting police numbers by 1000 in 3 years.

More interesting to me from Mr English’s address yesterday, though, were some of the pictures he painted from his upbringing on a Southland farm, his time as a young farmer fighting the debt which threatened to overwhelm him and, he said, learning economic reality. Below, I’ve run those parts of his speech:

A successful recipe

Some people believe New Zealand’s location protects us from the most immediate pressures. But in time, the effects of decisions made in Washington, Berlin, Moscow & London will wash up on our shores.

When our values & direction are tested, we should remember that history shows we’ve developed a successful recipe for New Zealand over many years, and we can hold true to our values. That allows us to face international challenges with confidence. Confidence in our resilience, confidence in our ability to adapt and confidence in our place in the world.

We have forged a distinctive place in the global community as a fair-minded people with a successful economy open to trade, investment & migration. That economic success has been hard won by New Zealanders. It should not be taken for granted.

As some of you know, I was brought up in Southland, a place where hard work & farm skills were respected more than profit, and where no one could do it all on their own. I got my politics around our large dining table growing up, and from my mother who ran a farm, raised 12 children and was a serial community activist.

By the early 1980s, I was a new, keen & highly indebted young farmer. Interest rates were around 17%, but farm costs were held down by wage & price freezes.

That wasn’t sustainable and just papered over the economic problems that had built up over a number of years.

The economy had to be restructured. My community was hit hard as farm subsidies were wiped.

I made lots of financial & farm management mistakes. But with the help of family and a lot of hard work, we stayed on our feet.

Many New Zealand families had similar experiences in other industries, as jobs were lost and they struggled to rethink where they fitted in a country that had suddenly changed.

We thought the world owed us a living. It didn’t.

Small steps

I learned then that business & families in a small trading country like ours needs to continuously adapt in small steps – and that government should back Kiwis to do just that, focusing on resilience & aspiration rather than fear & isolation.

Hiding from economic reality eventually requires drastic & damaging change.

This has been the guiding philosophy behind the National-led Government’s approach over the past 8 years. And it has delivered the strong economy we have now.

As a new MP in 1990, I saw the deep-seated resilience of our rural families & communities as they rebuilt their skills & their confidence. I saw the same qualities in the big city when I married into a Samoan Italian family.

I must admit the scruffy unemployed farm worker who turned up on the arm of their eldest daughter wasn’t quite what Mary’s parents had in mind as a son-in-law – busy as they were with several jobs and raising a large family. From them I saw the grit & determination it takes to feed & educate a large family, own a home and win respect when starting afresh in a new country.

Mary and I have raised 6 children of our own. Along with the hundreds of families we’ve met through school, church, relatives & dozens of sports teams, we’ve shared the experience of working multiple jobs, getting everyone everywhere on time, finding time to spend with the children & each other – and for enough sleep – as well as answering the hardest question of all every day: what’s for dinner and who is cooking it?

The people who shaped my life are resilient & capable.

I’m proud that on the other side of the globe from the European capitals I visited a few weeks ago, New Zealanders have built a cohesive & globally competitive country that can provide valuable lessons to the rest of the world.

In recent years, New Zealand has dealt with the biggest financial crisis since the Great Depression, we’ve dealt with devastating earthquakes and we’ve made significant progress on deep-seated social & Treaty issues.

A sound footing

We now have a dynamic & diversified export sector, sound government finances, low unemployment and thousands of new jobs. People are voting with their feet. New Zealanders are staying home, more tourists want to visit us, and more people want to live here. The outlook remains positive and the economy continues to grow, with over 130,000 jobs created in the last year. Average wages are expected to keep rising and reach $66,000 a year by 2021. That means more opportunities for our kids to get jobs and more money in people’s pockets.

The global economy is looking a bit better than last year, with improving prospects in Europe & the US. However, the political instability I mentioned earlier means there is no room for complacency.

In this environment, I believe the biggest threat to New Zealand is disruption of the international system of open trade. Under my leadership, New Zealand will continue to advocate for free trade and aim to execute high quality trade agreements. When we open doors for our exporters, they walk through and create opportunities & jobs for New Zealanders.

Immediate challenges

Our immediate challenges at home are what I call the positive challenges of growth. The Government is building the roads, schools & houses needed to support our growing communities. We’re providing the public services & infrastructure needed by a successful, growing & modern economy – and there’s much more to do.

