The Government is committing to setting up an “Implementation Unit” to ensure it implements complex policies.
The unit will sit within the Department of the Prime Minister and Cabinet and will be overseen by Finance Minister and Deputy Prime Minister Grant Robertson.
Delivering a pre-Budget speech to the Wellington Chamber of Commerce on Tuesday, Robertson said: “The Unit will be funded through Budget 2021 and will monitor and support implementation of a small number of critical initiatives, particularly where multiple agencies are involved in the work.
“This includes areas such as mental health, infrastructure, housing and climate change mitigation. The Unit will report to me as Deputy Prime Minister, and will engage closely with Minister’s offices."
The idea is for the Implementation Unit to be a permanent fixture, made up of about five staff.
“At a time, in the wake of COVID-19, where the Government is playing a much greater role in supporting the economy and investing for the future, it is crucial that we ensure that we are getting value for money from every dollar of spending, and that across the public service initiatives are being delivered in a way that supports our economic recovery.”
Here is a copy of Robertson's speech in full:
Thank you for the invitation to speak today, it is great to be here. I mean that both sincerely and literally. For this equivalent speech last year I took part virtually, beaming in from the Beehive Theatrette with only a socially distanced press gallery bearing silent witness. You are a more lively and friendly crowd already.
We have certainly come a long way since that event, although this Budget will still be a COVID Budget in a number of ways which I will return to shortly. When I delivered the speech last year we were still at Level 3. Many businesses were not able to operate or were doing so in the most trying of circumstances. Unemployment was still being forecast to get close to double digits and there were dire predictions about what would happen to almost every sector in the economy.
As the story has unfolded New Zealand’s economy has proved to be resilient. That is not to diminish the experience of those businesses, particularly in exposed sectors such as tourism, events, international education and hospitality, who have done and continue to do it tough. But overall we can point to a number of positives.
In terms of unemployment and GDP, New Zealand is strongly positioned relative to the countries that we normally compare ourselves to.
The economy was 0.9 percent below where it was in the December quarter compared to the December quarter pre-COVID. Australia dropped by 1.1 percent, United States by 2.4 percent, the United Kingdom by 7.3 percent and Japan by 1.3 percent.
Our unemployment rate has fallen to 4.9 percent, surprising most economic observers who were expecting a modest increase. The latest data is due out this week, and I expect the number will bounce around a bit. But we still compare favourably with the average jobless rate across the OECD at 6.7 percent. Our nearest neighbour, Australia, has an unemployment rate of 5.6 percent. It is a remarkable turnaround that for a number of employers it is lack of available staff that is the issue, not whether to lay anyone off.
One of the things that is sometimes easy to forget is that while our borders have been closed to people, our goods are still getting out to the world, partly through the government’s underwriting of air freight services through the last year.
Even in the tough times of COVID consumers all around the world still need what New Zealand sells. Exports remain resilient, with annual sales of logs, fruit and wine rising while dairy and meat holding up well. Global demand for New Zealand’s dairy products continues to be high, with Fonterra expecting to pay $7.30 to $7.90 a kilo of milk solids. This will pump more than $11.5 billion into the economy. Firms also appear willing to invest more on the back of an improving environment, with imports of capital goods strengthening.
New Zealand’s success has been recognised, not just in how we have handled the virus, but also in our economic resilience. Standard and Poor’s gave New Zealand the first ratings upgrade of any economy since the pandemic began and the first for New Zealand since 2003. And in the last couple of weeks Moody’s reported on the New Zealand economy, maintaining our AAA rating and noting our “very strong institutions and policy effectiveness”, along with our “robust fiscal position when compared with its peers”.
But for all of this resilience, we are still at a difficult period in the recovery from COVID-19. Even with vaccine rollouts picking up pace around the globe, the devastating impacts of the pandemic are all too real in India and other nations around the world.
The on-going economic impact is uncertain and most forecasts continue to emphasise the likelihood of continued volatility. Supply chain issues are set to affect the economy for much of the rest of this year, and potentially into next year as well.
For all these reasons it is essential that our top priority is that which the Prime Minister outlined at the start of this term: sticking to our plan of keeping New Zealanders safe from COVID-19. That means a continuing focus on keeping our borders secure, while opening up carefully as we have done with the Trans-Tasman Bubble and the Cook Islands.
