1 00:00:00,040 --> 00:00:01,880 Speaker 1: The government's going to open the books today with the 2 00:00:01,920 --> 00:00:05,000 Speaker 1: half year Economic and Fiscal update at one o'clock this afternoon. 3 00:00:05,160 --> 00:00:07,440 Speaker 1: Sounds like there is a chance we could yet be 4 00:00:07,440 --> 00:00:09,440 Speaker 1: surprised to the positive. But it sounds like there is 5 00:00:09,480 --> 00:00:11,039 Speaker 1: a chance that Nikola Willis is going to push the 6 00:00:11,080 --> 00:00:14,360 Speaker 1: surplus out. Yes again in Stephen Joy's former finance minister, 7 00:00:14,440 --> 00:00:15,160 Speaker 1: is with us in studio. 8 00:00:15,240 --> 00:00:17,560 Speaker 2: Morning, Stephen, morning, how are you. I'm very well, Thank you, 9 00:00:17,600 --> 00:00:18,439 Speaker 2: Thanks so much for coming in. 10 00:00:18,480 --> 00:00:20,640 Speaker 1: It's lovely to see you. Now, how do you rate 11 00:00:20,680 --> 00:00:22,240 Speaker 1: the chance she pushes out surplus? 12 00:00:22,680 --> 00:00:22,759 Speaker 2: Oh? 13 00:00:22,840 --> 00:00:26,480 Speaker 3: Look, she might. It doesn't matter too much either way. 14 00:00:26,480 --> 00:00:29,600 Speaker 3: And I say that, which just sounds weird. But as 15 00:00:29,640 --> 00:00:32,120 Speaker 3: Bill English used to say, you know, just getting to 16 00:00:32,200 --> 00:00:36,320 Speaker 3: surplus is it's like landing a seven four seven on 17 00:00:36,360 --> 00:00:40,000 Speaker 3: an aircraft carrier. The actual moment of arrival of surplus 18 00:00:40,440 --> 00:00:42,920 Speaker 3: one year earlier, one year later. This is such big 19 00:00:43,000 --> 00:00:46,600 Speaker 3: numbers that it's the difference between two very big numbers 20 00:00:46,600 --> 00:00:49,160 Speaker 3: as to whether you're actually in surplus. So I think 21 00:00:49,200 --> 00:00:51,800 Speaker 3: more the more important is the direction of travel. Is 22 00:00:52,280 --> 00:00:56,720 Speaker 3: are we bending down the cost of government? And is 23 00:00:56,800 --> 00:01:01,880 Speaker 3: revenue coming up now? Whether it's twenty seven, twenty twenty nine, 24 00:01:02,080 --> 00:01:05,840 Speaker 3: twenty nine, thirty. Finally, it's probably not going to make. 25 00:01:05,920 --> 00:01:08,480 Speaker 2: You don't think the pace of travel is really important. 26 00:01:08,120 --> 00:01:10,120 Speaker 3: To the pace of travel is very important. But one 27 00:01:10,160 --> 00:01:12,680 Speaker 3: year either way. My point is that one year either 28 00:01:12,680 --> 00:01:13,200 Speaker 3: way at all. 29 00:01:13,600 --> 00:01:15,680 Speaker 1: But the reason I'm asking you that because because if 30 00:01:15,680 --> 00:01:17,440 Speaker 1: it happens again, it's not one year either way, it's 31 00:01:17,440 --> 00:01:19,640 Speaker 1: three years either way, because it will be that Nikola 32 00:01:19,680 --> 00:01:21,600 Speaker 1: has pushed it out by three years in total in 33 00:01:21,640 --> 00:01:24,040 Speaker 1: the space of two years, which I well. 34 00:01:25,080 --> 00:01:29,800 Speaker 3: But again a couple of things. The size of the 35 00:01:29,920 --> 00:01:33,840 Speaker 3: increase of spending was phenomenal. I mean, if you look 36 00:01:33,880 --> 00:01:38,280 Speaker 3: at a graph which shows spending when I left office, 37 00:01:38,880 --> 00:01:41,400 Speaker 3: you know it was like twenty the debt was twenty 38 00:01:41,440 --> 00:01:43,920 Speaker 3: percent of GDP and now it's forty five, you know, 39 00:01:43,959 --> 00:01:46,760 