WEBVTT - How will Finance Minister Nicola Willis deliver economic growth? 0:00:00.240 --> 0:00:02.520 Someone said to me the other day, Oh, you know, 0:00:02.560 --> 0:00:05.320 shouldn't you We be doing retaliatory tariffs, and you know 0:00:05.360 --> 0:00:07.040 it's a bit like throwing a ping pong ball and 0:00:07.080 --> 0:00:09.320 an elephant, isn't it. Hey, Look, I'd love to be 0:00:09.400 --> 0:00:11.799 generous and spray the money down around. That would make 0:00:11.840 --> 0:00:14.360 my job a lot easier, to be honest, But I'm 0:00:14.520 --> 0:00:17.880 very aware of the context in which we're operating. I'm 0:00:17.920 --> 0:00:21.640 thinking very hard about in an environment of instability, what 0:00:21.680 --> 0:00:24.720 are the policies the government can pursue to give our 0:00:24.760 --> 0:00:28.960 local businesses and entrepreneurs the nudge that says be confident 0:00:29.040 --> 0:00:29.920 about investing. 0:00:34.240 --> 0:00:36.919 Cureder. Welcome to shed Lunch, brought to you by Shes's. 0:00:37.280 --> 0:00:40.040 My name is Leighton Roberts, and today I'm joined by 0:00:40.080 --> 0:00:44.159 the Minister of Finance, Nikola Willis. More than just managing 0:00:44.159 --> 0:00:47.200 the country's purse string, the Minister has also been charged 0:00:47.240 --> 0:00:50.520 with growing New Zealand's economy. She does this as Minister 0:00:50.600 --> 0:00:53.319 for Economic Growth. So in this episode we dig into 0:00:53.360 --> 0:00:55.680 the impact of the US tariffs and post on New Zealand, 0:00:55.960 --> 0:00:58.520 the leavers, the government will be pulling to stimulate growth, 0:00:58.800 --> 0:01:01.680 and what Kiwis can expel from the upcoming budget out 0:01:01.760 --> 0:01:05.800 later this month. Before we get started, here's some important information. 0:01:06.000 --> 0:01:08.560 Investing involves the risk you might lose the money you 0:01:08.600 --> 0:01:11.880 start with. We recommend talking to a licensed financial advisor. 0:01:12.640 --> 0:01:16.440 We also recommend reading product disclosure documents before deciding to invest. 0:01:16.720 --> 0:01:19.120 Everything you're about to see and here is current at 0:01:19.120 --> 0:01:19.920 the time of recording. 0:01:20.000 --> 0:01:22.000 Well, thank you so much for joining us, Miss Willis. 0:01:22.120 --> 0:01:24.720 Hey, look great to be here. I'm not particularly vain, 0:01:24.800 --> 0:01:27.480 but it is raining hard and well income days find 0:01:27.520 --> 0:01:28.959 that's the hair situation. 0:01:29.319 --> 0:01:33.759 Look fantastic, but outside is miserbral, so I'll definitely confirm that. Look, 0:01:33.800 --> 0:01:36.880 let's get straight into a New Zealand economy and the 0:01:36.880 --> 0:01:38.600 position that we're in at the moment. There are signs 0:01:38.640 --> 0:01:41.959 now that possibly we're through the worst of it, starting 0:01:41.959 --> 0:01:44.319 to see an upswing through twenty twenty five, and I'm 0:01:44.319 --> 0:01:46.240 just really interested in your thoughts on this at the moment. 0:01:46.360 --> 0:01:48.360 Yeah, Look, New Zealand's come through such a tough time, 0:01:48.440 --> 0:01:51.640 haven't we. Because post COVID we have very high inflation, 0:01:51.840 --> 0:01:54.720 very high interest rates that slowed things down in the economy. 0:01:54.720 --> 0:01:58.560 There's a lot of pain for businesses but also for 0:01:58.640 --> 0:02:01.400 households who are still dealing with that higher cost base 0:02:01.720 --> 0:02:04.840 that we've come through, but the road out is looking 0:02:05.080 --> 0:02:08.600 really good. And I know that everyone is focused rightly 0:02:09.120 --> 0:02:12.160 on global instability and what's happening in the world post 0:02:12.160 --> 0:02:15.720 Trump's tariff announcements, and yeah, that's a headwind for New Zealand, 0:02:15.840 --> 0:02:18.880 but we are on the growth trajectory. We will be 0:02:18.919 --> 0:02:21.360 growing faster over the next few months than we have 0:02:21.480 --> 0:02:23.840 over the past few months, and next year we're forecast 0:02:23.880 --> 0:02:26.800 to be growing even faster. So this is a time 0:02:26.840 --> 0:02:30.160 of opportunity for New Zealanders and I think we have 0:02:30.200 --> 0:02:32.480 a lot to be feeling positive about in this economy. 