Post-Cabinet Press Conference: Monday, 13 February 2017

Mr English, I see there was a victory in the court, I suppose, for the Government and the council when it comes to the unitary plan in Auckland. Are you pleased that that attempt to, I guess, block some multilevel apartments and buildings wasn’t successful?

Well, look, it's all—it highlights the importance of the unitary plan. I think it’s still yet to be understood what a significant change in the opportunity for housing supply that plan represented when it was finalised in the latter half only of last year. Just by way of illustration, under the old plans the Government stock of 27,000 could have been grown out to 30,000. Under the signed-off unitary plan, that could grow from 27,000 to 69,000. Now, this court decision, if it stands, will probably allow a bit more than that, but it just shows you how important that plan is. And, of course, this is a part of the process and, actually, it's good to see it moving fairly quickly to get through what I think were inevitable appeals.

How big is the housing shortage in Auckland and, in fact, the whole country? I mean, there seems to be some debate about the size—between 15,000 and 70,000 in Auckland, according to your own Treasury advice. ANZ is—they’re backing away from that 15,000 figure. What, in your mind, is the shortage?

Look, you can—there’s a range of estimates from what looks like was an erroneous estimate of 60,000. The numbers that look more likely are kind of in the 10,000 to 20,000 range. Either way, what it needs is more houses on the ground faster. This court decision today helps, but it also reminds us that the ability to sign off, you know, larger scale subdivisions and more densification really only came into action in the latter half of last year. And prior to that time, both Government and the council have been dealing with rules that were, you know, 15-year-old rules—20-year-old rules that determine the numbers. So it was a big step forward ahead then.

You've got the now 5" year of strong growth in construction, starting from a low base. But now the combination of housing and infrastructure construction is very evident in Auckland—I mean, you can see the scale of it—and that'll continue to grow.

You've clearly got skill shortages, you know, resource shortages to build these houses. Would you consider bringing in help from overseas in the term of foreign building companies, foreign workers, to come to build these houses?

Well, as far as I can see, that seems to be happening where it's needed. I mean, we were surprised in Christchurch at the capacity to mobilise the resources for what was a very sharp pick up in building there.

There aren't a lot of big, you know, big building companies in New Zealand. We know that there’s only three or four big ones. Is it time to go offshore and see if you can bring in some foreign companies to do the work?

Well, as I said, the signs are that as it becomes clear how large this pipeline is and how long is could go for, people are showing up. Now, probably the next change in that will be the way that Housing New Zealand goes about its procurement, because it's procuring quite large scale projects—Tamaki, where I understood there’s been good international interest in that; Northcote, where it’s, I think, using Hobsonville Land Co.; and then they move on to other areas, Avondale, Mount Roskill, where there's big potential for redevelopment. And they're consciously now setting out to use the scale of those projects— which will be large and will go on for a decade—to have some positive impact on the productivity of the construction industry.

Have you ruled out encouraging foreign, you know, firms to come in and try and build these houses for us, if we can’t do it?

No, no, I don’t rule it out at all. In fact, they've been, as far as I understand, involved in contesting for the procurement of the Tamaki project, which builds 2,500 houses out to 8,500. So we welcome them. We welcome the expertise. We welcome the people, because we need to get more of this done. All I'm saying is that the Government can contribute by the way that it goes about its procurement, moving from a model, you know, based on a lot of small builders to getting some scale.

How quickly can the Government move from that 27,000 State houses in Auckland to the 69,000 that the unitary plan gives you the potential for? Could the Government accelerate that or plonk in a chunk of capital to get that cracking?

Well, capital's not really the problem. I mean, that's all under discussion right now, but you've seen, you know, the surplus Crown land programme pick up now pretty quickly. You know, these things can move as fast as the council processes allow, because we still can’t build a house until the Auckland Council says we can, and we can't put a person into it until they have signed it off. So it's not like the Government can run its own system over here.

But we'll be applying as much effort and pressure as we can to build it as quickly as possible, bearing in mind that the Government projects will all be in areas where there's already houses occupied. And you have to work with the community. You have to solve the infrastructure challenges that go with it. We're getting better at that and you'll see the scale pick up.

Are you worried that it's not just Auckland now, that there are signs of housing shortages here in Wellington and Tauranga as well, and that in particular you're seeing rents going up sharply in Wellington is a pretty clear sign that there are shortages now in other parts of the country?

Well, look, these are all positive signs of growth, for a start, right? So it's great that places like Wellington are starting to feel a bit of pressure of demand, because it's a long time since that’s happened. It's a good sign about the underlying economic growth and the positive migration flows, or the Kiwis staying home, basically.