Speaker 3: in the forties. So the amount of ramping up of 40 00:01:46,800 --> 00:01:51,720 Speaker 3: expenditure of the government I don't think has We've got 41 00:01:51,760 --> 00:01:55,920 Speaker 3: similar things in the living memory. So then you're going 42 00:01:56,000 --> 00:01:58,240 Speaker 3: to try and bend that down, and with the. 43 00:01:58,160 --> 00:02:00,120 Speaker 2: Best remend it, why not cut it? 44 00:02:00,120 --> 00:02:03,720 Speaker 1: It's gone up so fast, like up so high so fast, 45 00:02:03,800 --> 00:02:06,080 Speaker 1: can you not bring it down just as fast? 46 00:02:06,120 --> 00:02:09,560 Speaker 3: And that's the that's the ruth Richardson argument, I know, absolutely, 47 00:02:10,120 --> 00:02:15,360 Speaker 3: and yeah, and you could do more, but you get 48 00:02:15,480 --> 00:02:19,240 Speaker 3: very quickly to teacher salaries and health salaries. That's because 49 00:02:19,240 --> 00:02:21,440 Speaker 3: they're big chunks, right, and you can do a bit 50 00:02:21,480 --> 00:02:25,519 Speaker 3: in the structure in Wellington, and they are I would 51 00:02:25,639 --> 00:02:29,440 Speaker 3: argue probably early on they should have done more, but 52 00:02:29,480 --> 00:02:31,680 Speaker 3: they were probably getting their heads around the whole place 53 00:02:31,680 --> 00:02:34,320 Speaker 3: because they were new. That's not an excuse, but I'm 54 00:02:34,360 --> 00:02:36,520 Speaker 3: just saying that it takes a while to wrestle the beast, 55 00:02:37,400 --> 00:02:40,120 Speaker 3: so they could have done more in that. But you know, 56 00:02:40,320 --> 00:02:44,840 Speaker 3: Wellington's Wellington's been in desperate negative economic straits for a 57 00:02:44,880 --> 00:02:49,240 Speaker 3: while even with what they've done, so it is it 58 00:02:49,320 --> 00:02:52,400 Speaker 3: is challenging to wrestle that machine down once it's got 59 00:02:52,480 --> 00:02:55,960 Speaker 3: up such a huge head of steam. Now it's currently 60 00:02:56,000 --> 00:02:59,480 Speaker 3: expenditures running about thirty two percent of about thirty two 61 00:02:59,480 --> 00:03:01,960 Speaker 3: percent of gen or it's heading towards that way now. 62 00:03:02,000 --> 00:03:03,919 Speaker 3: We had it down at about twenty nine, so it's 63 00:03:03,919 --> 00:03:04,800 Speaker 3: about three percent. 64 00:03:05,160 --> 00:03:07,480 Speaker 2: Is that core expenditure, that's. 65 00:03:07,120 --> 00:03:09,799 Speaker 3: Government expenditure, core expenditure, So that's got to get back 66 00:03:09,840 --> 00:03:13,600 Speaker 3: to around that under thirty level, and that does take time. Now, 67 00:03:13,639 --> 00:03:18,880 Speaker 3: if you remember, take Bill English's time as Finance Minister. 68 00:03:19,320 --> 00:03:21,959 Speaker 3: He had eight of the nine years I got. The 69 00:03:22,040 --> 00:03:26,639 Speaker 3: last one. He spent eight years after the Canterbury earthquakes 70 00:03:26,680 --> 00:03:29,880 Speaker 3: and the GFC wrestling that thing back into surplus. And 71 00:03:29,919 --> 00:03:31,640 Speaker 3: some of the commentators go on like he never had 72 00:03:31,639 --> 00:03:33,600 Speaker 3: a surplace. Well, he did all the hard work, and 73 00:03:33,639 --> 00:03:35,720 Speaker 3: they say, oh, Stephen Joyce had a surplus. Yeah, and 74 00:03:35,760 --> 00:03:38,360 Speaker 3: that was lucky because after the eight years of hard work, 75 00:03:38,640 --> 00:03:41,320 Speaker 3: I reaped the benefit of it. It takes a huge 76 00:03:41,320 --> 00:03:43,720 