0:02:32.639 --> 0:02:32.839 Yeah. 0:02:32.880 --> 0:02:35.240 Great. I always thinking about the last year. We heard 0:02:35.240 --> 0:02:37.360 a lot about the sort of survived to twenty five, 0:02:37.480 --> 0:02:40.520 and then that became thrive and twenty five and then 0:02:40.639 --> 0:02:42.720 now I'm wondering if we're still there or for we're 0:02:42.760 --> 0:02:44.959 thinking like it's sort of pick up six and twenty six. 0:02:45.040 --> 0:02:47.240 But I'm just wondering we think we are timing wise 0:02:47.320 --> 0:02:48.160 coming into the next year. 0:02:48.360 --> 0:02:50.640 Look, I think where we are as we are going 0:02:50.720 --> 0:02:53.119 to be out the worst of it, and we are 0:02:53.240 --> 0:02:56.120 now on the bit where the thriving starts to happen. 0:02:57.480 --> 0:03:00.680 But I'm also really conscious that when people see that 0:03:00.720 --> 0:03:05.440 instability internationally, they factor that in here at home. And 0:03:05.520 --> 0:03:08.119 so when I'm thinking about what does the government need 0:03:08.120 --> 0:03:09.960 to do in this moment to make sure that the 0:03:10.000 --> 0:03:14.760 potential for really rapidly accelerating growth actually over the next 0:03:14.760 --> 0:03:17.440 twelve and twenty four months, that that potential is fulfilled. 0:03:18.120 --> 0:03:21.040 Our job, I think, is to make sure that we're 0:03:21.040 --> 0:03:25.359 putting in place policies and actions that give people confidence, 0:03:25.400 --> 0:03:28.680 in particular to invest because what you're seeing internationally as 0:03:28.720 --> 0:03:31.880 people are pausing on the investment, New Zealand should position 0:03:31.960 --> 0:03:36.200 ourselves as a safe haven for investment. We have stable democracy, 0:03:36.280 --> 0:03:41.680 stable institutions, stable regulatory framework, a government that's fundamentally pro growth, 0:03:41.960 --> 0:03:46.440 pro trade, pro international investment, and all of those things 0:03:46.440 --> 0:03:49.920 position us well. We also have a constellation of trade agreements. 0:03:49.960 --> 0:03:53.960 We've always been the warriors out there fighting for export markets, 0:03:54.000 --> 0:03:56.960 and so on that context, I think that if I 0:03:57.080 --> 0:03:59.600 was an international thinking where do I want to plant 0:03:59.640 --> 0:04:02.200 my money, who do I want to be doing business with, 0:04:02.760 --> 0:04:05.000 I'd be looking to New Zealand, and we have an 0:04:05.000 --> 0:04:06.440 opportunity to lean into that. 0:04:06.840 --> 0:04:09.480 Yeah, small sample size here, but made me think we've 0:04:09.480 --> 0:04:14.040 actually had some quite random emails come our way for 0:04:14.160 --> 0:04:16.920 opportunity to trade the US market, but through a business 0:04:16.920 --> 0:04:18.840 that's not in the US, so like sort of these 0:04:18.920 --> 0:04:22.680 random opportunities and that might come from different countries, particularly 0:04:22.720 --> 0:04:25.160 on the export space for a technology company like US, 0:04:25.200 --> 0:04:28.159 but opportunities have never come from where you think going to. 0:04:28.520 --> 0:04:31.480 And I am hearing stories like that. I was speaking 0:04:31.480 --> 0:04:35.000 with someone from Garage Project, you know, boutique beer maker 0:04:35.000 --> 0:04:35.240 here and. 0:04:35.279 --> 0:04:37.640 Will there was botique beer, yeah, and. 0:04:37.880 --> 0:04:39.839 Great business and they said, look, they've just had one 0:04:39.880 --> 0:04:42.239 of the largest orders they've ever had in from China, 0:04:42.680 --> 0:04:46.360 who of course contemplating the reality that American craft beer 0:04:46.440 --> 0:04:49.880 might not be such a great proposition anymore. So there 0:04:49.920 --> 0:04:52.600 will be those niche opportunities and more sensitive though, because 0:04:52.600 --> 0:04:54.560 there'll also be those exporters who are impacted. 