About those tax cuts Mr Joyce...Save
By Liam Dann
After his first major speech as Finance Minister, Steven Joyce sits down with Liam Dann to talk economics, social investment and the odds of tax cuts in the upcoming budget.
Apart from a slap down for Phil Goff's Auckland fuel tax proposal, new Minister of Finance Steven Joyce wasn't giving much away in his first major speech of the year, delivered in Auckland on Thursday.
But with the Budget just three months away he highlighted four key areas of focus: public services, infrastructure, debt reduction and tax.
The running order of that list seems to suggest National might be shifting to a more fiscally generous approach.
It is election year after all.
Could the man once dubbed Minister of Everything be a bit looser with the purse strings than his famously frugal boss?
"I think I'm surprisingly tight," he says. " And I've found that since I've had the Finance Minister's name tag I'm even tighter."
They're words to warm the heart of conservatives everywhere.
He is however talking about spending more, saving more and cutting taxes.
That sounds a little like the all encompassing economic policy run by certain US leader?
Joyce, always very sharp with his one liners, nearly bites back, but checks himself.
"I'm not going into the Trump argument," he chuckles.
"But I don't know yet," is his frank response to the broader question of whether he can deliver in all four areas.
"We know we have to keep investing in public services for a growing country," he says.
We've already had an announcement about increased police funding and its sounds like
there will be something there for education and health and other social initiatives.
Of course, the left argues that the Government is just playing catch-up on overdue social spending.
And on the right, Joyce has faced criticisms that the Government is drifting into insipid centrist waters.
But, as if to emphasise this is not Labour-light, Joyce adds an aside that might not thrill many in the sector.
"So yes public spending, you have to keep investing but I think you can do it in a way that you get something back for that volume of investment. If we want to talk about productivity as a country then we need to talk about productivity in the public sector."
Then there is infrastructure. Joyce can rattle off an impressive list of projects under way and some big numbers.
"We're already investing a lot and we'll probably invest more," he says. "The current run rate of transport infrastructure investment by central government into Auckland is $1.4 billion a year...that's bigger than its ever been."
In terms of public debt Joyce unsurprisingly remains committed to Bill English's repayment track.
"We've just got to keep anchored to a reasonable target," he says. "It's all about future shocks and the Government has to think out beyond the next three years."
Tax cuts then, look like the most discretionary item on his must do list.
"I haven't ruled them in or out," Joyce says.
But the Budget is not far away, why mention them at all if they weren't achievable in some shape or form?
"It's just too early to say. I don't think you're going to see massive tax cuts in this year's Budget," he says.
"What you might see, if we get the room, is that I'm worried about some of the thresholds. The obvious one: at the $48k level people go from paying 17 and a half cents in the dollar to 30c. And if they've got a student loan they're at 42c. Those sort of things worry me. Again I don't know how much we can do this time. I wouldn't be rushing around thinking you're going to get a windfall. But if we can start a programme this year or next year, that's something we're interested in."
Certainly the top line economic numbers that Joyce inherits are very good. Reserve Bank Governor Graeme Wheeler has suggested they're the best the country has seen in 20 or 30 years.
But after Thursday's speech Labour finance spokesman Grant Robertson was quick to point to an economic picture that is being flattered by immigration and the housing boom.
That house price growth is exacerbating the wealth effect for those in the market despite being built on record levels of mortgage debt, Robertson argued. Meanwhile those who are not in the market are being left behind.
Joyce doesn't accept that inequality is growing.
Although he does accept New Zealand has been part of a global asset bubble driven by an environment of low inflation and low interest rates.
"In terms of asset prices these are very unusual times. There's a lot of money around the world, as a result of quantitative easing."
"It is one of the reasons New Zealand asset prices have gone up," he says.
"But with interest rates low, the cost of servicing a house mortgage is also significantly lower than it was. My concern is that people don't think that this is going to go on forever, because at some point interest rates are going to come back to more normal levels."
Overall New Zealanders are becoming better off, he argues.
"For New Zealand all the measures say we haven't got a greater disparity of inequality at the top end and low end of the scale. That doesn't mean we don't want to keep improving that situation. But in terms of those saying New Zealand is going to hell in a hand basket, there is nothing in the stats that backs that up."
Real wages have been growing, he argues.
"Now inflation is very low so people aren't noticing massive increases in their pay packet...but they are real and they are steadily providing more prosperity for New Zealanders, it's just not as dramatic because you are not dealing with inflation at three, four, five per cent."
Debate about whether the gap is widening aside, does the National Party Finance Minister see it as his role to address those issues of inequality?
Joyce - though he trained as a zoologist - cites his background in small business. He started a radio station which grew into a big business and his parents were grocery store owners.
His economic philosophy is grounded in the centre right view that government should create a platform for private sector growth.
"Those are the people that create all these statistics about employment and things, its not governments that do that."
But the left have "a caricature of National governments which is wrong".
"We feel passionately about giving everybody the opportunity to succeed," he says, noting that he shares a very similar outlook to English.
"That's good schooling, health, housing and all those things are very important. It's about helping people establish there own independence and being successful."
That just has to be underpinned by a strong economy, he says.
"Because you don't get to make those investments in public services unless you have a strong economy. One of the reasons we're able to look at those four things in terms of the Budget is that we've worked very hard in helping businesses to grow the economy."