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>>PM: OK, Cabinet today agreed a time line and a process for responding to the recommendations
of the Welfare Working Group. The report generated 43 wide-ranging recommendations for welfare
reform aimed at improving the incentives in the welfare system and reducing the number
of New Zealanders who depend on the Government for their income. I'm strongly committed to
improving New Zealand's welfare system so that it does more to encourage personal responsibility
and to support people into paid employment. I am not satisfied, and I believe many New
Zealanders are not satisfied, that our current welfare system performs as well as it should.
The welfare system should send a consistent message that if you can work and support yourself
then you must. The Welfare Working Group's work showed that it's not doing enough to
send that message. That's not fair on hard-working taxpayers; it's not fiscally affordable; but,
more than that, it's not fair on beneficiaries who end up falling far short of their potential.
And it's not fair to the hundreds of thousands of children who grow up in welfare-dependent
households. Together with my Cabinet colleagues, I am
enthusiastic about the potential for improvement as described by the Welfare Working Group.
I am ambitious for what we can achieve in this area. Cabinet has asked officials to
give careful consideration to each of the group's recommendations as we develop a comprehensive
package of welfare reform. With one exception, however - we will not give further consideration
to a specific recommendation which would require mothers to return to work at 14 weeks after
having a second child on the benefit. As I said at the time, I feel somewhat uneasy about
that length of time. While in due course we may well wish to consider an appropriate time-scale,
14 weeks is out of consideration. A ministerial working group has been formed
to steer this policy development and officials will report to that group regularly over the
next few months. As we move toward welfare reform, we will not lose sight of our goal
of providing support to the most vulnerable and needy New Zealanders. However, the proportion
of the working-age population on benefits has increased from 2 percent to 13 percent
since 1970. I think New Zealanders would take some convincing that that increase is justified.
The Government is looking for a balanced approach that marries improved incentives to work with
better support where it's warranted. The Cabinet expects to sign off on a comprehensive package
of welfare reform prior to the election. We will announce these policies in due course
and will campaign on implementing them. In terms of the Budget, you will all have
noticed the three opinion polls in recent days taken in the wake of the Budget. I think
there's a general acceptance of what the Government is trying to do. Our aims have been clearly
laid out. The Budget sets out the next steps in the Government's plan to get its own books
in order and to build faster growth and more jobs based on savings and exporting rather
than borrowing and excessive Government spending. Households and businesses are already moving
in that direction themselves by saving a bit more and paying down their own debt. That's
why I think the public generally understand the Government's programme. As I've said before,
most New Zealanders are realistic about what needs to be done. They appreciate the leadership
this Government is providing on things that really matter. On the other hand they are
weary of expensive political promises that would add billions of dollars to our foreign
debt. The Government took some difficult decisions in Budget 2011, but they were balanced and
considered decisions that needed to be made. We do not take the support we've received
from the public for granted and we never will. We will be working hard to continue to try
to take people with us and explain our policies and our reasons for them very clearly.
In terms of my activity this week, tomorrow and part of Wednesday I'm visiting New Plymouth
before coming back to Wellington to attend a Rugby World Cup “100 days to go” event
at the Grand Hall. On Thursday I am in Invercargill; on Friday I'm in the Rodney electorate. I
should just also note that on Wednesday Sir Peter Gluckman will be releasing a report
on improving outcomes for young people as they transition from childhood to adulthood.
>>Media: Are you supportive in any way of the idea of pre-funding welfare obligations,
so you set aside a pool of money, which was outlined in the welfare group report, to fund
future obligations of welfare payment? >>PM: I wouldn't want to go into the specifics
of that today or any real recommendations that the Welfare Working Group made. What
I would say is I think the current system is broken and it's not working. When you have
an increase from 2 percent of the working-age population in 1970 to 13 percent today, I
think that tells us that there are too many New Zealanders of working age on a benefit
and we need reform of that system. Now what the structure of that reform is, is something
we'll leave as we work through with our Ministers, and, as I say, that we'll campaign on, but
I do not want to go into the individual specific policies today.
>>Media: What was your thought process around ruling out the 14 weeks?
>>PM: I think 14 weeks is just a little bit too quick. I mean, I felt uneasy about that.