0:04:54.720 --> 0:04:57.800 Yep, yep completely. I mean, we've got straight into it, 0:04:57.920 --> 0:05:00.000 so we might as well cover it a little bit deeper. 0:05:00.160 --> 0:05:02.839 But it's somewhat of a political curve for what I'd imagine, 0:05:02.880 --> 0:05:06.400 which is the Trump's tariffs and very much to talk everywhere, 0:05:07.080 --> 0:05:09.360 been posed here in New Zealand on more or less 0:05:09.360 --> 0:05:12.000 every country. What do you think the actual impacts of 0:05:12.040 --> 0:05:14.559 this and looking like what's in your map and radar 0:05:14.560 --> 0:05:16.320 at the moment for dealing with these Yeah. 0:05:16.360 --> 0:05:18.800 Look, I think to some extent he did campaign on it, 0:05:18.960 --> 0:05:21.600 so we knew it was coming, and actually to some 0:05:21.680 --> 0:05:23.040 extent we what sort. 0:05:22.880 --> 0:05:24.120 Of number did you have in your mind? 0:05:24.360 --> 0:05:26.440 Well, I chose not to have a number. I mean, 0:05:26.640 --> 0:05:29.880 it's not a predictable man, is he. I think the 0:05:30.000 --> 0:05:35.440 key thing right now is the uncertainty, because what happened 0:05:35.440 --> 0:05:38.400 on day one is different from what's now unfolding, and 0:05:38.440 --> 0:05:40.599 we can expect there will be changes in the US 0:05:40.680 --> 0:05:43.359 policy position, and likely the China policy position and that 0:05:43.440 --> 0:05:45.960 of other countries over the next few weeks and months. 0:05:46.200 --> 0:05:49.360 And I think that uncertainty, as much as anything else, 0:05:49.720 --> 0:05:52.280 is what's making it really difficult globally, because what you're 0:05:52.320 --> 0:05:55.680 seeing businesses and investors doing is just saying, hold up, 0:05:55.680 --> 0:05:58.120 hold up, let's pause until we know what the lie 0:05:58.200 --> 0:06:04.200 of the land is. So by consensus, economists internationally are saying, 0:06:04.880 --> 0:06:08.120 come what May, there's going to be slower growth across 0:06:08.160 --> 0:06:11.280 the world. That always has an impact on New Zealand. 0:06:11.279 --> 0:06:15.800 Because we're an open trading economy. Our treasury is forecasting 0:06:15.960 --> 0:06:19.360 that the growth that we were predicting back in December 0:06:19.680 --> 0:06:22.360 will now be lower than we had thought, but it's 0:06:22.400 --> 0:06:25.719 still growth is just not going to be as fast 0:06:26.240 --> 0:06:29.119 as we were hoping it would be, and that's because 0:06:29.160 --> 0:06:32.320 we will be buffeted by these ones that are coming internationally. 0:06:33.400 --> 0:06:37.880 So when we grow slower, obviously that's harder in terms 0:06:37.880 --> 0:06:42.080 of job creation and income creation. But fundamentally I always 0:06:42.080 --> 0:06:43.720 have to worry about it too, because I'm the bean 0:06:43.800 --> 0:06:47.440 counter in the government, and less growth means less revenue. 0:06:48.040 --> 0:06:50.839 Less revenue makes it harder for me to balance the 0:06:50.839 --> 0:06:53.400 books and make all the investments that we need to 0:06:53.440 --> 0:06:56.040 make as a country. So we see our job as 0:06:56.160 --> 0:06:59.039 really keeping a steady course, making sure we are doing 0:06:59.040 --> 0:07:01.960 the investments needed, whether it's health, education, you know, the 0:07:01.960 --> 0:07:06.880 defense force, which is becoming increasingly strategically important. And we 0:07:06.920 --> 0:07:09.800 can do that by being careful about how we prioritize. 0:07:10.040 --> 0:07:13.480 But fundamentally, the best way for me to make our 0:07:13.520 --> 0:07:17.440 books healthier is to get that growth trajectory faster. So 0:07:17.520 --> 0:07:21.360 I'm thinking very hard about in an environment of instability, 0:07:21.400 --> 0:07:24.360 what are the policies that government can pursue to give 0:07:24.400 --> 0:07:28.080 our local businesses and entrepreneurs the nudge that says, be 0:07:28.280 --> 0:07:32.160 confident about investing, be confident about taking on the next market, 0:07:32.280 --> 0:07:34.400 taking the next step, so that. 0:07:34.240 --> 0:07:37.400 The uncertainty, you know, it's always uncertain really right, if 0:07:37.440 --> 0:07:40.760 you look back on history, we've never really been great forecasters. 