Gabriel Makhlouf 'relaxed' about Ministers disregarding Treasury's advice to make 'political decisions'; Sees the Government as 'very attuned' to Treasury

Gabriel Makhlouf 'relaxed' about Ministers disregarding Treasury's advice to make 'political decisions'; Sees the Government as 'very attuned' to Treasury

Treasury’s Secretary and Chief Executive is not surprised the Government is ignoring the concerns Treasury has raised over some of the challenges caused by record migration to New Zealand.

“There are genuinely political choices to be made. The Government at the end of the day makes political choices. I’m completely relaxed about it," Gabriel Makhlouf  told interest.co.nz in a Double Shot Interview.

Asked what he makes of the fact the Government has denied some of Treasury's observations and completely ignored some of its advice, Makhlouf says:

“Some of these things take time to deliberate over and to think about. The fact we’ve given advice at one particular time and it hasn’t been taken, doesn’t mean that it won’t be taken later on…

“I’m not surprised that because of the political nature of something like that, ministers will be very careful and will take their time to think about how to make change.”

Current policy settings questioned

Documents released under the Official Information Act reveal Treasury in December told Finance Minister Bill English a spike in demand for housing, spurred by more people arriving in New Zealand, is contributing to rising house prices. It cautioned prices would continue to rise unless supply was ramped up.

Treasury went further saying: “There is a concern that recently there has been a relative decline in the skill level of our labour migration...

“The increasing flows of younger and lower skilled migrants may be contributing to a lack of employment opportunities for local workers with whom they compete…

“Current policy settings may not be doing all they can to support the growth of higher productivity firms and industries, including facilitating the flow of higher skilled migrants to sectors of the economy where skill shortages may be acting as a significant constraint.

“In addition, our current approach to selecting migrants may have encouraged reliance over time on lower-skilled labour in some parts of the economy. This may have been discouraging some firms from either increasing wages and working conditions or investing, either in training their existing workforce or in capital.

“The size of these effects may not be large on aggregate across the economy. But at the margin, we believe that there are benefits to making changes to immigration policy…”

Migration 'a complicated issue'

Makhlouf says there’s no straight forward way of addressing migration as it’s a complicated issue.

“One of the things we as a community at large - not just officials and politicians - need to make sure, is we understand the issue at a more substantive level than the general sort of one-liners we see.”

He explains around a third of migrants are returning New Zealanders: “It’s quite hard to do much about those.”

Over 20% are students: “Students are quite an important revenue generator for the country and for universities… And when they go back to their countries, they build connections for us, which matter for our longer term prosperity.

“And then it’s about a third of migrants, who are actually on work visas… Businesses tell us they need the skills to grow their firms. Now it’s important we’re very careful that the skills that are demanded are the actually skills that are provided.

“But the rules that we’ve got are working appropriately,” Makhlouf says, changing his tune somewhat from the Treasury reports released under the OIA.

Government ‘very attuned’ to Treasury’s advice

Makhlouf in 2012 delivered a speech saying: “Treasury is a policy ideas factory and service delivery shop with the government as a very discerning customer.

“While they might not take everything on our shelves – and sometimes may not purchase anything at all or may get something elsewhere – we need our customer to feel assured that the Treasury delivers the right range of products of the highest quality.”

Asked how the Government’s shopping habits from Treasury’s “factory” have changed since 2012, Makhlouf says: “The Government continues to have very high expectations of the Treasury. We have very high expectations of ourselves.

“Whether the shopping habits have changed particularly, I’m not sure…”

“I think the Government is very attuned to the advice it gets from the Treasury. It hasn’t gone up, it hasn’t gone down…

“We’d be giving the wrong impression if we left people with the impression that the Government is becoming more or less engaged.”

'I don’t have a problem with people disagreeing with our advice'

Yet migration isn’t the only major issue Treasury and the Government don’t see eye-to-eye on.

Treasury in March advised the Government to consider including agriculture in the Emissions Trading Scheme - a move that would cause farmers to be up in arms. While the Government began a review of the ETS late last year, it has said including agriculture "remains off the table at present".

Furthermore, there have been instances where government ministers have been outwardly scathing of Treasury’s work.

Economic Development Minister Steven Joyce in June shot down Treasury’s gross domestic product per capita forecasts - which later turned out to be correct - for being too low.

Finance Minister Bill English did however at the time concede GDP per capita was down because "we've had a surge in people ... that's been more rapid than expected".

