Questions and Answers – March 16

Press Release – Office of the Clerk

1. ANDREW LITTLE (Leader of the Opposition) to the Prime Minister : What were the estimates given to him in his conversations with banks about the number of dairy farmers that are likely to go into receivership and leave the land?
Questions to Ministers

Dairy Industry—Estimates on Dairy Farm Receiverships

1. ANDREW LITTLE (Leader of the Opposition) to the Prime Minister: What were the estimates given to him in his conversations with banks about the number of dairy farmers that are likely to go into receivership and leave the land?

Rt Hon JOHN KEY (Prime Minister): I was not given a precise estimate, but the sense I was left with was that it would be modest.

Andrew Little: From the advice he has received, how many dairy farmers does he think will be forced off the land?

Rt Hon JOHN KEY: I do not know, but what I do know is that the Reserve Bank has released its stress testing. What the stress testing actually shows is that even under a very dire scenario where land prices fell 40 percent, the banks would be very strong and they would be in a position to continue lending to their existing borrowers—in other words, finance those farmers through a difficult downturn.

David Seymour: Has the Prime Minister thought of just making Fonterra put up the payout?

Rt Hon JOHN KEY: Sadly, that is not within my control. But I am sure the Labour Party will have that as a policy by tomorrow afternoon.

Andrew Little: Does he agree with the Reserve Bank that up to 25 percent of dairy debt, or almost $10 billion, will be written off, which means hundreds of dairy farmers will be forced off the land?

Rt Hon JOHN KEY: Well, I have not seen those comments by the Reserve Bank. You want to make sure that you are quoting them correctly.

Hon Member: It’s quoted in the report.

Rt Hon JOHN KEY: Well, that is not in the press release from the Reserve Bank.

Andrew Little: Is he at all concerned about the Reserve Bank’s projection that dairy land values will crash by between 25 and 40 percent, which will undermine the livelihoods of thousands of Kiwis?

Rt Hon JOHN KEY: That is the problem with the Leader of the Opposition—it is that you cannot take him seriously, when he actually misrepresents the Reserve Bank Governor. The Reserve Bank Governor is not saying there is a projection that land prices will drop by 25 to 40 percent; he is doing a stress test to say what would happen if land prices went down. There is quite a—

Grant Robertson: And that’s the scenario we’re in now.

Rt Hon JOHN KEY: Well, banks—reserve bankers do that all the time, because their prudential requirements require them to make sure the banking system is strong. And what he is saying is, even under a worst scenario like this, the banking system is very strong.

Andrew Little: Has the Prime Minister actually read the Reserve Bank’s report released at 2 p.m. today; if so, has he read it?

Rt Hon JOHN KEY: No, what I have read is the release—the press release—because it came out at 2 o’clock today, and I got this only 1 minute before I came here. But what the release says quite clearly is (a) the banking system is very strong, (b) under its worst-case scenarios—to quote—“The test results suggested that in the shorter term, banks would increase their dairy lending in order to support existing borrowers …”, and it is saying that even in the worst scenario, the losses could be between 3 percent and 8 percent of their total dairy exposure. Banks have considerably more exposure than just this, and, as the member was pointing out yesterday, banks have been making pretty good money. They can afford, if they have to—

Mr SPEAKER: Order! Bring the answer to a conclusion

Rt Hon JOHN KEY: —to take some losses in that sector.

Andrew Little: Does he agree with Mind Your Own Business that “approximately 100,000 businesses employing upwards of one million New Zealanders are facing reducing revenue because of the dairy downturn.”?

Rt Hon JOHN KEY: I do not have anything to back that up—I would need to see the analysis. But it could be as small as a business that is affected, from someone who sells sandwiches to someone who works in that area. There is a very large range of businesses in that sector.

Andrew Little: Is it fair that our dairy farmers go bankrupt and 100,000 small businesses face reduced revenue while overseas-owned banks continue to make $90 million a week and speculators circle over our farmland?

Rt Hon JOHN KEY: The member is, I think, terribly confused about what is happening. What you have got is a scenario where dairy prices are lower, and what we should be doing is supporting dairy farmers with the things that we can control. We cannot control the exchange rate and we cannot control commodity prices and we cannot control the weather. We can control free-trade agreements, planning laws, health and safety, Resource Management Act reform, and a variety of other things, and on this side of the House we support helping those farmers, actually, in good times and in bad.

Prime Minister—Statements

2. JAMES SHAW (Co-Leader—Green) to the Prime Minister: Does he stand by all his statements?

Rt Hon JOHN KEY (Prime Minister): Yes.

James Shaw: Does he stand by his statement made in the House yesterday that Government irrigation schemes are helping farmers to stay viable?

Rt Hon JOHN KEY: When there are droughts, yes.

James Shaw: Does he accept that many farmers are heavily in debt right now because they are having to pay for expensive irrigation schemes?

Rt Hon JOHN KEY: Primarily, no. That will not be the thing that is driving up their debt. In the case of dairy farmers, it is a lower payout, and, in some cases, it could be because they have done substantial conversions. Irrigation affects some farmers, but for the vast bulk of them, the bulk of their debt on the farm will not be for that reason.