I think we'd get worried if councils weren't responding to it. But if you take Wellington, for instance, what they've been saying is that they understand there is pressure for growth. And in a city that's always struggled with the idea of growth, it looks to me like they're adapting fairly well.

But is it quick enough, because that’s clearly the problem in Auckland, isn’t it? It wasn’t quick enough.

And yeah, that’s right, and they had to rewrite their plan there completely—all the previous eight plans or 14 plans or whatever it was. So yeah, look, it’s up the councils to adapt as quickly as possible. We can support that with the Housing Infrastructure Fund, which we're getting into intense negotiation with local bodies about that. So the Government has put a billion dollars on the table to bring forward housing supply. We've provided the resource, and it's quite a test for councils as to whether they really do have the projects that are actually being held up by lack of infrastructure, because the early indications are they've still got a focus on which projects they can actually bring forward. They've been saying they were short of funding. We've produced the funding, and now they've got to produce the projects, and we hope they'll do that as quickly as possible.

Prime Minister, on another topic, are you aware of the Zimbabwean William Nduku, who’s in this country, was part of the secret police of Mugabe and says he's committed up to 20 murders and rapes and torture. He's got a special protected status in this country. Do you think that’s acceptable?

Well, look, I can’t comment on the individual case other than to say that I know that it's in the process. You know, we have to follow the law as it is. You can understand the concern about someone with a history of serious crime being in New Zealand, being able to get into New Zealand. But we have to follow the law in dealing with that case.

He's out there in the open. He's not incarcerated anywhere. Isn't that concerning to New Zealand citizens?

I can see why people would be concerned. The Minister and the officials have to follow the law, and you can see the tension here, where, on the one hand, there’s a lot of expectation from New Zealanders that we are a compassionate and open nation, that if people turn up, coming from much worse circumstances, that we're welcoming. On the other hand, you have to be able to control to some extent—or to a significant extent— whether the appropriate people are coming across the border and being allowed to stay.

What are the options if we don’t grant someone in these circumstances asylum, but we don’t want to send them back to the regime where they could, arguably, lose their lives? Could they stay here as protected persons indefinitely? What are the options the Government has in those circumstances?

Well, look, you'd be best to address the Minister around the detailed legalities of it. Certainly the advice I've seen about the general situation is that it's pretty tricky.

He's not commenting specifically on this case, but it does raise the issue, doesn’t it, of protected people. This man, clearly, is looking for residency. Is he an appropriate person to give residency to?

Well, again, I can’t comment on the detailed legalities. I'm prevented from doing so. But, yeah, I can imagine people’s concern about someone with a track record offshore that’s not of the type that we would welcome here.

Prime Minister, can I just ask you to clarify your earlier figures about the housing shortage. Do you think that there is 10,000 to 20,000 houses short in New Zealand nationwide? Is that, is that—

No, no, I was just quoting a range of estimates. Look, it is, essentially, an academic argument. What we know is we need to get more houses on the ground faster, and the councils are showing a will to go as fast as they can. We're trying to support that with a billion-dollar fund to help them do it faster. And the building industry’s feeling pretty, you know, stretched about meeting all the requirements, but seems to be doing so, and that is why you've got record levels of construction.

Because the additional pressure here is not just the house building but the infrastructure spend over the next 5 years is basically double what it was over the last 5, and that is a big uplift right across the construction sector all happening at once. Now, it's great for everyone who's able to get jobs. It's great for the people who service the infrastructure and building industry, and it’s a positive indication about the economy. But it brings its pressures.

You know, for instance, in Auckland right now a fair bit of the traffic congestion is—well, some of the traffic congestion—due to the large-scale construction projects going on on the way out of the airport, on the Southern Motorway, the CRL, and that will continue when it gets into the East-West link in the northern corridor.

Is that good enough? I mean, don’t you need to be quite precise here, because if you get this wrong you're either going to, you know, undershoot or potentially oversupply the market?

Look, I think the best way to understand what's happening in the market is watch the prices. So we've yet to see whether the current cooling is going to be maintained, but a factor that will contribute is that the Government will have a large-scale building programme. It’s picking up speed. The Government is probably less likely to be sensitive to the impact on the market. So that’s all coming ahead of us, as well as the 10,000 houses— at least 10,000 houses—that are going to be built in Auckland this year.

But one of the constraints is funding. So developers have said over the last couple of weeks that there's not the funding to build all these developments. Could that restrict the supply response and is there a role for the Government to deal with that funding gap?