Speaker 3: amount of time. Now none of this has excuses. Yes, 77 00:03:43,720 --> 00:03:45,560 Speaker 3: I've got to keep the pressure on. But then on 78 00:03:45,600 --> 00:03:48,040 Speaker 3: the other side of the aisle there's you know, there's 79 00:03:48,080 --> 00:03:49,720 Speaker 3: an outfit that really wants to get back and to 80 00:03:49,760 --> 00:03:52,000 Speaker 3: spend some more money again, and you know they're trying 81 00:03:52,000 --> 00:03:55,120 Speaker 3: to be sensible about it, but the reality is they 82 00:03:55,160 --> 00:03:58,160 Speaker 3: would spend more. This is a big job to wrestle 83 00:03:58,200 --> 00:04:00,920 Speaker 3: this thing under control. Today is not going to make 84 00:04:01,000 --> 00:04:05,760 Speaker 3: anybody excited in a positive way. Taxpayers Union is going 85 00:04:05,800 --> 00:04:08,040 Speaker 3: to go out and it should be happening faster. The 86 00:04:08,200 --> 00:04:11,800 Speaker 3: Left will be either keeping very quiet or criticizing the 87 00:04:11,840 --> 00:04:14,920 Speaker 3: moves that have been made. So Nikola Willis has just 88 00:04:14,960 --> 00:04:16,599 Speaker 3: got to put her head down and this is the 89 00:04:16,640 --> 00:04:18,800 Speaker 3: hard yards, and the hard yards are going to run 90 00:04:18,839 --> 00:04:19,640 Speaker 3: for another couple of years. 91 00:04:19,720 --> 00:04:22,920 Speaker 1: Yeah, okay, we've got also this week, excuse me, I've 92 00:04:22,920 --> 00:04:25,880 Speaker 1: got the GDP. And obviously we're expecting a big bounce 93 00:04:25,960 --> 00:04:28,640 Speaker 1: back in Q three after what was terrible in Q two, 94 00:04:28,680 --> 00:04:30,599 Speaker 1: But the revision of Q two I think might be 95 00:04:30,640 --> 00:04:32,520 Speaker 1: a really interesting yan as well. Are you expecting a 96 00:04:32,520 --> 00:04:33,400 Speaker 1: big revision here? 97 00:04:34,320 --> 00:04:38,159 Speaker 3: Not particularly, And the quarterly figures do bounce around a lot. 98 00:04:38,680 --> 00:04:40,640 Speaker 3: We know it was a pretty average year. We know 99 00:04:40,760 --> 00:04:42,839 Speaker 3: next year is going to be better. The question is 100 00:04:42,880 --> 00:04:43,400 Speaker 3: how much? 101 00:04:43,520 --> 00:04:44,240 Speaker 2: What do you think. 102 00:04:44,480 --> 00:04:45,920 Speaker 3: I think it'll be a bit better. There's a couple 103 00:04:45,960 --> 00:04:50,240 Speaker 3: of things that worry me. There's the American economy and 104 00:04:50,320 --> 00:04:52,720 Speaker 3: something weird happening there, because there's plenty weird happening at 105 00:04:52,720 --> 00:04:56,480 Speaker 3: the moment, so that's a possibility. And then the other 106 00:04:56,520 --> 00:04:57,839 Speaker 3: one that worries me a little bit as the state 107 00:04:57,839 --> 00:05:00,400 Speaker 3: of the energy sector. And I think we've gone quiet 108 00:05:00,400 --> 00:05:02,279 Speaker 3: on that because it's summer and it's not an issue. 109 00:05:02,320 --> 00:05:05,680 Speaker 3: But I suspect we're going to have more challenges with 110 00:05:05,960 --> 00:05:09,920 Speaker 3: electricity prices and availability of energy at a reasonable price, 111 00:05:10,200 --> 00:05:11,760 Speaker 3: and that's going to be a bit of a handbrake 112 00:05:12,120 --> 00:05:16,040 Speaker 3: on the economic recovery. But I think overall will get better. 