James Shaw: Is it wise that the Government continues to subsidise irrigation for further dairy intensification at a time when milk prices are at record lows?

Rt Hon JOHN KEY: It may come as a shock to the member, but the water will not be used just by dairy farmers. It will be used by a great range of different farmers and horticulturalists—for everything from apples to kiwifruit to wine. So actually, yes, irrigation is a positive thing, and I go back to the point I made earlier: rather than people coming to the House with crocodile tears, they should come to the House with practical solutions to help our rural sector. That does, actually, include irrigation schemes, which helps them.

James Shaw: Should irrigation schemes not stand or fall on their own merits rather than require Government subsidies?

Rt Hon JOHN KEY: If I remember question time yesterday, the member was telling me we were not doing enough for farmers. Today he is telling me we are doing too much for them.

James Shaw: What Government subsidies currently exist for other industries, such as tourism, that rival the $400 million he has set aside for Crown Irrigation Investments?

Rt Hon JOHN KEY: Every single year the Government puts in well in excess of $100 million to pay for the promotion of New Zealand in the form of tourism advertising. We do not do that for any other sector other than tourism.

James Shaw: Will he consider putting the $280 million remaining in Crown Irrigation Investments to better use than massive irrigation projects, which are putting some farmers in debt, degrading the environment, and risking tourism?

Rt Hon JOHN KEY: No, the basis of the irrigation schemes—where the Government would be a shareholder but looking to exit those schemes over time when more and more farmers join them—is actually to give those farmers greater production and greater yield and greater comfort and assurance when the weather conditions do not otherwise support that. If we want to have a dairy, and, by the way, agricultural sector, that is robust enough to handle conditions, some of which will be drought, then, actually, they need better access to water.

Economy—Interest Rates

3. NUK KORAKO (National) to the Minister of Finance: What steps is the Government taking to help keep interest rates lower for longer?

Hon BILL ENGLISH (Minister of Finance): One contribution the Government does make to keeping interest rates lower for longer is ongoing fiscal discipline. Over the last seven Budgets the annual new cost of initiatives has averaged around $600 million per year compared with almost $3 billion of new spending in each of the seven Budgets before this Government came to office. Around a third of new spending is being financed through careful reprioritisation and savings. This means the Government has less pressure to borrow money, and this helps to provide one influence on lower interest rates. Combined with an outlook for ongoing moderate economic growth, low interest rates are supporting business investment and employment.

Nuk Korako: How are lower interest rates, rising wages, and low inflation putting more money and more spending power in the pockets of New Zealand families?

Hon BILL ENGLISH: Just by way of example, the latest data from the Reserve Bank shows that the average interest rate on first home mortgages at the end of February was 5.8 percent. This compares with nearly 11 percent at the top of the cycle in 2008. The difference between the two means that households are saving around $370 per week in interest costs, so it is not surprising that they are slightly more willing to pay more for houses. Of course, the actual interest rates paid by households vary widely, and many will be saving more than $370 a week. At the same time, wages are rising at just over 3 percent per annum while the cost of living is increasing at 0.1 percent, meaning that wages are keeping ahead of the cost of living.

Nuk Korako: How does an independent monetary policy support investment, employment, and growth?

Hon BILL ENGLISH: New Zealand has an independent monetary policy built on the idea that politicians cannot be relied on to sensibly set interest rates. The value of independent monetary policy is widely recognised all around the world. That independence gives households and businesses relative certainty about what will influence future interest rates, economic output, and prices. This of course creates a more certain environment for investment and employment. New Zealand’s monetary policy framework was put in place 30 years ago precisely to deal with the problem of politicians setting interest rates.

Nuk Korako: What reports has he seen on alternative approaches to economic management?

Mr SPEAKER: Before I call the Minister, I do not want this question to then lead to be an attack on an Opposition party. But I will allow—[Interruption] Order! I will allow the Minister to at least start his answer.

Hon BILL ENGLISH: Without naming the source of any of these reports, there has been a flurry recently: legislating retail interest rates, taxpayer bailouts for farmers, stiff-arming banks, overriding Pharmac, and opposing free trade. [Interruption]

Mr SPEAKER: Order! A number of front-bench members continue to speak when I am on my feet. I reminded one, in particular, yesterday not to do it, and I issue the same warning again.

Grant Robertson: What responsibility does he take for throwing fat on the fire when it comes to dairy debt, given that it has grown $11 billion since the global financial crisis, on the back of his policies to encourage that kind of thing?

Hon BILL ENGLISH: The Government, of course, takes responsibility for things like the New Zealand – China free-trade agreement—for which Labour deserves credit for signing—which was a boost to our dairy industry. But, I would have to say, in considering the decision of dairy farmers to borrow, that member should show them a bit more respect. These are people running complex businesses and dealing with all sorts of risk, including commodity-price risk, and they made their decisions with their eyes open. And now they will be working with their banks to ensure they can get through a tight spot.