0:07:40.800 --> 0:07:42.760 It's not a fantastic human trait. 0:07:44.320 --> 0:07:47.560 But any one who watches the weather forecast knows that completely. 0:07:48.040 --> 0:07:49.280 And you know, we have a bit of a front 0:07:49.320 --> 0:07:50.840 row seat to a lot of it, because markets tend 0:07:50.920 --> 0:07:54.680 to reflect how people are feeling, and people don't like uncertainty, 0:07:54.680 --> 0:07:57.240 and therefore markets don't and in their place, sir. And 0:07:57.280 --> 0:07:59.360 then I was just I literally just read the article 0:08:00.120 --> 0:08:04.480 from President Trump giving his one hundred day speech and 0:08:04.600 --> 0:08:06.880 saying that he wants to be the pope. All right, 0:08:07.480 --> 0:08:10.200 ye that specifically that would be the best job. All right, Well, 0:08:10.440 --> 0:08:12.120 I'm just not going to take a guess on that anymore. 0:08:12.160 --> 0:08:14.480 But what he did say was that he's only just 0:08:14.520 --> 0:08:16.880 getting started, and that sort of made me think, wow, 0:08:16.920 --> 0:08:19.120 if this is just getting started. But so, how as 0:08:19.120 --> 0:08:21.280 a government you do forecast and plan to that, and 0:08:21.320 --> 0:08:24.040 what sort of mitigations you're putting in place towards this? 0:08:24.120 --> 0:08:25.920 Given we can be reasonably one thing, we can be 0:08:26.000 --> 0:08:28.240 quite confident on is that the uncertainty will continue. 0:08:28.560 --> 0:08:31.640 Yeah, So there's a couple of things first in terms 0:08:31.680 --> 0:08:35.320 of the forecasts of what the global trajectory will look 0:08:35.400 --> 0:08:38.160 like and therefore what it looks like at home to 0:08:38.160 --> 0:08:42.360 some extent that stays outside of our control, because what 0:08:42.440 --> 0:08:46.640 he does won't be influenced by what we do. Someone 0:08:46.679 --> 0:08:49.040 said to me the other day, Oh, you know, shouldn't 0:08:49.040 --> 0:08:51.560 you we be doing retaliatory tariffs, and you know, it's 0:08:51.600 --> 0:08:53.800 a bit like throwing a ping pong ball and an elephant, 0:08:53.840 --> 0:08:54.200 isn't it. 0:08:54.240 --> 0:08:54.920 And that's not. 0:08:55.040 --> 0:08:57.319 All that will do is harm consumers here at home 0:08:57.360 --> 0:09:00.640 who will end up paying higher prices and business is 0:09:00.640 --> 0:09:03.560 here at home. So instead, what we're thinking about as 0:09:03.600 --> 0:09:08.120 to things, first of all, providing some stability in our 0:09:08.160 --> 0:09:10.560 own for school settings, making sure that we're still on 0:09:10.640 --> 0:09:13.480 track to get back to balanced books as a country, 0:09:13.559 --> 0:09:17.719 because you can appreciate that when there's global market volatility. 0:09:18.280 --> 0:09:21.880 Lenders on whom New Zealand is very dependent, we're currently 0:09:21.880 --> 0:09:26.480 every Thursday afternoon, New Zealand issues around five hundred million 0:09:26.520 --> 0:09:29.160 dollars worth of bonds. We need to look like a 0:09:29.160 --> 0:09:34.080 good place to be lending to and investing so we've 0:09:34.360 --> 0:09:37.400 made adjustments to our own position to make sure that 0:09:37.440 --> 0:09:40.920 we're still on track to get back into balanced books territory. 