It also means rolling out the COVID-19 vaccine to meet our target that every New Zealander who chooses to be vaccinated will be by the end of the year. In addition to its importance in keeping New Zealanders safe, the vaccine is an important part of our economic strategy.
As our vaccination rates ramp up, we will be less likely to have to resort to further Alert Level changes. It will also provide additional opportunities to safely open up travel to and from a wider range of countries.
Against the backdrop of COVID, Budget 2021 will take a balanced approach that continues to emphasise investment where it is needed most, alongside careful fiscal management.
Our stronger than expected economic performance means we have more options than we had expected to invest in critical services, but we are also mindful that we have an obligation to future generations to prioritise spending and over time reduce the debt we incurred fighting a one in one hundred year economic shock.
There were no costless decisions in our response to COVID-19. With hindsight there are many views as to what we could have done differently. But I stand by our approach. We moved swiftly to save lives and livelihoods. Programmes like the wage subsidy scheme saved jobs and businesses and we set ourselves up to build back better. It was expensive, it was not perfect, but it has given us a head start we are determined to follow through on.
One by-product of the better than expected economic outcomes is that not all funding allocated in the COVID Response and Recovery Fund has been spent.
As part of the Budget preparation I asked each Minister to look again at the areas of the COVID spending for which they were responsible to see if it was all still needed or is still a priority, and whether underspends could be reprioritised. This exercise has yielded around $926 million worth of savings. I am pleased that we have found these savings, and they can be returned to the fund to aid our recovery from COVID-19 and targeted to where it is needed the most.
This will be a Recovery Budget. I very much see the three Budgets that I will deliver this term as a package. It is simply not possible to fulfil every promise or commitment that we made or address all of our long term challenges in a single Budget. But we do have an opportunity to make real progress across this term on the core priorities of the Government as we recover and rebuild.
For this term of Government we have three core goals. In addition to keeping New Zealanders safe from COVID-19, we are focused on accelerating our economic recovery and addressing the big three foundational challenges, housing affordability, climate change and child wellbeing.
The Government is determined that we will deliver on these core priorities. To that end the Prime Minister has asked me to lead the establishment an Implementation Unit based in her department.
The Unit will be funded through Budget 2021 and will monitor and support implementation of a small number of critical initiatives, particularly where multiple agencies are involved in the work. This includes areas such as mental health, infrastructure, housing and climate change mitigation. The Unit will report to me as Deputy Prime Minister, and will engage closely with Minister’s offices.
At a time, in the wake of COVID-19, where the Government is playing a much greater role in supporting the economy and investing for the future, it is crucial that we ensure that we are getting value for money from every dollar of spending, and that across the public service initiatives are being delivered in a way that supports our economic recovery.
Accelerating our Economic Recovery
As I have already noted, New Zealand’s economic recovery has exceeded every forecast. Now is the time to build on the hard work of business and workers, and accelerate our recovery to move more quickly to our goal of a productive, sustainable and inclusive economy.
Over the three Budgets of this term there will be a continued focus in the areas that we know drive productivity - infrastructure, skills, research and innovation, trade connections and export growth. I want to particularly highlight the success we have had in skills and training as part of our COVID response.
Since we made apprenticeships and targeted trade training free on the 1st of July last year more than 100, 000 people have taken advantage of the programme. This includes nearly 58,000 apprentices in areas from construction to community health care. We have seen significant growth in women and older New Zealanders in these numbers. This is the kind of COVID response that will allow our recovery to continue at pace.
We also want to grasp the opportunities of adding value to the industries we have and taking the step into areas where we see our sustainable future. Industry Transformation Plans in agritech, the digital economy and advanced manufacturing are leading the way. We continue to develop our strategies for space technology, hydrogen and other renewable energy technologies.
The acceleration of our recovery also needs to look at some of the challenges we face post COVID. Tourism is a particular example. Now is the opportunity to look to reset this industry. Pre-COVID many in the industry and outside were concerned that the growth in tourist numbers was not sustainable, from an economic or environmental perspective.
Minister Stuart Nash is now working with the sector on a new model that will lift the value of what we offer and working to put in place the infrastructure for the industry to thrive when tourists return. This will take time and the industry will look different when it does happen, but there is a future.