Small Businesses—Confidence and Diversification

4. JACINDA ARDERN (Labour) to the Minister for Small Business: Does he believe that the statement by the Prime Minister yesterday that New Zealand “is a highly diversified economy” and “business confidence is strong” applies to small businesses?

Hon CRAIG FOSS (Minister for Small Business): Yes. New Zealand has a highly diversified economy, and business confidence continues to be strong. Small businesses directly and indirectly benefit from growth and increase in revenues from exports and diverse industries, such as meat, wool, education, forestry, seafood, horticulture, tourism, and ICT. I know that member herself believes that we have a diversified economy, when she stated that the Rotorua economy was better placed than many, as its diversification meant that it was not solely reliant on one sector, and that “If dairy falters, at least you won’t have such a huge hit to your economy,”.

Jacinda Ardern: If the New Zealand economy is highly diversified, why did the Mind Your Own Business (MYOB) survey released yesterday find that the dairy prices had affected consumer spending for more than a third of retail and hospitality businesses, and caused a decline in a revenue for even more businesses still in the manufacturing and wholesale sector?

Hon CRAIG FOSS: Either that member’s earlier statement was wrong about diversification in an area such as Rotorua, which has tourism, which has hospitality—you name it—and a very diversified economy.

Jacinda Ardern: Does he accept the findings of the MYOB survey, which found approximately 100,000 businesses, employing more than a million people, are facing falling revenues because of the dairy downturn?

Hon CRAIG FOSS: It comes as no surprise when the decrease in the dairy industry’s revenue has a flow-on effect on the rest of the economy. There is no surprise about that. But the dairy industry, other industries, small businesses, and farmers have been here before, and will no doubt be here again. But the strength of the economy and the changes that this Government has put in place to enable them to have sustainable, ongoing, growing export businesses will serve them very well.

Jacinda Ardern: What will the future hold for small businesses if dairy prices remain where they are for the next 18 months?

Hon CRAIG FOSS: I know what the future will hold for people involved in the dairy industry and beyond if this Government continues its policies: their industries will continue the solid growth they have had over many years. If, in fact, there was nationalisation of banks and trade unions, effectively, setting interest rates, that would be devastating for all New Zealand businesses.

Jacinda Ardern: What action is he taking as Minister for Small Business to support small businesses that are feeling the effect of reduced business confidence, as measured by ANZ, and falling dairy and farm spending?

Hon CRAIG FOSS: Business confidence comes from positive growth in the economy and certainty of application of Government policies and adherence to agreements such as free-trade agreements. Confidence and certainty in such an economy would be smashed if in fact a future Government made laws without regard to the controversial Trans-Pacific Partnership, as that member says her party would.

Question No. 2 to Minister, 15 March—Prime Minister’s Answers

5. FLETCHER TABUTEAU (NZ First) to the Prime Minister: Does he stand by all his answers in relation to Oral Question No. 2 in the House yesterday?

Rt Hon JOHN KEY (Prime Minister): Yes.

Fletcher Tabuteau: If he stands by his statement that New Zealand dairy farmers pay tariffs, is he not aware that foreign importers will be the ones to directly benefit from not having to pay those tiny tariff reductions in 20 years, not our farmers?

Rt Hon JOHN KEY: Dairy farmers are exporters, and they pay those tariffs, effectively, because they are charged on the product that they sell. In the case of dairy farmers, he might think $96 million is tiny, but I dare him to go out to an A and P show and tell them that.

Fletcher Tabuteau: I seek leave to table under Speaker’s ruling 164/2 a US Department of Agriculture document detailing benefits to US agriculture, published 30 November 2015—

Mr SPEAKER: Order! I just need to check: is it freely available on the internet?

Fletcher Tabuteau: It is published on the internet, but—

Mr SPEAKER: Then members will search for it if they want it.

Ron Mark: I raise a point of order, Mr Speaker. Can I draw your attention to a very astute ruling by Speaker Carter, Speaker’s ruling 164/2, which, in brief, highlights the fact that although a document may be available on the internet, given the weight of documents and the specificity a particular document may not be readily available. In light of your ruling, could you review that decision, please.

Mr SPEAKER: I will immediately review the decision and say I am still not prepared to put leave. The purpose of that ruling is that there will be occasions when the information is hard to find. If it is on a US Department of Agriculture website, I assume it is in the capability of every member here if they want it to search for it.

Fletcher Tabuteau: If Waikato University’s Professor Jacqueline Rowarth said this morning that new European subsidies will exacerbate the current global oversupply of dairy, what is this Government doing to combat them and the other $166 billion worth of subsidies in the Trans-Pacific Partnership (TPP) agreement countries?

Rt Hon JOHN KEY: For one thing, we made strong representations for decades to the Europeans, and in Nairobi last year they actually agreed to get rid of subsidies when it came to exporting. Secondly, we are doing all the things that we can do to help the dairy farmers and other farmers of New Zealand, but we cannot physically stop the European Union paying subsidies, even if we believe it is wrong.

Fletcher Tabuteau: How can the Prime Minister expect New Zealand farmers to be resilient and adaptive when they are competing against European and TPP farmers, who receive over $250 billion in subsidies every year?