0:09:41.000 --> 0:09:43.760 We think that's quite important right now. The second thing 0:09:44.280 --> 0:09:47.679 is just being clear that our exporters are going to 0:09:47.760 --> 0:09:51.000 need us. So in the first instance, we have established 0:09:51.000 --> 0:09:55.320 hotlines websites through the Ministry of Foreign Afairs and Trade 0:09:55.360 --> 0:09:57.880 and through MZTE to make sure exporters can get the 0:09:57.880 --> 0:10:01.360 information they need about what's a quickly changed environment. We've 0:10:01.360 --> 0:10:04.280 got a thousand companies that we work really closely with 0:10:04.360 --> 0:10:08.160 through MZTE, who we've been running seminars and really intense 0:10:08.480 --> 0:10:10.720 support for, and we're going to keep that going. We 0:10:10.800 --> 0:10:12.760 need to make sure that export is trying to get 0:10:12.840 --> 0:10:15.600 information can get it. That's going to be really important 0:10:15.640 --> 0:10:18.920 over the next little while. And then fundamentally strategically, New 0:10:19.040 --> 0:10:22.520 Zealand has always been a country that has pushed for 0:10:22.840 --> 0:10:26.800 a rules based trading system where countries trade with each other, 0:10:27.280 --> 0:10:30.360 and we want to keep that role in the world, 0:10:30.720 --> 0:10:33.640 so that means forging new free trade agreements is more 0:10:33.679 --> 0:10:36.360 important than ever. You saw the Prime Minister kick off 0:10:36.400 --> 0:10:38.760 the beginning of the year with a new arrangement with 0:10:38.760 --> 0:10:42.120 the United Arab Emirates, so really pushing into those Middle 0:10:42.160 --> 0:10:46.679 East markets. We've opened trade negotiations with India which are 0:10:46.720 --> 0:10:51.199 continuing to progress well despite global turmoil, and I think 0:10:51.200 --> 0:10:53.199 this is actually a time to double down on the 0:10:53.240 --> 0:10:55.440 trade agreements we do have and make sure that we're 0:10:55.440 --> 0:10:58.840 a good partner because that's how our exporters get access 0:10:58.840 --> 0:10:59.560 for their products. 0:11:00.120 --> 0:11:02.679 Over the last this uncertainty of the last two weeks 0:11:02.679 --> 0:11:04.640 has driven some of the highest training volumes we've actually 0:11:04.640 --> 0:11:08.360 seen on the platform, which again investing reflects people's confidence 0:11:08.360 --> 0:11:12.040 in the future. And so I think whilst is key, 0:11:11.880 --> 0:11:16.120 we do tend to be quite good in conversation having 0:11:16.200 --> 0:11:18.120 the negative part of it, like it's a nice way 0:11:18.240 --> 0:11:20.120 just to have a bit of a winge with friends 0:11:20.160 --> 0:11:22.800 and stuff like that, but how we act on mass 0:11:23.120 --> 0:11:24.880 behind that can be quite different totally. 0:11:24.920 --> 0:11:27.640 Look that the A and Z Business Confidence Survey came 0:11:27.640 --> 0:11:29.920 out today and instantly sort of stood out to me 0:11:30.200 --> 0:11:33.920 was while people were generally less confident about the economy 0:11:33.920 --> 0:11:37.160 than they were pre Trump, at the same time, some 0:11:37.200 --> 0:11:39.600 of them were more confident about the conditions for their 0:11:39.600 --> 0:11:42.400 own business. They were reporting high levels of confidence for 0:11:42.440 --> 0:11:44.480 their business than they were for the economy as a whole, 0:11:44.480 --> 0:11:48.079 but of course all the economy is is each individual 0:11:48.080 --> 0:11:50.920 business added together. And so that gives me heart that 0:11:51.000 --> 0:11:53.360 individual businesses are still confident about what the next few 0:11:53.360 --> 0:11:56.520 months looks like for them. Yeah, I feel a part 0:11:56.600 --> 0:11:59.600 of my job, the responsibility I have is to be 0:11:59.600 --> 0:12:02.720 optimis stick and to remind people of the good things 0:12:02.800 --> 0:12:06.319 going on because you know, for all of their own reasons, 0:12:06.440 --> 0:12:10.560 our mainstream media will often emphasize conflict or crime or 0:12:10.600 --> 0:12:14.920 negative things, and you don't often see stories of By 0:12:14.960 --> 0:12:17.200 the way, did you know that this new business is 0:12:17.200 --> 0:12:19.840 doing amazing stuff? Did you know that the Hawthorn Institute 0:12:19.960 --> 0:12:23.280 is coming up with world leading scientific breakthroughs into algay 0:12:23.360 --> 0:12:28.040 and seaweed with Nesley is their major major research partner 0:12:28.080 --> 0:12:29.800 because they think they're the best in the world that 0:12:29.880 --> 0:12:32.880 creating protein