The Minister supporting Greater Christchurch Regeneration, Gerry Brownlee, has also on several occasions been publicly scathing of the Major Projects Performance Reports Treasury has done on Canterbury’s anchor projects. He’s called the reports “utter tripe” and said they’ve been done by people who "fluff about the place pontificating".

Asked to comment on these clashes, Makhlouf says: “I don’t have a problem with people disagreeing with our advice. I want to make sure the work we do is of very high quality…

“Everyone makes mistakes, but by in large our work is of high quality.”

Responding to Brownlee’s comments, he points out English issued a media release after the most recent progress report was published, saying Cabinet would consider it and wants to keep track of the projects it’s investing in.  

Responding to Joyce’s comments, Makhlouf says Treasury makes forecasts to the best of its professional judgement.  

“Ministers have in the past tweaked the rules to make sure issues like the ones mentioned are addressed, and I wouldn’t be surprised if they make them in the future."

Furthermore: “There are loads of examples of where the Government has basically taken our advice.”

Makhlouf says Treasury publishes a lot of this advice on its website.

“If you went through all that, you’d probably get a much better balanced view of the quality of what we do and the extent to which it delivers the sorts of things the Government expects us to deliver for them.”

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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21
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Government is asleep at the wheel. Treasury is not the only group they are ignoring.... all the warning bells are out yet they continue not to act...

Great article on export growth as % of gdp he other day by BNZ economist .... other oecd nations have had great improvments where nz has been at a standstill for the last 40 years.

http://business.financialpost.com/investing/canadians-aussies-and-kiwis-...

This was intersting note from the article :

Economists at Bank of America Merrill Lynch have now grouped together Canada, Australia and New Zealand as part of a trio heading for “an unwinding.” They blame the complicated situation on the crash in oil and metal prices, and a surge of money into real estate.

The end result is expected to be a “painful unwinding” in the medium term.

“Canada, Australia and New Zealand have all faced commodity shocks that have hampered growth and left the economy highly dependent on housing activity,” a team of BofAML economists wrote in their report. “Despite mounting financial stability risks, central banks in these regions are stuck with low rates to stimulate growth.”

While all three central banks have warned about hot housing markets in each country, BofAML notes that growth in real estate has been incredibly important for each economy, making up 15-30 per cent of the GDP gains seen in the past two years.

All three countries are also struggling with rising trade deficits and growing foreign capital being pumped into housing. BofAML notes that actual data about foreign buying in all three countries is hard to come by, but anecdotal data suggests the money is there and it’s going into real estate.

“Evidence of a large foreign presence is abundant,” the economists write. “For example, resale house prices fell by 19% mom in Vancouver in August, the first month of a new foreign real estate transaction tax.”

This is what i have been banging on about for MONTHS...TAX THE FOREIGN (STUD, TEMP) INVESTORS
Nice to see others outside nz agree.

"The BofAML economists lean toward taxing foreign buyers to solve the problem, as they note that higher interest rates or changes to bank loans mainly affect domestic borrowers.

“This puts the onus on measures targeting foreign buyers such as foreign real estate taxes,” the economists write

AND THIS IS EXACTLY WHAT TIMID KEY IS DOING

"The final scenario is one where governments are too timid on action, allowing the current real estate bubble to grow even larger. When governments are eventually forced to act because of financial stability risks and populist pushes against growing unaffordability, the result is a much more serious price correction and potential housing crash"

11
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Was chatting with a family friend who lives in Papatoetoe the other day, and who deals with vulnerable youth. They were saying how difficult it is for anyone to find a job because of the large XX (nationality replaced with XX) workforce who tend to dominate the unskilled jobs. She was saying that as far as she could tell at the the management level, XXs will only employ their own kind at very very low wages. If true, that's a wage deflation mechanism that will never be acknowledged or talked about. I told my friend that wealthy Chinese have completely pricing out the middle and upper middle class in Auckland city, the North Shore, Remuera, Eastern Bays etc. Current government policy settings are causing quite a bit of racial disharmony.

What you are describing is not simply a matter of government policy. Our political and social philosophy is fundamentally flawed as it is only concerned with the individual and their human rights. It does not recognise groups for what they are (until it's time to court their votes). The treatment of immigration simply as a technical economic problem to be solved by 'experts' is a symptom of this myopia. Another symptom is Europe's increasingly authoritarian approach to speech in order to quell what you call "racial disharmony". In reality it is a recognition of the friction and dysfunction caused by multiculturalism.