I think a lot of New Zealanders would. We'll need to consider that issue of when people
have additional children on the DPB, what that might mean and what obligations might
fall on them. So I'm not ruling out a time-scale where people need to return to work. But I
think 14 weeks is just on the too short a side.
>>Media: When do you stop feeling uneasy? Would it be at 6 months, 8 months?
>>PM: Again, I don't want to run those policies through this press conference today. I'm happy
to do it at another press conference in due course, and that's genuinely because Cabinet
hasn't considered those. Cabinet has obviously read the Welfare Working Group report. It
understands the wide range of recommendations that are being made, and it certainly understands
the basic theory here, which is that we think the system has to support the most vulnerable
and those that are in need, but it also has to be affordable and there has to be a degree
of personal responsibility in the system. I think we are getting to the point where
that is not the case in the current system, it is sending the wrong messages, and, quite
simply it's not delivering the right outcomes, either for the taxpayers who are paying for
it or those that are the beneficiaries as a result of the system.
>>Media: You were going to announce a policy response a lot earlier. I presume that with
the time lag between the report coming out and now, you feel that this is electorally
advantageous to National and you're quite keen to make it a campaign issue?
>>PM: Yeah, so a couple of things there. You'll appreciate that the report was released on
22 February, so the day that the second earthquake took place in Christchurch, and that's consumed
a lot of Cabinet's time. By the time we got through at least the heavy lifting in that
process, we were moving into the Budget process. But I do think it is important that we signal
to New Zealanders that if we are afforded a second term, there will be reform in welfare.
I want people to get an understanding of the balance of that. It's not about being punitive.
I think that's always the risk of a Government, that it just looks like it's doing this solely
for the sake of saving money - although I would point out that welfare currently costs
about $8 billion a year. But I think the real issue here is making sure we have the right
incentives and deliver the right outcomes for everybody: those who are paying for it
and those who are in the system. >>Media: That Welfare Working Group said,
though, that you would have to spend money in order to do that. Are you prepared to do
that? >>PM: I am, and I'm not ruling out the fact
that we will need to spend money, I think, in areas like early childhood education and
training to transition people into work, but the basic theme of the report is that if you
can work, then you should work. Now, obviously, there is a group of New Zealanders for which
work will not be possible. We acknowledge that, and the welfare system should be there
to support them, actually, with integrity. But my view is that there are too many New
Zealanders who are not in that system for the right reasons - actually, they could be
working, and we need to encourage them into work. Look, we've seen some quite interesting
results when we've made very minor changes. Remember, as a Government we instituted the
change where after 12 months of being on the long-term unemployment benefit, you had to
reregister. That saw about 25 percent of all people who were registered as long-term unemployed
falling off the system. So I think that that just shows you that it's quite possible for
the Government to make some changes and achieve good results.
Now, we'll need to do more than that, and I acknowledge that. As I say, it will very
much be one that's done with a balanced view, not at all unsympathetic to those who find
themselves on welfare. There's a lot of hard luck stories and genuine cases, but there's
also fundamentally over 300,000 New Zealanders of working age on a benefit, and over 220,000
children being supported by those beneficiary-based households. Too many New Zealanders are finding
themselves in what Michael Joseph Savage once famously said “Not an armchair ride to prosperity.”
>>Media: You said there are too many people on a benefit. Who are those people? As you
say, there's too many New Zealanders on a benefit for the wrong reason. Who are they
in your mind? >>PM: It's people who can work, but where
the system is not encouraging them to work. So we need to look at that. There's obviously
a number of benefit categories, and in some areas that's very challenging and it won't
be possible, but all of the work we've done has identified that some people can undertake
part-time work and some people will be able to undertake full-time work. It's important
that we give them the skills and the opportunity to participate in work.
>>Media: But don't you come back to the old problem that there's no jobs for them to go
into? >>PM: I don't accept that line. Firstly, there's
about 1,500 jobs a week currently coming into Work and Income, so there are jobs out there.
We see a lot of people who come into a Work and Income office who actually never go on
a benefit; they're triaged into employment. The Budget quite clearly spells out that there'll
be about 170,000 jobs created over the next 4 years. I'm not talking about instant reform
of the welfare system. So I think we can get to a position where more New Zealanders are
engaged in work. >>Media: Are you thinking of taking a much
tougher line with people who turn down work? I'm thinking in particular of areas like horticulture,
which are reporting that they can't get workers. >>PM: That's right. So all of those things
are on the table, and I think we need to look at what will work. I think, in fairness, it's
a carrot and stick approach. >>Media: What was your general view of the
working group report? What did you think of it?