from the sea, Like, did we hear about that? 0:12:33.640 --> 0:12:35.640 And I get to see these success stories all the time. 0:12:35.679 --> 0:12:37.480 You know it picks peanut butter. I was there the 0:12:37.760 --> 0:12:40.240 other day. There's a little business that started with a 0:12:40.280 --> 0:12:43.480 fifty five year old who decided to make peanut butter 0:12:43.960 --> 0:12:46.920 in a concrete mixer for the market, and he is 0:12:46.960 --> 0:12:49.840 now making twenty five thousand jars of peanut butter a day. 0:12:50.440 --> 0:12:53.680 So we need to tell these stories about ourselves because 0:12:53.720 --> 0:12:56.880 we're awesome. I've just been at the Fintech Festival meeting 0:12:56.920 --> 0:12:59.559 all these people who are taking a risk to run 0:12:59.640 --> 0:13:03.679 a new financial business because they see opportunity. And I 0:13:03.720 --> 0:13:06.040 see that opportunity, and I think we should talk ourselves 0:13:06.120 --> 0:13:08.800 into that and not into the things that are hard. Yes, 0:13:08.800 --> 0:13:11.000 there are challenges, of course there are, but let's also 0:13:11.080 --> 0:13:12.319 highlight the positive. 0:13:12.440 --> 0:13:17.920 Coming back to these geo political situations where all as 0:13:18.000 --> 0:13:20.400 businesses trying to make changes to our business and thinking 0:13:20.400 --> 0:13:23.720 about that. You've made some early announcements on the budget 0:13:24.640 --> 0:13:27.360 and just interested to hear how much of this change, 0:13:27.360 --> 0:13:29.120 which has come very quickly over the last couple of weeks, 0:13:29.120 --> 0:13:32.000 is playing into your thinking there and what New Zealanders 0:13:32.000 --> 0:13:33.959 should start to expect for the budget in a month 0:13:34.040 --> 0:13:34.600 or so. 0:13:34.679 --> 0:13:37.120 Yeah. Well, look, I feel quite a solemn durty in 0:13:37.160 --> 0:13:42.320 this job to deliver responsible budgets because hey, look, I'd 0:13:42.320 --> 0:13:44.600 love to be generous and spray the money down around. 0:13:44.679 --> 0:13:46.760 That would make my job a lot easier, to be honest, 0:13:46.880 --> 0:13:51.000 But I'm very aware of the context in which we're operating, 0:13:51.120 --> 0:13:54.960 which is that New Zealand rightly took on debt during COVID. 0:13:54.960 --> 0:13:56.440 We can have a debate about whether we took on 0:13:56.520 --> 0:13:59.440 too much, but we now have dead at levels not 0:13:59.480 --> 0:14:02.600 seen since the mid nineteen nineties, for context, where at 0:14:02.640 --> 0:14:05.400 forty two percent government debt to the size of our economy. 0:14:05.840 --> 0:14:08.680 Historically it's hovered between five and twenty five percent. 0:14:09.120 --> 0:14:10.840 Now the probably what do you think is like a 0:14:10.840 --> 0:14:12.640 good level? Now what we'll we I'd. 0:14:12.440 --> 0:14:15.040 Like us to see come back down to forty and 0:14:15.120 --> 0:14:17.680 then hover between twenty and forty over time, depending on 0:14:17.720 --> 0:14:18.760 where we are in the side. 0:14:18.559 --> 0:14:20.280 Because we're still low globally, Is that right? 0:14:20.440 --> 0:14:24.920 Yeah, we are, and we should borrow for investments that 0:14:24.960 --> 0:14:28.640 are going to drive our future productivity. Absolutely on board 0:14:28.680 --> 0:14:31.760 for that. The problem that we always need to be 0:14:31.840 --> 0:14:34.560 aware of is that if something major happens, you know, 0:14:34.720 --> 0:14:38.800 big earthquake, big biosecurity incursion, we're then going to have 0:14:38.800 --> 0:14:40.480 to go out to the world and borrow a lot more. 0:14:41.000 --> 0:14:43.840 And there's a ceiling. Yeah, that's right, And there's a 0:14:43.880 --> 0:14:46.920 ceiling at which we don't look as good as proposition. 