Striving to be as non-discriminatory and inclusive as possible, many Kiwis project their liberal, multicultural humanitarian values onto newcomers and simply assume that society will coalesce around a shared civic identity based on liberal values. This is a delusional approach. Multiculturalism is a utopian fantasy that persists only because of our expert denial of human nature and our tendency for ingroup / outgroup preferences. Foreign ethnies like the Chinese have absolutely no problem with favouring their own people over others, for example. The notion that racism and the practice of "othering" is a unique product of european western values is bogus. It's simply a matter of polite society to ignore these things and carry on as if they do not exist.

An Eastern View Of Diversity

Living conditions have become increasingly cramped in Hong Kong. Yet there is much land that cannot be developed because of political resistance from narrow special interest groups. Less than 25 per cent of Hong Kong’s land has been developed.
These cases bring to mind the argument in favour of a diversity of minorities, which are considered the foundation of a pluralistic society. Alexis de Tocqueville made this observation in his Democracy in America.
But this view has increasingly been eclipsed by developments in the West, where minorities have gained political power at the expense of majorities.
Democracy is intended to be all-inclusive, but it is increasingly being hijacked by minorities – robber barons, conservationists, cyclists, unionists, environmentalists, chicken farmers and what not. This is not healthy for an inclusive system.

http://www.scmp.com/business/article/1670673/hong-kongs-soul-central-remote

25
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My beef is why the the Government never even tried to give us the heads up about what they were doing allowing 200,000 people in over the past 36 months .

All we got was total silence until the numbers were revealed by the media , after the fact .

What were they thinking ?

Did they not consider that there might be some consequences to an open door migration policy without a plan ?

Was this lack of communication from Government with its citizens borne of oversight or arrogance ?

They could have at least told us ( the business community ) of their intentions , and we could have ramped up housing provision and construction , built new schools and hospitals and created new suburbs.

Most importantly by keeping us informed they would have empowered Companies to plan strategically and make some decisions about the application of that scarce resource called Capital

Quite simply , we were blindsided by the hundreds of thousands of new migrants in the past 24 months , all looking for somewhere to live in Auckland .

Its wrong on every level , and the question is WHY ?

Who cares about small business owners? Fletchers and land owners are doing great. This government don't care about productivity when the building cartel is sheltered through BRANZ.

Yet the Nigel Latta programme on immigration said foreign immigrants were just 1% of population or 45,000 a year - the same as what it's been for years and years.

Policies haven't changed, the number of foreign immigrants hasn't changed - it's Kiwis not leaving, and Kiwis coming home, that has been the difference.

A good economy that has done what was said to be impossible - reverse the brain drain.

To do what you say should be done - for the government to give forewarning of Kiwis coming home - Kiwis would have to be banned from returning home, unless they gave the government a years warning.

16
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Well if more Kiwis are returning then we need less foreigners.

Not if they don't have the right skills

Great post.

Incredible only a 37k fine for not paying over 100k of wages and cheating 5 employees.

Surely the fine should have been at least the value of of the missed payments and some. Hardly teaching them a lesson.

MAARTEN HOLL
A North Shore food court forced its cleaners to work 60 hours despite only paying them for 40.
A food court on Auckland's North Shore will pay $164,397 for forcing its cleaners to work without pay for 20 hours a week.

Five employees worked from 10am to 10pm at the food court, six days a week, however they were only paid the minimum wage for 40 of these 60 hours.

The cleaners were "vulnerable" Chinese migrants who were older, did not speak English and were unaware of their rights and entitlements in New Zealand, the Ministry of Business, Innovation and Employment's David Milne said.

Food City Limited, operating out of the Northcote Shopping Centre will pay a $37,500 penalty for their serious breaches of employment law, according to an Employment Relations Authority ruling.