Well, these are just the trade-offs, right? So there’s been concern for some time that if you have a building boom financed on excessive debt lent by banks who aren’t being prudent enough, then that would create instability in the financial system. So you've got to weigh that up against the need for more supply of housing. Now, while there's been some anecdotal evidence around funding and some, I think, observable impact in the apartment market, it doesn’t seem to be as much of a constraint on the development of stand-alone houses, which, you know, where the growth continues.

But the consents have actually dropped in the last few months—the momentum, the trend, is not accelerating.

Well, the trend’s pretty clearly growing. I mean, we can argue about the make-up of the figures, and you'd need to talk to the Minister about that, but we don’t see any indication that the construction’s coming off. You'd have to ask yourself why that would be. It doesn’t look like there’s, you know, much less demand in the market. The prices are still pretty robust, even if it looks like they've slowed down for now. So the indicators are of ongoing need for more supply.

Prime Minister, what advice have you had that Israel has permanently downgraded its diplomatic ties with New Zealand?

Well, I haven't had any formal advice; I gather there’s some unconfirmed reports. We would prefer to have a positive and supportive relationship with Israel. I mean, I think if they were going to take that step at some stage, there would be a formal proposition. We haven't seen one.

Is it your understanding, though, that if the ambassador isn’t in residence, then bilateral relations are automatically downgraded, because that seems to be what the reports are saying?

Look, I don't—I haven't had any advice about the impact of it, I think largely because it's an unconfirmed report. But, look, we would prefer to have a positive relationship with Israel, with the potential for further positive development of it.

Did President Trump raise this in his discussion with you?

No.

You started the press conference talking about the UFB roll-out. Have you got UFB up at your place in Karori?

No, I think—I had a quick look at the map, and I think my part of Karori is about the last place in New Zealand to get the UFB1 roll-out.

Do you think that’s deliberate?

Ha, ha! Quite possibly, but I am comforted by the thought that if we're not getting it, it means that someone else is.

So when are you expecting to get it up there?

I think 2019.

Prime Minister, just looking at the funding of the health system and elective surgeries. Elective surgeries—you know, the numbers have gone up over the past sort of 7 years or so, but in some places, you know, it's actually [Inaudible] Southern DHB. Are you happy that the funding of elective surgery is keeping pace with population growth and the demands, essentially, for it?

Well, look, the impression I have is that it is.

Look, this is a—it’s a tricky area. There's always differences across DHBs and— you know, the Southern DHB, for instance, has significant deficits and should be taking action to balance their books, like most of the other 20 DHBs have. And that'll be a bit of a challenge for them. But the Minister of Health could give you the detail about that. We're satisfied that there's been consistent growth in elective surgery, and it's meeting the significant demand.

Sure. Because, you know, we're looking at a story where a woman is having to look at remortgaging her house—a woman from Dunedin—in order to get the hip or knee replacement that she needs. Is that sort of challenge appropriate—the fact that, you know, the fact that the Southern DHB is having to turn this woman away from the surgery she could get elsewhere? What does that tell us?

Well, look, I wouldn't want to comment in detail on the story. I mean, there’'s— there may be someone who is really, you know, feeling the pressure of not getting a service that they want to get, and we'd sympathise with that. But it's probably best dealt with on its own merits by people who are in a position to do something about it.

What's your response to North Korea launching a missile over the weekend?

Well, it's quite a concern, and it's the kind of issue where we've got a collective interest in the security in our region. You know, they've set out on a path to be provocative, and it's no doubt going to be an issue of real focus, particularly in the, you know, recasting of the relationship between the US and China. And we'll keep a pretty close eye on it.

On housing, again, sorry—you’re saying that the decision now to let the building of 69,000 more houses in Auckland, which is almost a tripling of what used to be quoted could have been—does that mean you're expecting a tripling of the building supply, in terms of building and construction? Like, have you had any advice on whether you can actually do that?

The 69,000 is related to the Government stock. So the Government owns 27,000 units, one in every—I think it's roughly one in every 15 or 16 houses in Auckland, and you can tell which ones are ours. I'm just making a point that the old plan allowed that to be built out to about 30,000—the old plans—and under the new ones you can build it out to 69,000. So—

That'll be taking resources from the private sector supply, so surely you're basically going to have just a Government building programme in Auckland taking away construction supply from the private sector?