0:14:47.000 --> 0:14:50.480 And so it's about having enough headroom that when that 0:14:50.520 --> 0:14:53.320 big event comes, we can borrow without getting into it's 0:14:53.320 --> 0:14:56.080 basically I worry about the death spiral of a really 0:14:56.160 --> 0:14:58.880 high interest bill on our debt. So, for context, right now, 0:15:00.040 --> 0:15:03.240 spill is nine billion dollars a year on our debt, 0:15:03.360 --> 0:15:07.880 up from hovering just around three previously. Nine billion hard 0:15:07.960 --> 0:15:11.360 number to understand because it's so big. That is more 0:15:11.360 --> 0:15:14.000 than the amount of funding we put into the defense force, 0:15:15.120 --> 0:15:20.480 the prison service, the police and customs combined. All of 0:15:20.520 --> 0:15:23.560 that's just context for the fact that I then say 0:15:23.560 --> 0:15:26.280 the next thing, which is that right now we are 0:15:26.320 --> 0:15:28.480 borrowing to pay for the grocery so we're not just 0:15:28.560 --> 0:15:31.280 borrowing for assets. We're borrowing for our day to day spending. 0:15:32.320 --> 0:15:35.480 There's a thirteen billion dollar deficit this year between what 0:15:35.520 --> 0:15:38.440 we as a government are taking in in revenue and 0:15:38.480 --> 0:15:41.160 other earnings and what we're spending to keep the economy going. 0:15:41.680 --> 0:15:44.360 That's the right thing to do, because New Zealanders need 0:15:44.400 --> 0:15:46.800 stability and their welfare supports and the funding for our 0:15:46.840 --> 0:15:50.320 schools and hospitals. It just can't go on forever. Now 0:15:50.360 --> 0:15:53.320 I've taken the gradual approach. Some people would say sort 0:15:53.360 --> 0:15:55.160 that out immediately. I think that would create a lot 0:15:55.160 --> 0:15:58.320 of pain for people, and it would actually create instability 0:15:58.320 --> 0:16:00.880 in the economy. So we've set a that says we 0:16:00.920 --> 0:16:03.760 will get the books back and balance by twenty twenty nine. 0:16:04.280 --> 0:16:07.400 We think that's reasonable period of time to narrow that 0:16:07.440 --> 0:16:09.560 gap between what we spend and earn, and that will 0:16:09.600 --> 0:16:11.920 allow us to start paying down debt. Now, because of 0:16:11.920 --> 0:16:17.080 the Trump stuff, the forecasts I've been receiving told me 0:16:17.520 --> 0:16:20.400 you're now going to be off track to meet that 0:16:20.560 --> 0:16:22.800 goal of getting the books back and balance unless you 0:16:22.840 --> 0:16:23.520 make for change. 0:16:23.760 --> 0:16:25.600 The interest rate's been held up because of what listen, 0:16:25.640 --> 0:16:28.240 new uncertainty or what is it that's driving Well. 0:16:28.080 --> 0:16:32.119 It's basically that because growth will be lower, we're forecasts 0:16:32.200 --> 0:16:35.440 to be taking in less revenue, which has two effects. 0:16:35.520 --> 0:16:38.400 One the deficit grows larger now and two we then 0:16:38.480 --> 0:16:42.280 have to borrow more, which then creates a larger cost 0:16:42.320 --> 0:16:45.120 there in terms of interest. So those effects on the 0:16:45.160 --> 0:16:49.720 books mean in the absence of any reaction, I'd be 0:16:49.840 --> 0:16:52.520 literally presenting a forecast to New Zealand that showed no 0:16:52.640 --> 0:16:55.600 path to balanced books, and I don't think that's feasible, 0:16:56.440 --> 0:16:59.080 both in terms of international lending but also in terms 0:16:59.080 --> 0:17:03.200 of what's responsible. So we've said, look, we were planning 0:17:03.600 --> 0:17:06.439 that our kind of our allowance, if you want to 0:17:06.440 --> 0:17:09.320 call it, that would be two point four billion in 0:17:09.359 --> 0:17:12.720 the coming for school year. Actually, we've gone and looked 0:17:12.760 --> 0:17:15.880 really hard. We've found some more stuff we can reprioritize. 