Rt Hon JOHN KEY: The member might want to use his time after question time to go back and have a little study of the New Zealand economy in 1982 and 1983 and 1981, and have a look at how big agriculture actually was, and how successful they were, because they got supplementary minimum payments back then. I tell you what, it did not do them a hell of a lot of good—unsubsidised New Zealand farmers are far more robust and far more successful than they were back in the days when politicians were giving them money.

Fletcher Tabuteau: Did the Prime Minister and the Minister of Defence agree that one of the best ways to undermine any reasonable opposition to the TPP was to farcically deploy New Zealand armed forces at the Christchurch TPP evening, given that the only criteria for their deployment is if there is a threat of loss of life and property?

Rt Hon JOHN KEY: The Minister of Defence advises me that it did not happen.

Trans-Pacific Partnership—Dairy Farming

6. Dr KENNEDY GRAHAM (Green) to the Prime Minister: Does he stand by his statement, “The single-biggest gainers out of the Trans-Pacific Partnership are dairy farmers”?

Rt Hon JOHN KEY (Prime Minister): Yes. As I said in the House yesterday, the biggest area of tariff reduction under the Trans-Pacific Partnership (TPP) is dairy. This is supported by the estimates in the Trans-Pacific Partnership National Interest Analysis published by the Ministry of Foreign Affairs and Trade. For the member’s edification, if he looked at Table 1.2, the estimated benefits under the national interest analysis is $274 million in tariff savings. By far the biggest is dairy, at $96 million.

Dr Kennedy Graham: In full knowledge on all our parts of those facts, how will the TPP help dairy farmers now when New Zealand’s Expert paper No. 5 shows that even when the TPP is fully implemented the tariff reductions are more likely to benefit processors and retailers rather than the farmers themselves?

Rt Hon JOHN KEY: The TPP, over time, like all of the free-trade agreements that New Zealand has signed, will help our exporters. A substantial part of our exports still come from the agricultural sector, so it will help them. But equally, there are many things that we can do to continue to help them: better planning laws—we welcome the Green Party if they want to support us on Resource Management Act reform; better irrigation for farmers—we welcome the Green Party if they want to support us in that area; and free-trade agreements including TPP—we welcome the Green Party’s support if they want to do that.

James Shaw: I raise a point of order, Mr Speaker. Dr Graham’s question was in relation to how the TPP would help farmers now, not about what Green Party policy would do in the future.

Mr SPEAKER: It was not only that question. If it had been just that, I could help, but he then went on and incorporated a reference to how it would help processors—and from memory—retailers more than it would help dairy farmers. If questions are short and sharp, it is easier for me to assist.

Dr Kennedy Graham: How will the TPP help farmers now, when the expected benefit from dairy would be $40 per New Zealander per year in 1947 when all of the tariff reductions are finally in place?

Rt Hon JOHN KEY: The TPP will not help things that happened just after World War II.

Dr Kennedy Graham: How will the 2.2 percent tariff saving, according to the Ministry of Foreign Affairs and Trade’s own figures, in 30 years’ time, do anything to help farmers today?

Rt Hon JOHN KEY: Free-trade agreements are about the future, ultimately, and that has to be ratified. It has not been ratified today by the parties, but if one goes and has a look at the New Zealand – China free-trade agreement where the estimates on tariff reductions were in the order of about $150 million and the benefits were roughly $1 billion—actually, that was the best modelling we saw; it turned out to be about 11 times more successful than they thought. In the case of the TPP the numbers are much greater than that. They are $274 million and about $3 billion worth of benefits. Secondly, we are already seeing quite a number of countries considering joining the TPP in addition to this. But in the end, actually, even if it just does what the national interest analysis says, it will save dairy farmers $100 million. If the Green Party does not think that matters, that is fair enough. Again, they should join New Zealand First and go out and tell people.

Economic Growth—Government Initiatives

7. IAN McKELVIE (National—Rangitīkei) to the Minister for Economic Development: What is the Government doing to encourage economic growth?

Hon STEVEN JOYCE (Minister for Economic Development): The Government’s comprehensive Business Growth Agenda includes more than 350 initiatives and assisting businesses with the six things they need to be internationally competitive: access to innovation, to capital, to skilled workers, and to the necessary resources, the supporting public infrastructure, and, of course, markets in which to sell their products. It is things like rolling out ultra-fast and rural broadband to connect our cities and regions to the world, it is equipping our kids with the skills they need to succeed, lifting research and development with things like the Primary Growth Partnership, and it is signing free-trade agreements like the Trans-Pacific Partnership (TPP) to give New Zealand businesses the best shot at competing on the world stage. These things, coupled with stable and sensible macroeconomic and fiscal settings and keeping interest rates lower, are providing businesses the opportunity and confidence to invest and grow and to employ more Kiwis.

Ian McKelvie: How has the New Zealand economy performed with these settings and initiatives in place?