The whole point of building a strong economy is to improve the lives of all New Zealanders. If we can stay on course and build on the progress we’ve already made, we have the best opportunity in decades to make positive sustainable choices for our country – choices that deliver better incomes for our families, safer communities, and provide better government services for everyone.

As prime minister, I want people to be rewarded for their hard work & enterprise.

Businesses, farms and entrepreneurs across New Zealand are the engines of growth in our country – as are the people who work hard every day in those enterprises.

So we’ll continue to back people who take risks to create new jobs & new businesses.

We’ll back hard-working people who get up early in the morning to milk the cows or to catch the bus to work, so they can raise their families. And we’ll back people who bravely leave behind welfare dependency to move into work or who work hard to manage their health issues or disability so they can live independently. I believe in the capacity of all New Zealanders to improve their lives in some way, large or small. And I believe in the generosity of this country to help them do it.

Here’s what I mean.

Last year, I visited Kaiti School in Gisborne, where many of the children come from low-income families. I saw inspired teachers sign up parents, mostly young mums, to the local iwi savings scheme. I met a 5-year-old who presented me with a business plan for selling toffee apples at the school fair. He told me about his products, his customers & his marketing.

If we accept the normal assumptions, then that young Maori boy hasn’t got much chance. But what I saw in his eyes, and in the teachers supporting him, will change his life.

Finding the bright side

Through my extensive family & many years as a local MP, I have seen hundreds of examples of suffering & loss of hope turned around by quiet heroism in our communities, families, schools & public services. It never happens without the hope of one person for another.

I’ve also seen lives blighted by poor public services, bad decisions, neglect & bureaucratic inertia. A well-intentioned public service on its own is no guarantee of success – we have to help people to fan the small flames of hope. This government is committed to doing that.

We’ve developed a better understanding of the needs of people who rely on us most. Public servants can now see the lifelong benefits of intervening early to help those in need, and the lifelong costs when that doesn’t happen. We know, for example, that a teen parent on welfare will spend an average of 17 years on a benefit, at a cost of just under $300,000.

There is a group of around 1000 5-year-olds each year who, in later life, are far more likely to commit crime, be on a benefit or go to jail, and they’re far less likely to succeed at school. Left alone, each of these children will cost taxpayers on average around $270,000 over the next 30 years, with some costing over $1 million. We will spend time and money now to change the course of their lives.

For too long, governments have serviced misery, rather than investing upfront to help people change their lives for the better. Some New Zealanders need ongoing support to help them lead a decent life – and they should have as much choice as possible in how that happens. But there are many more who will benefit from smart, lighter-handed assistance and will then move on.

A basic: Money isn’t always the answer

It seems pretty basic to me that if you are spending billions of dollars on social programmes like health, education, welfare, housing and law & order then it should work. You should actually be achieving something, otherwise you’re wasting taxpayers’ money and messing with people’s lives. So we now publish results every 6 months showing what has been accomplished.

Spending more public money is not, in itself, an achievement. Real achievement is reducing welfare dependency. Real achievement is getting better results for our kids at school. And real achievement is preventing rheumatic fever, and reducing emergency department waiting times. Real achievement is changing lives. This approach, which we call social investment, is showing promising results.

There are now over 50,000 fewer children living in benefit-dependent households than there were in 2011. And the number of sole parents on a benefit is the lowest since 1988.

My government is willing to take the risk of trying new ways to help those most in need. Some new services might not work. Others might be opposed by existing providers. In election year, some will say the answer is always more money. If that were true, we would have no social problems, as we’ve been increasing funding for decades. The recent rise in the prison population confirms we need to do better.

We’ve made some progress in breaking the cycle of welfare dependency, child abuse, low education levels & escalating criminal offending, a cycle that is often intergenerational. It is a long job.

The people who fall through the cracks

But there remains a small number of people who have a disproportionate impact on the safety of our communities. Too many people in prison and on community sentences are regulars in the government system. So today I want to address that issue.

This Government’s Policing Excellence and Prevention First programmes have focused on reducing crime and preventing reoffending. These programmes contributed to a 20% reduction in crime between 2009-14. They improved public confidence in police, and they drove productivity gains that freed up the equivalent of more than 350 extra frontline officers. More recently, we’ve set challenging targets to reduce violent crime, youth crime & reoffending.