Well, we wouldn't be building them all. A lot of those houses, in fact the bulk of them, would be sold to the market, because we've got—the Government's got its own programme for how many social housing places it needs, and, of the new ones, I think there'll be a couple of thousand extra places over the next 3 years, some of those will come from Housing New Zealand, a lot of them will come from other suppliers consistent with our housing policy. So that’s one track. As part of that, Housing New Zealand, of course, will supply some new housing but also the vast bulk of that—those extra numbers, the extra 35,000 houses or so—would be sold to the market. So they'll be just part of the supply to the market, alongside other developers.

But they're, effectively, underwritten by the Government—that extra 35,0007 Like, how does it come under the Government's programme in layman’s terms?

Well, it's just the Government owns the land, right? So that's all on existing Government-owned land and the type of development you'll see is like what's been going on in Tamaki now, getting started in Northcote, and the plans for the funding and organisation of that are all under discussion between the, you know, new Minister and Housing New Zealand, who are the owners of the land.

Because you said earlier that you're looking at doing it in Mount Roskill and Avondale as well. Is that similar kind of building on Government-owned land in Mt Roskill and Avondale also as we're going to see in Northcote?

Yeah, well there’s plenty of scope there for medium-density housing, also out in South Auckland. I mean, I just flew over all those areas last week as part of the police helicopter patrol and you can see very clearly from the air what's striking is the scale of new development going on, particularly down south—private sector development at the moment mainly—but also the low density of the State housing, right through Auckland.

So you're talking about medium-density housing in Avondale and Mount Roskill like what we've seen in Northcote, similar projects.

Well, yeah, that sort of style, but that’s where we're headed, yeah.

And will they be announced this year, do you think? Do you think that you'll have plans for those this year, like we've seen in Northcote? Is it that close?

Oh, look, it depends a bit on the council processes, really. I mean, you can imagine there's some challenges with it. The communities might have views about it. The infrastructure has to match any growth in population. And, you know, we learnt from Tamaki “these things can take a while.

Yeah, because what I'm talking about here is—are you talking about announcing developments in Avondale and Mount Roskill, involving thousands of homes on Government land, some of them which will be available through the private sector this year?

Well, you'd have to talk to the Minister about timing, once, you know, she’s got her feet under the desk and spent more time with Housing New Zealand. So I wouldn't want to make commitments about timing, but, you know, consistent with the kinds of issues that came up in the court decision—the Auckland Unitary Plan—that opportunity is there and, you know, we've developed models for doing it.

Is it—sorry to use the layman’s terms, but is it just sort of a bit of a fact of life that foreign companies and foreign labour will likely have to be involved to build to the kind of scale that we're talking here, and speed?

Well, they're likely to be interested because of the scale of the projects, and we saw in Christchurch the industry adapt pretty quickly. This has got the extra dimension of the social housing components, which is attractive to local and international businesses. So basically we'll be setting out to do the work and we'll see who shows up. I mean, that process is under way right now in Tamaki.

OK, and specifically on foreign companies, foreign labour will be needed as well because we, you know, we don’t have the skills? Is that—

Well, I'd expect you'd see—II mean, as the construction continues to grow in Auckland, I'd expect you'd see the sort of influx that we saw in Christchurch. A lot of Irish and Filipinos came in. Some of them have now gone to Auckland. Some have gone back home now that things have levelled out a bit in Christchurch.

But you'd expect another, sort of, similar influx because of this, basically, you know, a building and construction boom in this country in the pipeline?

Well, I think—probably. The point here is that the industry has proven to be pretty flexible, pretty responsive, to need. In Christchurch, we imagined that there'd be real problems with capacity—didn’t turn out to be quite the case, although there were some constraints. And in Auckland I think we keep expecting that we'll just run out of people to build these places, but the growth seems to continue to grow. It's hard—when there's all this expectation about further acceleration of housebuilding, this is an industry which is running as full as it has in our lifetime. So it's going to be hard for it to accelerate quickly, but we would expect to see the continued growth—partly the housebuilding but also the very large scale infrastructure, growth in the infrastructure build that's going up there: hotels, roads; there’s a lot happening.

Are you confident that the council won't be the constraint on this response? You seem to suggest that it might have been a constraint for Housing New Zealand.

Oh, well, look, it's got its processes it has to go through, and we're getting much better insight into what it's like for them, through Housing New Zealand, who will be becoming the largest developer in Auckland, by a long short. The Crown land programme, through negotiations over the CRL, where the Government is a significant funder of it, and now through the Housing Infrastructure Fund, we're a significant funder. I mean, we're basically putting up somewhere, what, between $2 billion and $3 billion directly into projects that the council is bringing forward. So we're becoming increasingly engaged in the decision-making process, and that enables us to see how it works, but I think also enables them to see how it can be improved. And of course we've got an RMA amendment bill going through the House, which is designed to speed up these processes for all councils.

