Good afternoon, ladies and gentlemen. As you know, I was in Drury yesterday with the finance Minister, Steven Joyce; Minister Anne Tolley; also the mayors of our faster-growing cities—Phil Goff of Auckland, Andrew King from Hamilton, and Greg Brownless from Tauranga—to announce a new funding vehicle designed to speed up further major housing projects. Our Crown Infrastructure Partners will give local bodies access to new sources of funding for roading and water infrastructure necessary for housing developments. The company is being formed out of Crown Fibre Holdings, the company which has overseen the very successful roll-out and commercial arrangements around ultra-fast broadband. It's been chosen because of its experience designing commercial partnerships between the Crown and non-Government players in arrangements that involve the Crown taking some early-stage risk in order to speed up infrastructure development.
So Crown Infrastructure Partners will continue to oversee the roll-out of ultra-fast broadband, but now also help to arrange finance for housing-related infrastructure. The establishment of the company is another example of the growing levels of cooperation between central and local government. A few years ago, this level of cooperation would've been unlikely, but are going to be increasingly common.
The establishment of Crown Infrastructure Partners follows the announcement just under 2 weeks ago that five of our faster-growing councils would have infrastructure projects funded through the Government's $1 billion Housing Infrastructure Fund. That funding, which has been announced and is now in place, will speed up the construction of 60,000 new homes over the next 10 years. However, more houses are needed. In higher-growth regions the demand for new housing continues to outstrip councils’ ability and willingness to take on further debt. This new vehicle will allow councils to access new sources of capital that are not counted against their debt limits.
We announced yesterday the Crown will allocate $600 million of uncalled capital to the new financing vehicle, but we also expect it to attract investment from external investors, as happened with the roll-out of ultra-fast broadband, where Chorus and a number of other companies invested alongside the Crown. In return for investing in these infrastructure assets, investors, which include the Crown, will receive a stream of revenue from developers and infrastructure users through targeted rates and volumetric charging.
Overall, this will enable more homes to be built more quickly by ensuring that there is no funding constraint where infrastructure is needed.
Councils will have the option of buying back the infrastructure at some point in the future, but won't have to do so. And I want to acknowledge the support and the work done by the mayors who attended the launch yesterday to achieve this next step in expanding our housing supply and, more appropriately, funding our infrastructure.
Tomorrow, as you know, foreign affairs Minister, Gerry Brownlee, and I will be meeting with British Foreign Secretary, Boris Johnson. It will be a chance to reaffirm our close historical relationship with the UK, to update ourselves on the challenges of Brexit, and we are anticipating a wide-ranging and interesting discussion.
This week in the House the Government will look to make progress on the appropriation Estimates bill. Wednesday the 26" will be a member's day. I'm in Wellington most of the week, although on Wednesday afternoon I will be missing question time to go to watch the “St Pats Town” versus Silverstream first XV game, in my capacity as a father, not a Prime Minister, with my son captaining one team against the team I used to play for. I'll be around Parliament on Wednesday morning attending Cabinet committees and will find a few minutes to come and talk to you because I'll miss the question time run. On Thursday I'll go to Auckland for the day, and on Friday I'll be in Timaru and Ashburton. Any questions?
Well, I think, more particularly we'll just indicate our ongoing interest in improving rights of New Zealanders to be able to work in the UK. I think we should be practical about our expectations of movement in the shorter term, because they have to deal with the fairly big challenges of how they deal with citizenship and access rights in their exit from the EU. But we want to make sure we keep the issue in front of them.
Well, we can keep an eye on it. Remember, this is going to be a discussion that won't include us. It'll be between the UK Government and the European Union, and they've got a very large number of issues to canvass. So we will be indicating our ongoing interest in it. I would expect that once, like the free-trade discussion, Britain has left the European Union, then they'll be in a better position to deal with us.
Well, look, they've a range of charges related to applications for citizenship and visas and residency, and so on. It's up to them to set their charges. We set ours. They set theirs. Our primary focus is on being able to maintain and improve access.
Well, look, I'm sure we can have that discussion, but I doubt that it's very high on their priority list. I think, as I said, we've got to be realistic about the positon Britain is in as it embarks just in the last few weeks on its negotiations with the European Union.
So what will you say to Boris about it? I mean, what are your personal thoughts on the rights of New Zealanders over there, and is the Government clamping down on them?