>>PM: Well, look I thought they actually took a thoughtful view of it. They certainly came
up with some interesting ideas. Some of them are more controversial than others; we accept
that. As I say, with the exception of the 14 week stand-down period, that's why we don't
want to take things off the table. We do want to go away and have a thoughtful, considered
view, and I think we understand that welfare reform doesn't just sit with the responsibility
of the Ministry of Social Development; it also falls into other areas that will have
to play a part. >>Media: So nothing else is off the table?
One of the other controversial ideas was providing free, long-term, reversible contraception
to people who are on welfare. Presumably that's in the mix?
>>PM: Yeah, all of those things have to be considered. As I say, there'll be a package
of initiatives. I don't want to second guess what those will be today, but let's just see
where we get to. We are committed to seeing fewer New Zealanders dependent on welfare.
That will mean a cheaper cost for the country, but hopefully it will also mean a better life
for a whole lot of people who are currently trapped on welfare. We need to give them the
skills and the opportunity to transition into work.
>>Media: The Welfare Working Group said there were two fundamental changes: one was the
single benefit and also the new agency to implement all of this. Is it a given that
they'll be picked up? >>PM: No, again I would not want to second-guess
that. The idea of a single benefit is to say: “Look, that is a starting point.” There
are distortions within the welfare system at the moment with beneficiary categories,
which may encourage people to transition into one benefit, then another. I think the Welfare
Working Group, from memory, said that that can be resolved with top-ups and add-ons in
different areas that might make sense, but a single benefit they thought would be beneficial.
In terms of another agency, I mean, again you are aware that the Government is looking
at public sector reform. That does not stop us potentially establishing a new agency if
we really believed that was the right way to go, but it does meant that we need to be
absolutely convinced it is going to be more efficient. Again, I would not want to second-guess
that today. >>Media: So do you think there's enough jobs
out there, or there will be enough jobs out there, for all those people to get off the
benefit? >>PM: Over time, yes. Clearly, when you have
about, whatever it is, 330,000 or 360,000-odd people of working age on a benefit, quite
clearly not all of them are going to get into paid employment. I think the ambition from
the Welfare Working Group was to take that number over time down to 250,000 people. But
I think we can help people to get into work. There are jobs out there and increasingly,
as the economy picks up, there will be more opportunities. I think, in fairness to those
who find themselves on benefits, often one of the reasons that they find it more and
more difficult is the longer they are on a benefit, the more dislocated they are from
all of those work skills, all of those contacts that people have, the confidence that people
have. This is a two-way street here. We have actually got to make sure that we help people.
As I have always said, I think you judge a society by the way you look after the sick
and the vulnerable, but you have also got to make sure you do not have a society that
is creating people who are dependent on the State, and I think to a certain degree we
have been doing that. >>Media: But that target - that will surely
be reached if you got the economy really going? I mean, that would simply soak up those people
anyway without any reform of the welfare system anyway, wouldn't it?
>>PM: Well, it may or it may not. I mean, obviously if you look at the unemployment
benefit numbers at the moment, they are sitting at about 60,000, so that of itself would not
be enough. I think the Welfare Working Group has established that there has been a disproportionate
increase in sickness and invalids beneficiary numbers and, over time, quite a consistently
high level of people on the DPB. Now again, we will need to look at all of those different
categories. So I do not think just a growing economy will fix it.
>>Media: But if you take the previous Labour-led Government, for instance, from the time it
came into power until just before it left power, it started to go up for the last few
months, but benefit numbers had dropped by close to a third just on the back of that
boom. >>PM: That is true, but also what we did see,
though - and we have to acknowledge there were very low levels of unemployment in New
Zealand - but we also saw at that time quite a significant increase in other categories,
and - >>Media: I'm talking total benefit numbers.
>>PM: Yes, but primarily, because unemployment benefit numbers were very, very low. So, overall,
we think the system needs a bit of work. >>Media: Don't you run into problems again
for the very specific nature of the job growth and even, I imagine, a lot of those new jobs,
for example, being in Christchurch? You know, we've got unemployment in Auckland - youth
unemployment. That's not necessarily going to fix that problem.