0:17:15.920 --> 0:17:19.080 We've juggled around the other tens of billions of government 0:17:19.119 --> 0:17:23.280 spending that we do, and that collectively means that we 0:17:23.320 --> 0:17:25.840 will only need an allowance of one point three billion, 0:17:25.920 --> 0:17:28.720 so a bit less, and that as to effects one, 0:17:28.760 --> 0:17:31.280 it just means that we're borrowing less than the short 0:17:31.320 --> 0:17:34.920 term than we would otherwise be doing. But it's doable 0:17:35.640 --> 0:17:40.800 because with the reprioritization, I can still look everyone in 0:17:40.840 --> 0:17:43.840 the eye and say we've got enough to make the 0:17:43.880 --> 0:17:47.080 investments we clearly need in our health services, that we 0:17:47.160 --> 0:17:50.679 clearly need, in our schools, that we clearly need in 0:17:50.760 --> 0:17:54.040 our defense force, in law and order. Also got enough 0:17:54.160 --> 0:17:57.320 room to make a few modest measures to support businesses 0:17:57.320 --> 0:17:59.720 to grow, which is going to be really important over 0:17:59.720 --> 0:18:03.199 this period. So I've made room for that, and I've 0:18:03.200 --> 0:18:07.240 made room for some very modest, targeted cost of loving measures, 0:18:07.280 --> 0:18:09.639 so I can do all of that and spend less. 0:18:09.720 --> 0:18:12.000 So that's the right thing to do. I'll still be 0:18:12.040 --> 0:18:13.800 spending more next year than this year. I mean, this 0:18:13.840 --> 0:18:16.840 is the context, right, it's just about how much more 0:18:16.920 --> 0:18:17.960 we're spending next year. 0:18:18.560 --> 0:18:20.359 Actually, I hadn't actually observed that. 0:18:20.480 --> 0:18:23.440 Yeah, we'll be spending more next year and the year 0:18:23.480 --> 0:18:25.280 after that and the year after that. So the trend 0:18:25.320 --> 0:18:27.359 is always up because things like super anuation. 0:18:27.920 --> 0:18:28.120 Lie. 0:18:28.359 --> 0:18:31.160 Yeah, the trend is always up. Yeah, that's right, things 0:18:31.200 --> 0:18:33.800 like superinnuation. That bill just grows by baliance over the 0:18:33.800 --> 0:18:36.760 next few years, you know, So we will be spending more, 0:18:36.760 --> 0:18:38.760 but it's just a question of how steep that spending 0:18:38.760 --> 0:18:39.560 more line is. 0:18:39.520 --> 0:18:41.879 The defense size of the defense spend. Has that been 0:18:41.920 --> 0:18:44.199 a bit of surprise to you, like it was that 0:18:45.119 --> 0:18:48.280 presumably when you were going through the election process that 0:18:48.359 --> 0:18:49.040 probably wasn't. 0:18:49.520 --> 0:18:51.879 Yeah, it's definitely become much more of a top of 0:18:51.920 --> 0:18:54.800 mind consumed for everyone in the world. I think we've 0:18:54.840 --> 0:18:59.000 all observed that the strategic environment is far less stable 0:18:59.080 --> 0:19:02.640 than it was, and New Zealand really has to look 0:19:02.640 --> 0:19:06.560 at it through two lens. One, we have really solemn 0:19:06.600 --> 0:19:10.760 commitment to our Pacific partners, who, to quite an extent, 0:19:10.960 --> 0:19:14.000 you know, our Pacific family, rely on us to be 0:19:14.080 --> 0:19:18.560 the ones that are survailing their ocean space to be 0:19:18.640 --> 0:19:22.199 there if there's a disaster and they need help. So 0:19:22.280 --> 0:19:25.040 that matters, and it's become clear that our defense force, 0:19:25.200 --> 0:19:27.640 without a lot more investment, is going to have reduced 0:19:27.680 --> 0:19:30.520 capability to do those things. The second part of it 0:19:30.560 --> 0:19:32.199 is we need to be a good partner, you know, 0:19:32.240 --> 0:19:35.760 particularly to Australia who our only ally, but also the 0:19:35.800 --> 0:19:41.000 other countries who realistically we defend on, We depend on, 0:19:41.359 --> 0:19:47.000 defend on you depend on to not only defend us 0:19:47.240 --> 0:19:51.520 if we need defending, but also to defend the values 0:19:52.359 --> 0:19:57.199 that we collectively as a world share, and so you 0:19:57.240 --> 0:20:00.480 know right now that's playing out in Ukraine. New Zealand 0:20:00.600 --> 0:20:05.320 is helping by training troops and at the same time 0:20:05.440 --> 0:20:07.080 we want to keep being able to do those. 0:20:06.920 --> 0:20:10.200 Things alongside the country's per strings or being counter I 0:20:10.240 --> 0:20:15.240 think you put it before. You'll now also have the 0:20:15.480 --> 0:20:19.440 economic growth portfolio, so the Minister of Economic Growth as well. 0:20:19.920 --> 0:20:22.520