Hon STEVEN JOYCE: That is a very good question. Despite the twin challenges of the Canterbury earthquake and the global financial crisis, along with the more recent slump in dairy prices, the New Zealand economy is showing its resilience and strength. Even with dairy exports down $3 billion last year, our total exports were up by nearly $2 billion, or $69.3 billion, and that is a $4.9 billion increase in non-dairy exports. Our meat sector is growing, beer exports are up around 10 percent, wine, seafood, fruit, and wool are all growing, the ICT sector, ICT services exports, and also tourism, where the numbers of visitors are up by around 11 percent. So we are seeing growth across the country. The average growth rate that the Reserve Bank is predicting for the next 2 years is 3 percent a year, and unemployment has fallen to its lowest level in 7 years.

David Seymour: What contribution did the Government’s 2010 tax cuts make to this growth?

Hon STEVEN JOYCE: The Government believes that is an important contribution, because the tax changes in 2010 did the exercise of rewarding hard work and, actually, taxing consumption a little bit more, which shifted the balance in favour of work and investment. Those are good outcomes, and, along with all the other initiatives that the Government is doing, we think the record is strong that New Zealand is growing at one of the fastest rates in the OECD right now.

David Seymour: In light of that, has the Minister made any representations to his ministerial colleagues that the Government should cut taxes again?

Hon STEVEN JOYCE: The member raises a fair question, and, of course, if we had the fiscal room, we have been clear that we would like to reduce the tax burden on New Zealanders over time, because that does provide the incentives for people to work hard and get ahead. But, of course, the Government has a range of needs to address and, of course, the Budget comes up every year and that is the opportunity we get to assess those things.

Ian McKelvie: Has the Government rejected any alternative approaches to running the New Zealand economy?

Hon STEVEN JOYCE: Yes, we have rejected a number of potential alternative approaches, often short-term fixes, made-on-the-hoof suggestions that would have no regard to the wider impacts of the economy. For example, policies like a single-buyer model for the power industry—that was one we rejected. Regulating food prices by dictating what is healthy and what is not, we rejected. Hitting farmers with a punitive emissions trading scheme and a capital gains tax, we rejected that one. Just yesterday we saw a proposal for the Government to set interest rates, removing banks’ ability to compete with one another and, presumably, meaning compulsory interest rate hikes. Those are the sorts of knee-jerk reactions we reject.


8. CHRIS HIPKINS (Labour—Rimutaka) to the Minister of Education: Why did she say yesterday that “we will not be interested in how we stigmatise children” as part of the school funding review when she said less than a minute earlier that the current decile system was unhelpful because it stigmatised low-decile schools?

Hon HEKIA PARATA (Minister of Education): Tēnā koe, Mr Speaker. The full quote from which that excerpt is selectively taken was: “we will not be interested in how we stigmatise children, rather what we are trying to do is get the right resource to the right kid at the right time in the right places …”. I have been consistent in stating that I do not believe that stigmatising children based on the community they live in, the decile of the school they go to, or individually would lead to good educational outcomes, and I am surprised the member is promoting that.

Chris Hipkins: If she does not want to stigmatise children in the same way that low-decile schools are currently stigmatised, will she rule out attaching school funding to children with parents who have criminal convictions, no qualifications, or who rely on a benefit?

Hon HEKIA PARATA: We are at an early stage in the process. At no point have I suggested that we will be individualising funding to follow a child on any basis. We are simply at the stage of exploring the options of how we identify what resourcing needs to go where in order for the size of that education challenge to be better met.

Chris Hipkins: Will she give an assurance that socio-economic factors will continue to be taken into consideration in any change to school funding given that Treasury’s proposed approach excludes socio-economic disadvantage as a funding criteria; if not, why not?


Chris Hipkins: Do any of the options currently being considered by the Government link school funding to student achievement data, such as national standards or the National Certificate of Educational Achievement (NCEA)?

Hon HEKIA PARATA: We have a number of reports. They are ones that I am going to be sharing with the teacher unions, with the professional associations, and with the sector as a whole. We will work our way through, and then I will be delighted to share the outcome of those discussions with the House.

Chris Hipkins: I raise a point of order, Mr Speaker.

Mr SPEAKER: No, listen—I will just invite the member to repeat that question.

Chris Hipkins: Do any of the options currently being considered by the Government link school funding to student achievement data, such as national standards or NCEA?

Hon HEKIA PARATA: There are no specific options currently under consideration.

Chris Hipkins: Has she read the Ministry of Education’s report from July 2013, which states that the performance-based funding model for charter schools “tests a possible incentive model”, and will she rule out that model being rolled out to State schools?

Hon HEKIA PARATA: I think it is a long bow—a suggestion in a report in 2013 that related to a particular category of schools and whether the suggestion was considered in that context. To extrapolate it into the wider mainstream system—

Hon Member: Then rule it out.

Hon HEKIA PARATA: Again, I am not ruling in or out any option at this stage, because it would be disrespectful to the process and the discussion yet to occur with the sector.

Jenny Salesa: How does she believe her approach to decile funding—in her words “we will not be interested in how we stigmatise children …”—will benefit Pacific children, given the fact that 65 percent of Pacific students attend a decile 1 school and that her approach is likely to stigmatise many of those students?