Another part of the New Zealand economic story that is in focus as we recover from COVID-19 is immigration. Clearly inward migration is well below forecast and will be so for some time. We are working with sectors particularly affected to both ensure some workers can still come to New Zealand but also to train and employ those who are already here to fill these roles.
Beyond the immediate term, the Government believes that immigration will continue to play an important part in our economy in years to come. We will continue to be strengthened economically and socially by people who come here to fill essential skills gaps and make their lives here.
But we also know that in some sectors immigration has seen an entrenchment of low wages and a failure to make technological changes that will improve productivity. Minister Kris Faafoi has work under way to look again at our overall immigration settings and policies.
To support that he and I have asked the Productivity Commission to focus on immigration for its next inquiry. The terms of reference were released yesterday. It is time for the country to have a mature debate about immigration, its positives and negatives, and I welcome Dr Nana and his team being involved in this work.
The three Budgets this term will seek to make significant progress in addressing foundational challenges in our economy.
In March we announced a significant package of housing initiatives to address both demand and supply issues, including a $3.8 billion package to accelerate infrastructure development. Turning around a housing crisis decades in the making will take time, but we are committed to improving affordability and accessibility of housing.
The release of the report of the Independent Climate Commission marks a pivotal moment in our transition to a low carbon economy. Almost every sector of our economy is affected by the carbon budgets that have been outlined by the Commission.
I will have more to say at Budget time about our approach to meeting the targets we have set, but we will continue to look for not just the measures we must take to reduce emissions but the possibilities and opportunities that exist to create high paying and sustainable jobs as we make that transition.
Good progress has been made in the area of child wellbeing, with more than 40,000 children lifted out of poverty since we came into office using the after-housing costs measure.
There is of course always more to do here, but initiatives such as the Families Package, the Winter Energy Payment, indexing benefits to wage growth and significantly increasing the amount those on benefits can earn before it begins to abate are making a real difference.
Alongside these important areas of focus the Government also has a number of essential pieces of structural reform underway. As recently announced we are modernising our health system to ensure quality services are provided wherever you live in New Zealand.
We are also overhauling our planning systems through the replacement of the RMA and we are reforming the way we manage water through our Three Waters Reform programme. Taken on their own each of these reforms are significant, together they represent a government not afraid to make changes for the long term benefit of New Zealanders.
From a fiscal perspective Budget 2021 will continue our careful and balanced approach. The levels of debt that we have taken on to save New Zealanders’ lives and livelihoods are projected to reduce from the middle of the decade. We are in a good position to handle the debt we have taken on.
Interest rates are low and the HYEFU released in December showed that our debt servicing costs across the forecast period remain less than one percent of GDP - below where they were before COVID despite the significant increase in borrowing. Our fiscal objective as outlined in the Budget Policy Statement remains to stabilise debt by the mid-2020s, and then reduce it as conditions permit. Even at their elevated levels our debt position is significantly better than almost every country we compare ourselves too.
On an internationally comparable basis of General Government net debt that is produced by the IMF, New Zealand’s current levels of net debt are slightly below 22 percent of GDP. This is less than half of Australia’s level of close to 49 percent, and some way away from the United Kingdom at 97 percent and the United States at 109 percent.
As a small economy subject to external shocks, it is sensible that we look to reduce our public debt as the economy returns to full health.
However, any attempt to hasten this runs the risk of undermining the recovery. A turn to austerity measures will simply mean it takes longer for us to rebuild society in pursuit of numerical goals that ignore the real world we are living in. It is all about getting the balance right, which we have shown through the COVID period that we can do. We will move to reduce debt and return to surplus as a responsible government should, but not at the expense of our people or the hard won stability and security from our COVID response.
In conclusion, I would return to my comments at the beginning of the speech. Budget 2021 will still be a COVID Budget. While it will not have the large scale and urgent response required in 2020 it still needs to recognise that the health and economic impacts of the pandemic are still being felt and will be for some time to come.
Like every Budget there are hard choices to be made. We continue to insist that budget initiatives are of a high-standard in terms of value for money, and we will be making sure that new spending is directed towards the greatest need.
We have an excellent opportunity to secure the recovery in a way that gives every New Zealander a fair go, and to deal with the debt that we have incurred along the way through accelerating the growth of a sustainable, more productive economy.