We will just make sure he’s aware of our ongoing interest in maintaining and improving access of New Zealanders to the UK, and he’s someone who's indicated in the past his interest in that issue. Again, I think we have to be realistic about the size and complexity of the issues they are dealing with, but ours aren’t going to be major in the short term, in that context.
Look, it's hard to speculate about that because they are now having, and will continue to have, a pretty intensive discussion about the rights of European citizens in the UK and UK citizens in Europe, and I don’t think anyone’s quite clear about where that’s going to come out, let alone what the unintended consequences of it might be.
Look, that’s a matter for the discussions, but both Governments have signalled a strong interest in a free-trade agreement, but, of course, we can’t begin that process until they've exited Europe. In the meantime we've got a pretty high priority, which is to negotiate a free-trade agreement with Europe, which, as it stands at the moment, includes the UK. So we've just got to keep things in the right order.
Well, I think in the same way we've been able to be a priority for other large economies. We aren’t as economically significant as others but we're easier to deal with, and we would, I think, want to encourage the view that if the UK needs to be able to establish early its ability to do free-trade agreements, then New Zealand is a candidate for that. They'll make their own decisions about trading that off against what will no doubt be a pretty busy schedule of agreements with larger economies.
How far away, realistically, are you talking about for a free-trade agreement with Britain? I mean, presumably a couple of years before they exit Europe and then a couple more years after that, at least, I would think?
Well, you know, your guess is as good as mine, really. We would advocate for an early start with a country that’s easy to deal with. They've still got some way to go to get to the point where they can even contemplate those discussions.
Oh, look, I wouldn't want to comment on it in detail, but I'd imagine that there'll be a lot of the same sort of issues that apply whenever New Zealand goes to negotiate free-trade agreements, and that is that agriculture is a pretty important part of it, and sometimes a pretty challenging part of it.
You've said that the discussions you're going to have are going to be wide-ranging but, you also said interesting, and had a bit of a chuckle. What do you mean by that?
He sometimes says a few politically incorrect things, and he compared a hongi today with a head-butt. Do you think any in New Zealand would take offence at that?
No, I don’t think so. I think we need to bear in mind that a hongi is a fairly unfamiliar ritual to almost anyone else in the world. It's pretty unique here, and sometimes people don’t exactly understand what it’s about.
Just on the immigration policy, you made noises this morning that you might be rowing back on some of the ideas that you guys put out a few months ago. Can you just explain what exactly you're thinking of not doing—is it around the 48,000 cap?
Well, look, the details will be clear when a final decision’s announced. But we put out a proposition around the essential skills visas—changes in the parameters there—and we put them out deliberately for consultation. You know, there's been some response to that, which we're listening to, and it's come from across the board, from employers and business, and employees, actually, and migrants. And so we’ll be taking that into account. But you wouldn’t be looking at wholesale change. We're just looking at changing some of the parameters.
Well, as I said, we'll look at changing some of the parameters, but you'll have to wait and see where our considerations get to. I mean, we've got the submissions. They're being looked at.
Look, I wouldn't be—again, I wouldn’t comment on the particular parameters. But I would make this point—that in an economy that’s producing 10,000 new jobs a month, that demand for skills applies right across the country—Auckland and in the regions. And I think the extent of it in the regions, the strength of that demand, is surprising some people. But, equally, in Auckland, if we're going to build the, you know, 35,000 houses the
Government's said it's going to build—a proportion of the 60,000 houses enabled by the Housing Infrastructure Fund—with thousands more that'll be enabled by Crown Infrastructure Partners, we're going to need people in Auckland to do it. So theyre not an exception to the demand; they're part of the strong demand for skills.
Why not let the market decide here, by having employers increase their wages to attract staff, and change their systems, invest in R & D, to try and improve their productivity— with those staff you can justify the higher wages?
And I think you see that happening in parts, particularly in the construction industry, where there’s, you know, a lot of discussion now about how to deal with the fact that there’s so much work, there’s such a long pipeline, and it's so strong, and the opportunities to do just the things that you've said.
Surely these people you'd expect them to be paid more than $48,000 a year, though? Because they're in industries for which there's a lot demand. So why would you need to look at changing that wage gap?
Well, as I've said, you'll just have to wait and see just what decisions—because the decisions haven't been made. But, you know, we're listening to the feedback.