We’ve made it harder for violent offenders to get bail and we’ve sharpened our focus on preventing family violence. And we’re using social investment to better understand the people who most need our intervention and identify what really helps them to lead better lives.

We have driven government agencies to address the drivers of dysfunction, rather than just responding to the symptoms. Because preventing crime often requires intervention from education or housing agencies rather than just the police, for example.

Here is a surprising fact: The most common age of an apprehended burglar last year was 16. That’s right – just 16 years old. We need to push harder to keep every young person on a track that avoids first offending and prevents them moving on to even more serious crime. But the police frontline need more time to dedicate additional resources to crime prevention & working with other agencies, while also meeting higher demand for dealing with serious crime now.

Although recorded crime has fallen since 2009, overall demand for police services has recently increased. That’s down to the complexity & time-consuming nature of cases such as family violence, child abuse & sexual assault, as reporting of these crimes increases. In addition, recorded crime has begun to rise again over the last 2 years – particularly burglaries, robberies & assaults.

As I’ve said, this government is prepared to invest up front in programmes that will tackle these complex issues and make a positive difference to communities.

Warning: examine the promises closely

Delivering better public services for a growing country is all about investing where it’s needed, while working smarter and being more accountable for results.

In weighing up promises by political parties this year, I challenge you to look beyond the dollar-figure soundbites. I want you to ask whether the policy sets out exactly how it will improve people’s lives – or whether it is just taking the easy option of throwing money at a problem.

Attribution: Bill English speechnotes.

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Housing minister no more

Nick Smith has lost the housing portfolio in today’s Cabinet reshuffle by new prime minister Bill English, and nobody’s picked it up, although 2 ministers have social housing & Housing NZ in their titles.

Dr Smith has retained the building & construction (previously building & housing) and environment portfolios.

Ministers with ‘housing’ in their title are:

  • Amy Adams, responsible for social housing, responsible for Housing NZ Corp, also Associate Minister of Finance, Minister of Justice, Minister for Courts, Minister Responsible for Social Investment, and
  • Alfred Ngaro, Associate Minister for Social Housing.

Steven Joyce picks up finance & infrastructure, Gerry Brownlee remains Leader of the House and retains Supporting Greater Christchurch Regeneration, Defence and the Earthquake Commission portfolios. He will also be appointed Minister of Civil Defence.

Simon Bridges continues as Minister of Transport and will pick up the economic development & communications portfolios and associate finance.

Anne Tolley becomes Local Government Minister, replacing Peseta Sam Lotu-Iinga, who is retiring from Parliament.

Full ministerial list

Attribution: Prime ministerial release.

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Williamson quits as minister, not as MP, over support for Chinese developer

Building & Construction Minister Maurice Williamson, 63, resigned as a minister outside Cabinet yesterday – but said he wasn’t resigning as an MP – after a news investigation established he’d contacted police over their investigation of Chinese property developer Donghua Liu.

Mr Williamson, MP for Pakuranga since 1987, had a series of unusual links to Mr Liu. Mr Williamson & Prime Minister John Key opened Mr Liu’s refurbished Boulevard Hotel in Epsom just before the Rugby World Cup in 2011. That was to have been the forerunner to a $70 million redevelopment around the hotel, which didn’t proceed.

But the intended investment helped sway Mr Williamson to support Mr Liu’s application for citizenship, and to call Immigration Minister Nathan Guy about it, although Internal Affairs had recommended declining the application because Mr Liu didn’t speak enough English.

Mr Williamson conducted the citizenship ceremony himself, the day after the application was granted.

In March, Mr Liu pleaded guilty to charges of assaulting his de facto wife and her mother in December.

He’d also advocated reducing the sum required of applicants for citizenship under the business migrant category to be halved to $5 million.

Mr Key said yesterday he’d accepted Mr Williamson’s resignation. The prime minister said: “I have been made aware that Mr Williamson contacted police some time ago regarding their investigation of Mr Donghua Liu. Mr Williamson has assured me that he did not in any way intend to influence the police investigation. However, Mr Williamson’s decision to discuss the investigation with police was a significant error of judgment.