113 00:05:16,080 --> 00:05:17,719 Speaker 3: But it's not going to help the government's fiscal books 114 00:05:17,760 --> 00:05:22,200 Speaker 3: yet because that's all that's all trailing, So the tax 115 00:05:22,279 --> 00:05:26,599 Speaker 3: take and the decline and things like benefit payments doesn't 116 00:05:26,600 --> 00:05:29,320 Speaker 3: happen until the economy's really back on its feet, So 117 00:05:29,360 --> 00:05:31,120 Speaker 3: the government's not going to reap the benefit of that 118 00:05:31,160 --> 00:05:31,920 Speaker 3: next year yet. 119 00:05:32,200 --> 00:05:34,200 Speaker 2: So would you say next year is good? 120 00:05:34,200 --> 00:05:36,520 Speaker 1: Because this is Simon Bridges argument is that yep, we're 121 00:05:36,520 --> 00:05:38,080 Speaker 1: going to have an improvement, but it is not going 122 00:05:38,080 --> 00:05:40,039 Speaker 1: to be blockbuster, and you need to good your loins 123 00:05:40,080 --> 00:05:40,840 Speaker 1: and calm your farm. 124 00:05:41,160 --> 00:05:42,240 Speaker 2: It's going to feel a bit hard. 125 00:05:42,480 --> 00:05:44,520 Speaker 3: It won't be a blockbuster, but it will feel pretty 126 00:05:44,520 --> 00:05:45,600 Speaker 3: good relative for the last year. 127 00:05:45,640 --> 00:05:46,560 Speaker 2: I think it will feel good. 128 00:05:46,640 --> 00:05:48,920 Speaker 3: We'll feel a lot better than the last three years. Now. 129 00:05:49,520 --> 00:05:52,360 Speaker 3: It's been really tough. A lot of businesses have done 130 00:05:52,400 --> 00:05:54,920 Speaker 3: it really really tough over the last three or four 131 00:05:55,000 --> 00:05:58,360 Speaker 3: years since COVID. Basically they had that sugar rush and 132 00:05:59,400 --> 00:06:01,600 Speaker 3: they had problem with supply and you know a lot 133 00:06:01,600 --> 00:06:03,840 Speaker 3: of balance sheets have been very baddy damage and that's 134 00:06:03,880 --> 00:06:06,160 Speaker 3: one of the reasons we haven't gone well out of 135 00:06:06,279 --> 00:06:09,520 Speaker 3: this last recession is that a lot of companies had 136 00:06:09,680 --> 00:06:12,760 Speaker 3: much worse balance sheets than they had, say after the GFC, 137 00:06:13,279 --> 00:06:15,480 Speaker 3: and so they've struggled to get on their feet and 138 00:06:15,600 --> 00:06:18,440 Speaker 3: invest in the future. They're now starting to do that. 139 00:06:18,800 --> 00:06:21,200 Speaker 3: Confidence is starting to build. But yeah, it's going to 140 00:06:21,240 --> 00:06:23,720 Speaker 3: be it's going to be better, but not it's not 141 00:06:23,800 --> 00:06:27,200 Speaker 3: going to be a rockstar economy to call corn of Rods. 142 00:06:27,160 --> 00:06:28,840 Speaker 2: Not for a while, but hopefully soon. Now, have you 143 00:06:28,880 --> 00:06:30,360 Speaker 2: got anything nice planned for summer? 144 00:06:30,920 --> 00:06:33,720 Speaker 3: Yeap, sit on a beach, have the family around for 145 00:06:33,800 --> 00:06:35,200 Speaker 3: Christmas and all and normal stuff. 146 00:06:35,279 --> 00:06:35,640 Speaker 2: Brilliant. 147 00:06:35,680 --> 00:06:37,080 Speaker 1: I'm so pleased to hear it. You take yourself a 148 00:06:37,080 --> 00:06:39,120 Speaker 1: lovely break and thank you for coming in, Stephen. Great 149 00:06:39,160 --> 00:06:39,560 Speaker 1: to chat to you. 150 00:06:39,560 --> 00:06:41,800 Speaker 2: Steven Joyce, former finance ministers. 151 00:06:42,200 --> 00:06:45,120 Speaker 3: For more from the Mic Asking Breakfast, listen live to 152 00:06:45,240 --> 00:06:48,279 Speaker 3: news talks that'd be from six am weekdays, or follow 153 00:06:48,320 --> 00:06:49,840 Speaker 3: the podcast on iHeartRadio.