Oh, no, look, the main concern has been people being able to—well, businesses and regions being able to get the people they need to do the work that’s available. And I think pretty well all the politicians have had that message, including Mr Peters.
That's right, and they've got to take that into account. And that’s part of the balance we're trying to achieve here—getting the skills we need for the jobs that are available, making sure that New Zealanders have appropriate opportunities for jobs they could be getting, because we have a strong interest in that, and, you know, not being in the position where our industries find themselves, you know, becoming completely reliant. Now, I must say there’s been a good discussion over the last 12 or 18 months with a number of our industries, particularly horticulture, but hospitality coming to it as well, where, you know, they need to understand it’s not the Government's job to go and procure their workforce; it's their job.
Well, it’s not a matter of letting them off. I mean, we're doing both, making sure that—remember, this discussion has come about because we've been trying to get the mix of skills differently. That was the core of the propositions in April, so that was proposing to change the status quo, and alongside that we're having increasingly constructive discussions with these industries to make sure they don’t become reliant on Government policy to supply their workforce.
But you'd seem to not be changing Government policy once they cried foul. Like, you've put out a set of proposals; they've said they don’t want them. You've indicated you're going to row back on those proposals, so it seems like their concern is having to pay workers more and also maybe spend more for training local workers. So why not initiate the proposals that you put up a few months ago?
Using your argument that the huge increase in immigration is down to Kiwis coming home and staying home, why, then, do they need overseas workers so much, if there are other Kiwis coming home?
Well, the key element of that argument is Kiwis not leaving, actually. So in the last 5 years there's been estimated that about 150,000 Kiwis have stayed home who 5 years ago we'd probably thought would've left. The fact is the economy’s growing. The demand for skills continues to grow. We've already talked about construction and infrastructure. That's just one industry where that demand looks like it's going to be strong for some time. And other industries have, you know, I think through their public statements, made it clear that they've got very strong demand too, whether it’s, you know, trucking or horticulture or agriculture or hospitality. Aged care is another one. So, you know, these are real services that have to be provided, actually, next week, the week after, next year. So we do have to take into account those issues.
Well, I think we've already had some of that discussion. It's not a matter of letting people away with it; it's a matter of making sure that we've got the people to do the work that has to be done—like, you have to service the tourists, you have to build the houses, you have to look after the old people—there’s no choice about that—and working with the industries to make sure that they are adapting to this situation. And the point I'm making is that they seem to me to be getting significantly more constructive about that.
Well, you know, there’s some new aspects of the rules, and that's why we put them out for consultation, because, you know, when you're doing the policy you can make some assumptions but you have to test those, and, I think, you know, the strong demand for skills in the economy has continued, particularly in our regions. It's remained strong and that’s what's reflected in the discussion.
Well, I think simply to emphasis, really, two things. One is that these are illegal drugs and people should expect firm policing of the law, and the second thing is that these are tragedies. These are young people who must've believed they were taking some harmless or recreational drug and, if it's found that synthetic cannabis is the cause of their deaths, which seems likely, then that’s a real tragedy. They had no idea what they were doing, and people should listen to the health warnings about these substances. They can be lethal.
Well, that’s a matter—this is an illegal drug, and that’s a matter for the police. And if they're seeing, you know, a significant number of deaths like that, it's a very significant policing issue.
Well, I don’t think it's business as usual. I mean, you'd need to talk to the police about how operationally theyre dealing with their aspect of, you know, policing the sale and distribution of these drugs, but the most important thing is that people who are considering taking recreational or synthetic cannabis have to be aware it could kill them. It's not a harmless recreational drug; this could kill them. They've seen the pictures on TV, and there's worse on social media. They need to understand that. Don’t take the substances; we don’t know what's in them. It’s illegal, but also, it's potentially lethal.
Well, is it not important to find the source to prevent perhaps another seven deaths in the next fortnight? I mean, how urgently are you actually taking this?
Well, again, that is a matter for police. I mean, they need a set of legal powers to investigate and take action. Only the police have those powers, and they, you know, I think have shown previously that where they see a priority for policing they're able to move resource to it. It's up to them to make that decision about how they do so.
You talked yesterday about arresting people rather than, you know, ideas like offering an amnesty to people to come forward to actually identify the source.