>>PM: There is a number of category issues and, again, they all need to be addressed.
No one is saying this is a simple task, and you are right; there are high levels of youth
unemployment, there are high levels of Maori unemployment and Pacific unemployment. They
all require a different approach. As I say, it is not just a matter of the Government
being punitive; it is a matter of the Government taking a sensible approach and understanding
what tools and skills are required to transition people into work.
>>Media: Why do you think it was that the polling at the weekend by three of the news
media organisations showed that, despite people not necessarily liking the cuts in the Budget,
the support for the Government remained relatively high - why do you think that is?
>>PM: Well, I think largely people are very conscious of the times that we find ourselves
in. They know that we need to pay for Christchurch. I think they do know that this is a time for
the Government to be conservative and get its books back in order. I think New Zealanders
highly value the fact that they want a Government with a strong set of accounts, and the fact
that if, by about 2013-14, we can be back into surplus or a neutral position, I think
we will be one of only three OECD countries that find themselves in that position. I think,
if anything, the Christchurch earthquakes showed us that the Government needs to be
in a position where it can afford to respond, and racking up debt that we expect future
New Zealanders to pay for is not a sensible approach. So it was, as I said on Budget day,
a Budget for the times. It is consistent with what New Zealanders are doing with their own
household budgets, and I think that was reflected through the polling support that the Government
is enjoying. >>Media: John Whitehead said at the weekend
- the outgoing Secretary to the Treasury - that he and Treasury were concerned about the high
levels of inequality in New Zealand; it is one of the most unequal countries in the developed
world. Do you share that concern? >>PM: Look, they have written a number of
reports recently. You will have also seen that they have released a report that looks
not just at GDP per capita but other indicators of whether people are getting ahead and feeling
as though they are part of society. Are we deeply unequal? I am not so sure, actually,
that is right. I mean, I would need to have a look at relative to other countries, and
I have not had - >>Media: He said in the OECD.
>>PM: Yes, I have not had a really good look - you know, an apples and apples comparison
of that. I mean, if you take New Zealand's welfare system for a start off, as we have
just been discussing, that is universally accepted as a more generous scheme in New
Zealand than in many other countries. So at one end of the scale you could say New Zealand
is arguably providing more support for a lot of people. If you go and have a look at the
taxes on our average income, I think it is either the IMF or the OECD is about to come
out and say that New Zealand has one of the lowest levels of tax on average income, and
that is because of Working for Families, which in tough times the Government has continued
to support. At the higher end, yes of course we have some New Zealanders that earn very
large incomes, but, relative to the United States or even Australia, where a bank CEO
in New Zealand might get $3 million or $4 million, it's $15 million or $16 million in
Australia. I am not quite sure that range is as deep as other countries.
>>Media: So you're not worried about it? >>PM: I don't worry about one thing - that
is, if some New Zealanders do very well and enjoy high incomes, personally, as a Government,
I want to support those people because I think that they go out there and create lots of
employment. I worry a lot about those New Zealanders who have low or modest incomes,
because that makes life very difficult for them. So in terms of closing the gap, I want
to do that by lifting up those on the lowest incomes if we can. Now, we have done that,
I believe, by reforming the tax system - again, very low levels of taxation. But also ultimately
it is about growing opportunities for New Zealanders. There is only so much you can
do through the tax system or through a tax credit system. Ultimately, it's about providing
those skills and those opportunities. >>Media: Going back to welfare for a moment,
that 2 percent in 1970 to 13 percent now, that ignores the introduction of the DPB in
the 1970s. What contribution in percentage terms has the DPB made to those figures, because
I wouldn't want you to intimate that the 2 percent was some kind of golden era to which
we should be returning? >>PM: Well, I don't think anyone's arguing
we're going back to 2 percent. From the last time I looked, there's around about 100,000
people on the DPB benefit, of about 350,000-360,000 New Zealanders on a benefit, so you can go
and do the maths of that. But you can see that it is a proportion. But whatever way
you look at it, and whatever the make-up is, the question we have to ask ourselves is (a)
is it sustainable to have so many people on a benefit, and, secondly, is it affordable?
If we do have too many people on benefit-based incomes, then why is it that that's happening
and are we sending them all of the right signals and giving them all of the right opportunities?