Hon HEKIA PARATA: In the primary answer I gave a response that made it clear I was not interested in stigmatising any children, whether they came from a particular community, went to a school with a particular decile, or individually. How do I think Pasifika kids can be helped? The way we are doing it now. We have more Pasifika kids in early childhood education than ever before, and we have more Pasifika young people getting our minimum qualification than ever before.

Superannuation Rate—Effect of Inflation

9. MATT DOOCEY (National—Waimakariri) to the Minister for Social Development: How is low inflation supporting a real increase in superannuation?

Hon ANNE TOLLEY (Minister for Social Development): Thanks to the strong financial management of this Government, superannuation has increased by over 34 percent since 2008, which is double the rate of inflation of 15.5 percent in that same time. As this Government has committed to keeping superannuation and veterans pension rates at 66 percent of average income, both rates will increase by 2.73 percent on 1 April. This means that, in addition to lower living costs, our superannuitants are better off, with an extra $15.74 a week for a married couple, $10.23 a week for a single person living alone, and $9.44 for a single person sharing accommodation.

Matt Doocey: In addition to superannuation, what other supports are set to increase on 1 April?

Hon ANNE TOLLEY: On 1 April changes introduced as part of the child hardship package will come into effect. That means benefit rates for families with children will rise by $25 a week after tax—the first real increase in 43 years. Given the falling cost of living, this is a significant increase for these families on a benefit. Working for Families rates will also increase by $12.50 for low-income working families, and $24.50 for very low-income working families. The child hardship package reaches over half a million children and will help ease the depth of hardship experienced by families in New Zealand’s lowest-income households.

David Seymour: How long after the current Prime Minister’s retirement will the Government raise the age of entitlement to New Zealand superannuation?

Mr SPEAKER: No. Oh, I will let the Minister address it. It is a marginal question, I have to accept.

Hon ANNE TOLLEY: That is so far in the future I could not even contemplate it.

Carmel Sepuloni: How many applications for superannuation were unable to be processed in the last 2 weeks due to the issues of the client management IT system, and is the new system still struggling to process these applications?

Hon ANNE TOLLEY: I am not aware that there were—I do not have any figures on how many superannuation applications were delayed, but what I can say to the House is that the system, by Friday, was at a hundred percent capacity, which is fantastic—

Chris Hipkins: That’s not true!

Hon ANNE TOLLEY: I beg your pardon. It is true, they are at hundred percent capacity, and they are catching up on the backlog, and they are to be congratulated on implementing a very complex system in a very short period of time.

Carmel Sepuloni: Not true.

Mr SPEAKER: Order!

Migrant Workers—Recognised Seasonal Employer Scheme

10. IAIN LEES-GALLOWAY (Labour—Palmerston North) to the Minister of Immigration: Is the Recognised Seasonal Employer Scheme working for New Zealand and for the temporary migrants who work under the scheme?

Hon MICHAEL WOODHOUSE (Minister of Immigration): Yes to both. The Recognised Seasonal Employer scheme has been held up by the World Bank as a model scheme because of its benefits to both New Zealand and the Pacific. For example, in a report released last year, four out of five recognised seasonal employers said they had employed more New Zealand workers as a result of the Recognised Seasonal Employer scheme because they could expand their business.

Iain Lees-Galloway: Does he agree with Kaikōura MP Stuart Smith that the answer to the labour shortage on Marlborough vineyards is to increase the number of temporary migrants who work in New Zealand each year under the Recognised Seasonal Employer scheme, despite the fact that the Government has nearly doubled that number already?

Hon Michael Woodhouse: The member may be aware that, actually, the largest increase in the Recognised Seasonal Employer scheme numbers was by the Labour Government 4 days—4 days—before being thrown out of office in November 2008. They increased the Recognised Seasonal Employer scheme numbers by—

Iain Lees-Galloway: I raise a point of order, Mr Speaker. The question was: does he agree with Stuart Smith about increasing the numbers now, despite the increase that this Government has made—

Mr SPEAKER: Order! [Interruption] Order! In framing the question the member then went on and talked about a recent doubling of the numbers, and the Minister has chosen to respond to that part of the question.

Hon MICHAEL WOODHOUSE: In contrast to that, this Government takes a much more discerning view about where those increases in Recognised Seasonal Employer scheme numbers go, including into Nelson-Marlborough, when the last increase of 500 last year targeted specific regions with the lowest unemployment. That was western Bay of Plenty and Nelson-Marlborough.

Iain Lees-Galloway: If he cannot bring himself to agree with Stuart Smith, does he agree—

Mr SPEAKER: Order! The member will resume his seat. Do not start the question that way; simply start the question in line with the Standing Orders.

Chris Hipkins: I raise a point of order, Mr Speaker. Which part of the beginning of his question was not in line with the Standing Orders?

Mr SPEAKER: When the member stood up there and said “If he cannot agree with his colleague”, and I said: “Don’t start the question that way. Start it in line with the Standing Orders.”

Chris Hipkins: I raise a point of order, Mr Speaker.

Mr SPEAKER: I have ruled, Mr Hipkins. Is it a fresh point of order?