They were

1. Vulnerable
2. Elderly
3. Could not speak english
4. Unaware of their rights
5. Unaware of their entitlements
6. exploitable and exploited
7. Permanent residents
8. Not yet citizens
9. Not here on Skilled Migrant Visas

Raises a few questions
They were working 60 hour weeks, underpaid, couldn't speak english, so one would guess they lived within walking distance of Northcote Shopping Centre on the North Shore which is not cheap. So one wonders where they were living - doubtful they were travelling down from Kawakawa and back each day by bus

In pursuit of the dollar, these people are not kind to their elders or their own
The fact they were elderly, not yet citizens, but permanent residents and could not speak english suggests they had arrived not so very long ago under family entrance visas

The one positive was the ERA and MBIE recognised the probable risk that Food City Ltd would simply fold and liquidate and phoenix so attached the liability to the directors who immediately coughed up $164000

Interesting Law

the stats don't totally match that claim, it is about the same amount leaving, and yes more are returning especially from aussie but overall it is still negative flows more out than in.-2588 year to august 2016
table 9 if you want to read the actual numbers and not go off JK spin
http://www.stats.govt.nz/browse_for_stats/population/Migration/IntTravel...
I would like to know the demographics and reasons of those returning which increased dramatically after HC signed away kiwis ability to receive government help and services when needed even though they are paying Australian taxes.
I know of older folk coming back home to retire so they can get hospital treatments and young ones with little ones doing the same thing.

Kiwis pay taxes in other countries too yet don't complain about not getting government help or services in those countries. Good to see Kiwis finally returning back to New Zealand.

650,000+ Kiwis live in Australia & was costing Australian taxpayers $1.1 billion dollars before 2001.

About time Kiwis stopped treating Australia as it somehow owes them something because it doesn't. Australia isn't a ATM. both are entirely different separate countries.

you might what to check your history NZ started out as part of NSW, and was asked to join the federation of states that became australia, not the other way. whether you like it or not both countries are very close and have interlinked history.
http://www.diskiller.net/nzstatehood/

Nigel Latta's program on immigration was biased
https://croakingcassandra.com/2016/09/12/hard-stuff-or-mbie-puff-piece/

Exactly three times the rate of immigratiom than the uk have....

Immigration rate needs to be adaptable so if more kiwis come home or are not leaving then the rate of immigration should be adjusted until infrastructure is there to support more people.

This is just national spin.....

What possible relevance does the uk's immigration rate have to the NZ debate? You couldn't pick a country further away from here than that, nor one that is more socially and geographically different to us. Other than an ageing colonial link, their experience and policy settings are just irrelevant for us. We need to figure out our own solutions based on our own issues. Importing them from some mythical 'mother england' is a dopey solution.

OK, what country should we compare our immigration rate to? We have the fourth highest immigration rate in the world. How about lets aim for Australia's immigration rate and only allow a third of what we currently take in? Australia might be more relevant do you think?

Why compare? Why not set our policies based on what we need? rather than what others are doing? For all we know, those other benchmarks may be wrong, may not be logical even for them, or may just be haphazard. I am not actually claiming ours are right either, just that for something as fundamental as population policy, reference to other countries is quite irrelevant.

Why would an isolated , primarily land based economy, far away from markets need a large population?
It is the non-tradeables sector which needs the population, but for it's own ends.

11
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David David David.. surely we can compare the rate with other countries in the world ?

We are just doing so to highlight that other countries have far lower limits than we do.

There are huge infrastructure issues and housing issues due to high rates at the moment it makes sense to have some sort of limits if immigration rates are too high. I do favour immigration however like The Treasury said we should manage it better.

The issue is immigration equals GDP growth for National (even if gdp per capita barely moves) so they are completely in favour.

So Gabriel Makhlouf serves the government over the people of New Zealand, but the government serves vested interests (property investors and developers, banks, finance companies, Mitre10, Bunnings)?

" Businesses tell us they need the skills to grow their firms."
the old naive innocence line.
We have a BIG problem of crony capitalism combined with an inbred left-wing media of the sort which produced Nigel Latta's The New New Zealand.

“There are genuinely political choices to be made. The Government at the end of the day makes political choices. I’m completely relaxed about it," Gabriel Makhlouf  told interest.co.nz
Corrin Dann
you don't want to get immigration down , to fall though, do you. I just got to say something. I saw you in a speech after the budget and you were in a big room of business people [non-tradeables sector], now some of those were the biggest business minds of the country and you stood up and said: “don't worry about treasuries figure the estimation that it will go back to 12000, you were confident the figure was going to be a lot higher than that.

JK
I just think it is likely to be higher than that

Corrin Dann
But it's like telling them you wanted immigration to be up. You were telling them “ don't worry the demand will be there, the economies going to stay there, that's what's keeping New Zealand affloat
http://tvnz.co.nz/q-and-a-news/pm-s-reaction-aussie-election-results-vid...