“The independence of police investigations is a fundamental part of our country’s legal framework. Mr Williamson’s actions have been very unwise as they have the potential to bring that independence into question. I have advised the governor-general to accept Mr Williamson’s resignation as a minister.”

Mr Key said he would appoint a new minister outside Cabinet early next week. In the meantime, Housing & Conservation Minister Nick Smith would act in the Building & Construction portfolio, Nathan Guy in Land Information and Simon Bridges in Customs & Statistics.

Attribution: Government release, news stories.

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Political triumph at heart of Key housing message

Prime Minister John Key delivered the triumphal speech to the National Party’s annual conference in Nelson yesterday of a man who knows he has his opponents beat, using the issue of affordability to beat them.

He spoke of how this government had taken New Zealand forward despite difficult times – the global financial crisis topped with earthquakes – and it is the rising economy that will win him re-election next year.

He & his ministers announced policies on resource management reform and more loan package support for first-homebuyers at the conference of the party that is the controlling force in the Government.

Resource management is a convenient scapegoat: while home construction has been at the bottom of its cycle, it has been easier to blame councils’ failure to rezone more land for causing higher prices. Councils have also steadily introduced more compliance costs over the last decade, largely to meet the philosophies of sustainability & care for the environment – taking compliance to an unreasonably high proportion of housing cost.

Increased loan support for first-homebuyers will feed into prices, just as easier credit & low interest rates have done. The next package of resource management reforms still contains safeguards, but there will be more pressure on councils to act faster.

That conforms to the underlying philosophy Mr Key enunciated yesterday: “The fundamental difference between us and the opposition is that we are about doing things, and they are about stopping things.”

Each of Finance Minister Bill English’s 5 budgets had laid out further stages in National’s plan to deliver a brighter future for New Zealand, Mr Key said: “Under our plan, we have protected the most vulnerable New Zealanders through difficult times, set a path back to surplus and built a solid platform for growth.

“Under our plan, the economy is growing, wages are rising, the cost of living is well under control and there are 65,000 more jobs in the economy than there were 2 years ago.

“Under our plan, business confidence is the highest it has been since 1999, we are delivering better public services for Kiwi families and crime rates per capita are at their lowest level in more than 30 years.

“Under our plan, we are overhauling a welfare system that is trapping thousands in dependency and giving people more support to get off the benefit.”

Mr Key labels his opponents disparagingly far more effectively than they do to him: “Under MMP, all elections are close elections. And they are not just about National versus Labour, but about the centre-right versus the left. And it’s clear for everyone to see that Labour has hitched their wagon to the Greens, lurching the opposition to the far left. Make no mistake, our opposition comes from the far left of politics. The Greens are leading Labour by the nose.

“It’s important that New Zealanders understand what a Green-dominated government would look like. They want to tax you more, rack up more debt and make you work 2 more years before you can retire.

“They want a government department to run the entire electricity system, just like it did in the old days when we had blackouts. They want to stop oil, gas & mineral exploration that would create jobs & growth. They blame foreigners for all the ills of the country when our future prosperity lies in being open & connected to the rest of the world. They even characterise businesses relocating jobs from Australia to New Zealand as ‘deeply worrying’.

“We believe in a supportive government but also in personal responsibility. We understand that businesses large & small create jobs & prosperity in our country. We believe in supporting people’s hard work & enterprise. We have tolerance & respect for all New Zealanders and we don’t favour one group over another.”

From that platform, Mr Key devoted a large part of his address to home ownership & affordability, and his opponents made it easy for him to win the argument. Labour has proposed building 10,000 affordable homes/year to dilute the market. But, in reality, what homebuyer wants prices to stay down? Everybody wants the value of their purchase to rise. And what homebuyer wants to aim for the cheap house when available credit, low deposits & low interest rates mean you can aim higher?

Part 2 of the John Key housing story: Key points finger at councils, changes loan support

Link: Full Key speech

Attribution: Speech notes.

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Key points finger at councils, changes loan support

I finished the first part of this 2-part story on John Key’s address to the National Party conference yesterday by asking: In reality, what homebuyer wants prices to stay down? Everybody wants the value of their purchase to rise. And what homebuyer wants to aim for the cheap house when available credit, low deposits & low interest rates mean you can aim higher?