Well, look, again, these are—we don’t run the police force. It's an illegal drug. They make the operational decisions. They've indicated where they see priorities, they're able to shift their resources to police more effectively and more aggressively, and we would expect that if this does turn out to be a rising death toll, that would be taken very seriously.
Well, I've asked for advice about what action is feasible to be taken, and that falls into those two categories, and that is it’s an illegal drug; it has to be policed. We are not the police force. They have to be able to deal with it. The most important thing here, though, is that people do not take these illegal substances that can kill them. That sense of personal responsibility is pretty critical to staying alive. They need to decide they're not going to take these drugs. They're not harmless recreational substances; they are potentially lethal because no one knows what's in them.
Isn't this what you were warned about, though, when you banned legal highs— that this would go underground and there'd be a black market where people are putting horse tranquiliser on the synthetic cannabis? Isn't this what you were warned about?
Well, there was—as you may remember—extensive public discussion at the time because the ban followed on from the alternative policy, which was to make them publicly available in a regulated form. And it turned out that was both not practical, because they could keep changing the make-up of the drugs, and unacceptable to the public. You may recall that. So we've been through a whole cycle of policy to try and get this right. In the end, we have two tools right now. One is young people deciding not to take a drug that can kill them. I can’t emphasise that enough. They should have a sufficient sense of self-preservation to be very, very careful, and the capacity for assertive policing around the sale and distribution of the drug.
Well, if it is the case that there’s been seven deaths and a large number of hospitalisations, that’s a tragedy. We have tried our best on policy over 6 or 7 years, with different versions to try and get it right. As we pointed out, the readily available public sale of them turned out to be impractical and unacceptable to the public. Now those drugs are meant to be clinically proven before they're approved, and if they're approved they can then be sold. None have been clinically tested. But we've got a more urgent problem, which is there's clearly pills out on the street which are lethal, and young people should stay well away from them.
No, I wouldn't assert that. I think, you know, things change. In the world police are dealing with, sometimes something’s a problem and it becomes less so.
There's less aggravated robberies going on in South Auckland, partly because of assertive policing and support for the shop owners. This is just another different source of criminal activity that they have to deal with.
Media; But it's not hard to find them. We went down to Queen Street and we found a handful of people who were high on these drugs and talked about it happily. So it's not like they're hard to find; it's not like it's hidden. They're just wandering the streets on Queen Street.
Has anyone applied for their products to be tested so they could be legalised? Is it that no one’s applied or they've applied and the products aren't acceptable?
One of the problems is that the Government outlawed animal testing so that made it harder to get a rigorous test. Is there any room for relaxing that to essentially allow these low-risk products to get on the market and replace the black market?
Well, that’s an interesting policy idea. At the time there was a great deal of pressure to ban animal testing. So the Parliament listened to that and banned animal testing, which does make it reasonably challenging to be able to get the drugs tested.
There's an argument that if you were to legalise or decriminalise cannabis, more people would be smoking that instead. Does that change your view on that in any way?
The Rich List came out this morning and it showed that the collective wealth of everybody on that list was over $80 billion, essentially showing the rich of New Zealand are getting richer. Does this show that inequality in New Zealand is on the rise?
No, it doesn’t. The Government reports regularly on trends in income and inequality in New Zealand. I think there’ll be another report out pretty soon. The trend has been that inequality rose in the late 1980s, early 1990s, and since then it's been roughly flat to falling.
That's right. It is income inequality. You'd have to look through about the wealth inequality. I don’t think there’s much doubt that if you look at what's happened with interest rates over the last 8 or 10 years, going back to 2008, much lower interest rates drive up capital values. It wouldn't be surprising that people who hold assets are going to find those assets are more valuable. If interest rates rise, then on that measure of inequality, inequality will drop, and they'll still have the same assets. So, you know, it’s a tricky area, but I don’t think there's any doubt, from people who bought a house in 2009 to those who owned a bunch of shares on Wall Street, that those values have all gone up, and one of the big drivers has been low interest rates.
With the infrastructure fund announced yesterday, do you think that the targeted rates used to fund them will reduce land values, because in theory they should be capitalised into the land grants.