Just looking ahead to your meeting with the Prime Minister of Australia, Malcolm Turnbull, do you expect to discuss the issue of refugees and, in particular, you know, the deal, or the potential deal, or otherwise, for us to take some extra to ease Australia’s burden?

Oh, I expect we'll note it. I mean, it was an offer made by New Zealand that remains in place. The Australians haven't taken it up. They appear to have been able to maintain their agreement with the US, so they may not see a need to take it up. But we'll note it in passing.

But if—do you think that they could say “Yeah, actually, we'll take”? Is the offer still there, if they want it, for 250 more refugees?

Yeah—I think it's 150. The offer’s still—yeah, the offer is still there.

The offer’s still—

Yeah.

But that would stay within that quota—that is, you wouldn’t change the quota to allow for that?

Well, look, I'd have to check just what was intended at the time. From the Australian point of view, it's 150 people, if that’s what they want to do.

Yeah, and that could include from Nauru—relocated people from Nauru?

Well, as far as I understand, in the terms of the offer they would decide that.

That offer was made 4 years ago, when John Key met with Julia Gillard in Queenstown. Would it be somewhat symbolic if could make some movement on that now?

Well, it's not really a matter of us making movement. The offer is there, and they take it up if they want to take it up.

Has there been any further talk about it, though, in recent times?

Not as far as I'm aware. They seem to have their own reasons for not taking it up.

It's up to them, OK?

Why won't the Government hold an inquiry into abuse in State care?

Well, look, there's been a proposition put forward to do it. The question is what we would gain from it. There's absolutely no doubt that a lot of people suffered at the hands of Government agencies, in care, over the last 30 or 40 years, and it's not just children in care—this goes back to the mental health services. And I was quite heavily involved as a Minister of Health and as an MP in, for instance, the problems from Lake Alice as it was closed down, and any number of other institutions. So there was a whole wave of activity to deal with historical concerns there. Then there was the listening service, and now that's been changed again to, probably, a process with MSD that works a bit better for people, in so far as more of them are coming forward, and there’s more compensation being paid as we speak.

All the lessons from that have influenced our quite significant policy decision to completely overhaul the way that we care for children for whom the State becomes the parent. And there's been a pretty broad consensus about that, which I think tells you that most people understood what happened. And we've been able to put together a set of propositions to change it significantly, and that's being supported by pretty much everyone involved. And the new agency kicks off on the 1° of April.

So the question really is whether an inquiry that goes back over the same history is going to make it mean that we do a better job of dealing with the people who are in care right now. And, in my view, it would probably be a significant distraction. I mean, if we're just seeing the kind of problems they've got into with some of these inquiries overseas—they become wide-ranging, pretty sprawling, expensive, long-running inquiries. And we know what it would tell us. It would tell us there was some pretty significant abuse, and some people have—of various sorts—and some people have really suffered from it. And that’s why the Crown’s got a compensation process in place.

Do the victims not perhaps deserve an opportunity to publicly air their experiences—to, you know, to encourage other victims to perhaps come forward?

Well, that’s all being going on now for quite a number of years in various forms. There’s been, as I said, related to the mental health services, more recently related to the children in care, through the listening service, and so on. At various times it's been larger scale legal representation around these things. So that'll continue. So there's no attempt to deny the experience or deny people the opportunity to tell their story. It's really a matter of what's going to work from here. So, you know, I'm happy to look at the letter—I think it's addressed to me—and respond accordingly.

But we need to be really clear what could be achieved in addition to what's already been achieved in listening to people and in changing the systems. And we know that, you know, further change in the care of our most vulnerable is warranted, and the effort required to change some of these historical agency structures in something is enormous, and we'd have to weigh that up against the effort that would go into an inquiry.

Have you seen that letter yet, sorry?

I haven't actually read it through yet, but I know it's around. But I'll be doing that today.

Just on the Greens’ domestic violence bill, some businesses, including GCSB, already offer annual leave of sorts for domestic violence victims. Why would the Government not even consider taking it to select committee so there could be further discussions on it?

Well, I think, just the point you've made—that employers are in a position to do it now. There's nothing to prevent them offering such leave.

Even Business New Zealand, though, says there’s value in sending it to a select committee. Why not just do that at least?

Well, just for the reason that we've said. Employers have that opportunity. Some will take it. I would hope that employers are understanding and compassionate where they need to be with people who are victims of domestic violence.

Do you know if any work has been done on how much that would cost if it was introduced?

No, I don’t know. OK. Thanks very much.