Mr Key hasn’t said he’ll lower the price of housing across the board, but that specific support measures will enhance the opportunity for new buyers to compete.

The housing issues just happen to provide National with an excellent opportunity to win praise for dismantling the carefully constructed environmental support system of the previous decade, which turned into a bureaucratic nightmare instead of being valued as a way to get better development.

It’s not clear that the new package of resource management reforms will make development that much easier – the main changes look like they will add bureaucratic requirements rather than simplifying anything. The reforms will enable the Government to constantly wield a stick at local government, and it will be local government that gets blamed for not performing.

I deal with the resource management package separately. This article covers Mr Key’s speech on housing affordability & loans.

Said Mr Key: “The Government has been working on issues around home ownership & housing affordability for quite some time. We share the concerns many New Zealanders have that some young people who have worked hard to get a reasonable income, have saved to put a deposit together and who want to settle down in a home of their own are either being locked out of the housing market altogether or are having to spend far too much of their incomes on housing. The National-led government is committed to ensuring home ownership is attainable for New Zealanders.

“ I want to make it clear at the outset that I think orderly increases in the value of homes over time is generally a good thing. Most New Zealanders have a lot of their savings tied up in their home, so if that is increasing in value then well & good. But if those increases are so rapid they leave other people behind, we have a problem.

“In the 9 years to November 2008, the end of the last term of the Labour government, the average wage rose about 40% while the national median house price rose 100%. No wonder home ownership was much more difficult for a lot of Kiwis after that 9-year period. And no wonder Labour are feeling guilty about home ownership – they were in power all that time… and they did nothing but talk about it.

“Since 2008, house price rises have been more subdued. Over the last 4½ years, house prices across the country have gone up only 13%, while the average wage has risen 15%. But the national picture hides what’s going on in some regions. Over the last year or so, the housing market has been heating up in parts of the country like Christchurch & Auckland.

“Christchurch, of course, has its own unique set of issues, which we are addressing. But Auckland, amongst other places, is a city where many people have to stretch way too far to buy a house. The problem, in a nutshell, is that not enough land has been set aside for building, planning & consenting processes are too cumbersome and the costs of construction are too high. So not enough houses have been built to keep up with demand.

“Some pretty elementary economics tells you that prices for existing houses have to rise as a consequence. And they can rise very rapidly. That affects people wanting to buy a house but it also has an impact on the economy as a whole. As the Reserve Bank has repeatedly said, rising house prices affect financial stability and put pressure on interest rates & the exchange rate. If a bubble is created & bursts, it could leave many homeowners with little or no equity, and leave banks in a vulnerable position. I know that the Reserve Bank governor is very worried about this risk, and precisely that situation has occurred in other countries. We certainly do not want it to happen here.

“I want to tell you that homes can be made more affordable in New Zealand. The way to do that is pretty clear. When you have a shortage of something you make more of it. So the answer is to build more houses. That’s what will really make a difference at the end of the day. And building more houses, at reasonable prices, comes down to ensuring that there is more land available to build on, that there are better consenting processes and that costs are lower. Addressing this set of issues is far & away the most important thing the Government can do for housing affordability.

“For example, we will have a law passed soon that will speed up the provision of new housing and streamline approvals in areas where housing is least affordable. We already have a housing accord agreed with the leadership of the Auckland Council which will see 39,000 homes consented over 3 years – a massive increase on what we’ve seen in the past. And yesterday [Saturday] we announced a number of significant changes to the Resource Management Act.

“These include making councils plan for a minimum of 10 years of urban land supply, to cope with projected population growth. And in the shorter term, there are other things the Government can do to help people get into their first home. We do some of that already – through KiwiSaver & Welcome Home Loans. And what I’m pleased to announce today is that we will significantly beef up those 2 programmes, to give more New Zealanders a helping hand into their first home.

“In KiwiSaver, if you have been a member for at least 3 years, after that period you can already withdraw not only your money but also any employer contributions and any investment income earned, and all of this can be used as a deposit on your first home. That part of the scheme is not going to change.

“But many first-homebuyers in KiwiSaver can also get extra assistance towards their deposit. They can get $1000 for every year they have been a member, up to a maximum of $5000. They are eligible for this extra help if their income is under a certain level, and they are buying a house under a certain price. So the first thing I want to announce is that we are going relax these restrictions.