Chris Hipkins: It is a fresh point of order.

Mr SPEAKER: And it is not relitigating a decision I have just made? I just want to check on that.

Chris Hipkins: Yes, it is a fresh point of order.

Mr SPEAKER: I will hear it.

Chris Hipkins: Are you now ruling that a question beginning with the word “If” cannot then contain a statement relating to the answer that has just been given?

Mr SPEAKER: No, that is not a fresh point of order. The member is now only attempting to relitigate. It was the reference to the fact that, according to Mr Lees-Galloway, the Minister was not prepared to agree with the statement of Stuart Smith. That is the part I took objection to. Does the member have further supplementary questions? I am happy to move on.

Iain Lees-Galloway: Does he agree with Wine Marlborough general manager, Marcus Pickens, who says that “for New Zealanders who want to get on board, the opportunities are endless, there are jobs for life.”; if so, should he and Stuart Smith not focus on how to get more New Zealanders working in vineyards and orchards?

Mr SPEAKER: Either of those two supplementary questions, the Hon Michael Woodhouse.

Hon MICHAEL WOODHOUSE: Speaking to the second part of that question, that is exactly what the Government is doing, and the best evidence of that is that although there has been a 10 percent increase in growth in the horticulture and viticulture industry in the last couple of years, only 1 percent of the extra labour costs have come from the Recognised Seasonal Employer scheme. This Government has been very, very stern with the employers to ensure that they are diligent in employing Kiwis first.

Iain Lees-Galloway: Does he believe in free markets; if so will he encourage employers to meet the market by ensuring that pay, conditions, and accommodation are sufficient to attract New Zealand citizens to work in horticulture and agriculture?

Mr SPEAKER: Again, either of those two supplementary questions—the Hon Michael Woodhouse.

Hon MICHAEL WOODHOUSE: I am very sure that the Minister for Workplace Relations and Safety has a strong framework for ensuring that fair, flexible, and safe workplaces in New Zealand are maintained, including increasing the minimum wage by about 3.4 percent only a couple of weeks ago. I think he is doing a very good job.

Hon Paula Bennett: Has the Minister seen any reports on the economic benefits to the Pacific Islands that actually come from the Recognised Seasonal Employer scheme. Can he say, actually, what past Governments have done to support that, and how ironic—

Mr SPEAKER: Order! [Interruption] Order! I allowed the member to ask a supplementary question. It was not a chance to ask three.

Hon MICHAEL WOODHOUSE: Indeed, I have seen a plethora of reports about how beneficial this is to Pacific nations. The remittances that are sent back, the skills that are developed, and the work ethics identified are extraordinarily positive. I have had successive Ministers of Foreign Affairs and Ministers of Immigration coming to my office saying how valuable this scheme is to them and to New Zealand.

Iain Lees-Galloway: Supplementary question—[Interruption]

Mr SPEAKER: Order! [Interruption] Order! [Interruption] Order! Mr Brownlee, I am giving you your last warning for this week. If you are going to continue to interject when I call for order, you leave me no choice but to ask you to leave the Chamber. That is your final warning for this week.

Iain Lees-Galloway: Why should temporary migrants have to work for pay and conditions that New Zealanders will not tolerate, and is it not in the long-term interests of the New Zealand wine industry to build a sustainable workforce rather than looking for short-term fixes that are designed to keep wages down and discourage investment and providing better conditions?

Hon MICHAEL WOODHOUSE: I simply do not accept the prefacing statement in that question. I am satisfied that overseas workers are being treated fairly and in accordance with New Zealand wage rates. Indeed, I have direct experience of vineyards right around the country where those Pacific workers are enjoying very much the benefits of their productivity and taking significant remittances back to their home countries.

Small Businesses—Impact of Low Interest Rates

11. MAUREEN PUGH (National) to the Minister for Small Business: How are small businesses benefiting from Government policies that are contributing to lower interest rates?

Hon CRAIG FOSS (Minister for Small Business): Small businesses continue to benefit from the Government’s policies of prudent and stable fiscal management, which contribute to low inflation and low interest rates. Many small-business owners mortgage or borrow against their family home to create, grow, and fund working capital for their businesses. Current low interest rates and mortgage rates of under 5 percent make it easier for those small-business owners to operate, grow, and create jobs for Kiwis. Interest rates have not been this low since records began in 1964. This is in stark contrast to just 8 years ago, when those interest rates started at 10 percent.

Maureen Pugh: How are Government policies contributing to certainty for small businesses?

Hon CRAIG FOSS: This Government has pursued stable macroeconomic policy that has contributed to low inflation and low interest rates. This is contributing to ongoing confidence and certainty for small businesses. What small businesses do not need are policies where the Government is meddling, tinkering, tampering, and putting macroeconomic settings at risk. Policies such as controlling interest rates—who knows what could be next? Carless days, controlling the exchange rate, wage and price freezes? What other policies from the 1970s—

Mr SPEAKER: Order! I have heard enough of the answer.

Maureen Pugh: What other policies have contributed to small-business growth?