Quite possibly. I mean, there was a report that came out from SUPERU the other day showing that around half—well, that land had a premium of over 50 percent on it due to regulation; land price. So I would expect that, looking ahead, if the policies are right, then you will tend to see land being less expensive but there being a bit more paid for marginal infrastructure. Now, overall, whether that means the overall price of housing stays the same or goes down, I think is yet to be seen. But, clearly, better regulation of our land markets and more competitive land markets are going to tend to take the pressure off the price of land. And this fund, or this vehicle, alongside the Housing Infrastructure Fund, are important elements in creating more competitive land markets, which would, in time, with better regulation, lead to, on average, lower land prices.
But don’t you need to have significantly lower land prices, though, to be able to actually get housing costs down, because these targeted rates will be an extra cost per year on the homeowner—quite significant costs?
Well, that’s what we're going to be testing. But these are, I think, steps in the right direction. But, you know, the magnitude of those effects, I think, is yet to be seen.
So how much bigger does the fund need to be to cope with the infrastructure demands, which look a lot bigger than $600 million, or whatever the leveraged version might be?
Well, we'll get to test that as the market realises there’s greater availability of finance and that the usual bottlenecks—such as council debt ceilings, which have helped underpin higher land prices—are gradually being freed up. So we'll see what the magnitude of those effects are.
What do you think of New Zealand First's plans around updating the Boxing and Wrestling Act to allow police to have the power to stop events like what happened at the weekend?
Look, I think the more important thing for the gangs is to stop manufacturing meth—that wrecks lives—and to take better care of their children and their women. That's what they should focus on.
Just one further point about the Boris Johnson meeting—will you be talking to him at all about the Conservative Party’s appetite for a change in leadership?
As I said, we'll just be making sure that the Foreign Secretary is aware of our ongoing interest in improving access for Kiwis to the UK. And, again, I'd stress, we're practical—we understand the pressures they are under over the next few years to deal with very significant issues for their own citizens and European citizens. And we would expect that when the time comes, we're able to talk to them directly in detail about our requirements—well, our interests.
The prospects around Gareth Morgan perhaps running in Epsom—does that worry you or alter your outlook for how you might deal with ACT in that electorate?
Not particularly. I mean, I don’t think it matters much. I don’t think it matters much where Gareth runs. I mean, he’s presumably chasing the party vote, and seems to be creating a bit of pressure for the Greens and Labour in that process.
Well, that’s yet to be seen. I think in the meantime it's pretty important that we build confidence in the interregional work there. So I'm advised NZTA have taken over the maintenance of the Saddle Road from the council, because that is going—you know, for at least the foreseeable future, that's going to be the main route and it needs good maintenance and upgrade. So we're, you know, keen to make sure that access is there and that people aren’'t—people who may have been reliant on the gorge have got an alternative option, because the gorge problem does look pretty considerable.
Well, look, we're always open to listening to them. The Saddle Road route goes through Woodville. I understand people in Ashhurst are worried about the heavy traffic going through their small town there, too. There'll be some things that can be done to mitigate those, but, you know, the route services those towns and we just want to make sure the route’s of sufficient quality to handle the volume of traffic that’s going to be on it.
Right. Yeah, I mean, we wouldn't be assuming a support package. As I say, we're, you know, happy to listen to what businesses have to say. If there's a route there that’s taking traffic through the towns, then the case for support wouldn’t be very strong, I wouldn’t think.
I mean, it’s an act of God, really, just like the earthquakes, just like floods. You've rolled out packages of support for businesses in Kaikoura, Edgecumbe, and the like. Why not here, where, essentially, it's an act of God that’s prevented them from getting business?
Well, you know, as I said, happy to listen to whatever it is the businesses have to say. I have to say in the other cases the impact has been pretty definitive in that the businesses were closed, and, you know, in the case of Kaikoura indefinitely. So we’ll work on the access route, because the ideal here is that Saddle Road is in an acceptable state, that the traffic is unaffected and the traffic through those towns is maintained in a way that'll assist the businesses.
Well, it's—you know, sometimes as a parent you have to make decisions that trade off different obligations, and I've made the decision in this case. There’s good reasons for it.
Sorry, just really quickly. There’s been a letter signed by hundreds of GPs calling for extra funding to train more GPs. They want to train 120 more a year. Would the Government look at funding that?
Oh, look, all that’s under discussion, and these various proposals have been floating around about how to get more rural GPs. As I understand it, officials have been looking at propositions from Waikato University, Otago, and Auckland University, so they’ll—