“At the moment, for example, a couple who want to get a first-homebuyers’ subsidy from KiwiSaver have to be earning under $100,000 together. We are going to bump that up to a new combined income of $120,000. At the moment, you can only get the subsidy in Auckland if you are buying a house under $400,000. We are going to bump that up to $485,000. A quick look at Trade Me yesterday showed about 2000 house listings in Auckland under $500,000.

“We are also raising the house price cap in other parts of the country with housing affordability problems. That includes Wellington, Christchurch, Queenstown, Hamilton, Tauranga & here in Nelson. We’re not helping wealthy people buy an expensive house – they can do that on their own. But we do want to help more people with low & moderate incomes get a foot in the door of home ownership. So that’s the first thing.

“The second announcement is around the Government’s Welcome Home Loans scheme. We give about 850 of these/year to first-homebuyers. Under this scheme, the Government underwrites loans for eligible people who have sufficient incomes but may only have a relatively small deposit. Again, you have to meet certain income & house price criteria. But these haven’t changed since 2003 and they are even stricter than the criteria that apply under the KiwiSaver first-homebuyers’ subsidy.

“So we are going to relax those restrictions and make them the same as the new criteria in KiwiSaver. And what is more, we are going to triple the size of the scheme so that 2500 first-homebuyers/year will now be able to get a Welcome Home Loan.

“The third & final thing I want to announce is that, in the future, to get a first-homebuyers’ subsidy from KiwiSaver or to get a Welcome Home Loan, you will have to be able to put a 10% deposit together, including what you can access through KiwiSaver. At the moment, for example, you can get a Welcome Home Loan having saved a very small deposit, or no deposit, if the house is valued at $200,000 or less. International experience shows it’s risky to lend 100% of the value of a first home.

“So in expanding these schemes, we are assisting these people to put together a deposit, but we are also requiring them to have an initial stake in their asset as well. In total, the package of changes I have outlined complements the Government’s broader programme of work on housing affordability. It will come into effect from 1 October this year and cost $64 million over 4 years. The package gives more first-homebuyers access to financial support, whether it’s through a bigger deposit – thanks to KiwiSaver – through underwriting their mortgage – through a Welcome Home Loan – or through both of these together.

“It encourages people to save for a bit longer, get a better deposit together, and therefore be in a more solid financial position when they own a home and become responsible for servicing a mortgage. And the expansion of Welcome Home Loans reduces the risk to banks & the economy from lending to first-homebuyers.”

In company with the loan extensions & deposit requirement, Mr Key was at pains to say he wasn’t interfering with the bulk of the market: “We have been very careful, of course, to ensure that this package of policies doesn’t contribute in any excessive way to the demand for housing. That would put more upward pressure on house prices and that is not the intention of this policy. And we have been very careful not to cut across the Reserve Bank’s options for cooling down the heated housing market.

“The Reserve Bank governor has a tough decision to make. On the one hand, he can put a limit on the number of low-deposit home loans that banks can make. On the other hand, he can raise interest rates across the board, which would impact on every homeowner & business in the country and most likely push up the exchange rate and affect every exporter.

“That is his call to make, and he acts independently of the Government. But either way, first-homebuyers would be affected. Today’s package is a way of ensuring that, even if lending is restricted or interest rates rise, first-homebuyers are looked after. First-homebuyers will get a significant portion of the new loans that are written, because they will be in a stronger financial position. Over 1600 more first-homebuyers each year will be getting Welcome Home Loans and, because these are Government-guaranteed, they will be a priority for the banks to lend to. And we estimate we will be doubling the number of people who could potentially get a KiwiSaver first-homebuyers subsidy.

“Again it is about balance. We want to support the Reserve Bank’s objectives, which are crucially important. But at the same time we are going to ensure that first-homebuyers don’t unfairly carry the cost of policies intended to support the economy as a whole. I have said for some time first-homebuyers are a priority for the National-led Government and this is one way we are demonstrating that.”

Part 1 of the John Key housing story: Political triumph at heart of Key housing message

Links: KiwiSaver
Welcome Home Loans

Attribution: Key speech.

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