Hon CRAIG FOSS: There are a number of policies from this Government that have contributed, and continue to contribute, to small-business growth, including reducing company and personal tax rates, introducing the 90-day trial to make it easier for small businesses to employ and for many to gain employment, continuing to pursue and sign free-trade agreements, and adhering to such agreements. These are just some of the policies of this Government that have helped small businesses across New Zealand. It is unfortunate that the Opposition has opposed all of these policies.

Forestry—Trade Initiatives

12. RICHARD PROSSER (NZ First) to the Minister of Trade: What trade benefits has the Government negotiated for New Zealand’s forestry industry?

Hon STEVEN JOYCE (Minister for Economic Development) on behalf of the Minister of Trade: New Zealand’s forestry industry has benefited significantly under our free-trade agreements, and I thank the member for his question. For example, under the ASEAN-Australia-New Zealand Free Trade Agreement our forestry exports now have tariff-free access to the markets of Brunei, Indonesia, Malaysia, Singapore, and Thailand. Thanks to the New Zealand – China free-trade agreement, 97 percent of our exports enter China tariff-free. At 1 January 2017 all of our exports will be tariff-free into the Philippines. Under the New Zealand – Korea free-trade agreement, 90 percent of our forestry exports are now tariff-free, with the remainder being scheduled to be eliminated within the next 10 years, and through the Trans-Pacific Partnership (TPP) we have negotiated the elimination of all tariffs on New Zealand forestry and forestry products. This notably will include Japan, New Zealand’s fourth-largest export market; the US, our sixth-largest market; and Viet Nam, our eleventh-largest market. The TPP would result in an estimated $11 million in annual tariff savings for the sector, when it is fully implemented.

Richard Prosser: Why, after nearly 8 years in Government, has it not got rid of the 17 percent value-added tax, imposed by the Chinese Government on New Zealand sawn timber and value-added timber products, under the China free-trade agreement?

Hon STEVEN JOYCE: Every country reserves the right to put sales taxes, VAT, and GST on their products, and that is not likely to change. The member would be very upset if, for example, one of our trade partners told us we had to take GST off one of their products that was sold in the country. So it is China’s right to do that, and I understand that every imported product going into China is subject to the same VAT.

Richard Prosser: Will he ensure that the renegotiated free-trade agreement with China supports New Zealand’s regional timber processes by removing China’s 17 percent VAT on our manufactured wood products; if not, will his Government ask the World Trade Organization to challenge China on its use of many non-tariff barriers, which include building codes that do not allow Pinus radiata?

Hon STEVEN JOYCE: The member asks a number of questions there. Firstly, in relation to VAT, I have already answered that in answer to a previous supplementary question. It is not something that New Zealand can demand of our trade partners, in terms of their taxation systems. But in relation to non-tariff barriers, the member raises a reasonable point. The Wood Council, as we know, has put out a report today, which officials are already looking into, in terms of the things that can be achieved there. But it probably does not need to be done under the free-trade agreement upgrade. There are ways of resolving the non-tariff barrier issues in individual industries.

Dr David Clark: Why is the Government sitting on its hands?

Hon STEVEN JOYCE: The member is simply wrong, and he is continuing to be the worst Opposition MP in 50 years.

Dr David Clark: What is the Government doing?

Hon STEVEN JOYCE: The non-tariff barriers work that the Government is doing is actually comprehensive. Dr Clark needs to find a job.

Richard Prosser: Given that China’s imports of softwood logs fell by 16 percent by volume and 20 percent by value in 2014-15 is he concerned that the bulk log trade may be at risk of a dairy commodity – style price correction?

Hon STEVEN JOYCE: I am not sure the member’s figures are exactly correct. The most current figures suggest, as I recall—I am doing this from memory—that those numbers of exports from New Zealand are up. But every commodity has risk attached to the cycle; it does not matter which commodity we are talking about. But I am confident that industries are actually able to manage those risks, and in the case of the forestry industry, the member will be pleased to know that the level of processed timber that goes offshore through the New Zealand export sector is actually as high as or, in fact, slightly higher than it was 7 or 8 years ago.

Richard Prosser: Does his Government understand that supporting timber processing in the regions not only creates jobs for New Zealanders but also provides New Zealand with higher-value products to export and trade and, therefore, increased export receipts, higher per capita GDP, and an improved balance of payments; if so, why is he not doing it?

Hon STEVEN JOYCE: The Government agrees that processing is good, and I would note for the member a number of investments that have made in recent times that indicate the settings are positive. For example, in Taupō, Pacific T&R is building a new high-tech processing plant; in Rotorua, Red Stag Timber is constructing a new super-mill there, which is to be the largest in the southern hemisphere, and the first-stage investment is $60 million; Lumbercube has invested tens of millions of dollars in a world-first square log processing plant in Rotorua; and recently the Pan Pac Forests Products owner, Oij from Japan, has made a very big vote of confidence in the New Zealand processing industry by buying the Carter Holt Harvey processing assets, and it has significant plans to further invest in processing in this country through those plants. So, for the member’s benefit, the settings are delivering continued investment in forestry processing in New Zealand


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