As I say, this is not about being punitive, but it is about saying what's sustainable,
what's fair, and what's delivering the best outcomes. I think most New Zealanders would
say that 13 percent of New Zealanders of working age on a benefit is not sustainable and not
affordable. >>Media: Do you think some of them are making
a lifestyle choice; if so, what sort of percentage are we talking?
>>PM: I think the time for getting into sort of subjective comments about that sort of
stuff is over. From the Government's point of view, we look at the numbers, we look at
the outcomes, and we look at the current structure of the welfare system when we say, “Look,
it needs reform.” What we are going to put on the table is a set of reforms and ask New
Zealanders to endorse them at the coming election. >>Media: Can I ask you: from our poll, Kiwis
seem to be split on whether or not they accept the KiwiSaver changes. How do you interpret
those figures? >>PM: What I would say is the poll is reflecting,
for those who are saying that changes shouldn't have occurred, some disappointment. I acknowledge
that, but I think also New Zealanders reflect that this is a Budget for the times and where
the Government is putting in half of the contributions going into a KiwiSaver account, I think most
people acknowledge that's not sustainable. I think if you look at what the private sector
commentators are saying about KiwiSaver, they're still saying it's going to be a very effective
scheme that people should be a member of. They're likely to stay in the scheme and I
think that is a good thing. I think we've now put the scheme on an affordable and sustainable
plan. >>Media: The polls show that Don Brash didn't
get much of a lift at all as the new ACT Party leader. Do you think that the ACT Party might want
to think about returning to Rodney Hide? >>PM: I wouldn't want to speculate. I've got
enough things on my plate without worrying about that!
>>Media: The New Zealander dollar today is trading at a record high. Can you see anything
in the medium-term future that might bring it down from these levels?
>>PM: Well, again, my days of speculating or considering those matters are somewhat
behind me. But the reason in my view that the New Zealand dollar is trading at such
high levels against the US is because of inherent weakness in the US. It's because of the size
of the deficit in the United States of America, and the enormous amount of debt that that
economy is producing, and the fact that that debt is being funded through quantitative
easing. In the short term that is proving to be very challenging.
>>Media: How high do you think the New Zealand dollar can go?
>>PM: I don't know. Look, we're in unchartered territory, so that's of some concern. There's
a good news, bad news part of the story. For many of our exporters, there's an imported
component of what they export, so that reduces that price. For New Zealand consumers, it
takes the pressure off oil prices and imported goods. For commodity-based exporters, life
is a bit more bearable because, obviously, commodity prices have been high. For those
going to Australia, it's good, but I think we all acknowledge that for the manufacturer
that's in a non-commodity-linked area, selling into a US dollar-based market, these are levels
that are not sustainable. >>Media: The recent moves in the dollar though
seem to suggest that it's more a New Zealand - plus story rather than a US-negative story,
because the three jumps are all on the back of good local data - trade today, the Chinese
investment last week, and the Fonterra stuff last week.
>>PM: Trade was at a record high, and that's good news. Look, on the one hand I think we
delivered a Budget that the international markets would say they would like to see in
their own countries. At the end of the day, we're returning to surplus, we're holding
debt at under 30 percent of GDP, and we're anticipating good wage growth and job growth.
That's on of the reasons why I think New Zealanders by and large, notwithstanding the cuts that
they're having to make, are supportive of the Budget. But, obviously, we have concerns
about that very high New Zealand – US exchange rate.
>>Media: Isn't the high dollar in part the Government's fault as well, because you're
auctioning off record amounts of Treasury bonds?
>>PM: Well, there's lots of ways of looking at this. The other argument you could say
is that we've been taking, I think, very prudent steps to get the books back in order, and
that's likely to see interest rates stay lower for longer. It doesn't mean that there won't
be a cycle; of course there'll be a cycle. As economic growth picks up, naturally you
expect interest rates to rise, but we think relative to what is proposed by Labour we
can keep interest rates lower than them. We're at lows that we haven't seen since 1964.
>>Media: But there wouldn't be so much demand for New Zealand dollars if you weren't putting
out so much debt. >>PM: Yeah, I think in the final analysis
this is largely a US-dollar story than a New Zealand-dollar story. There are bits that
are encouraging the international markets; that's a positive. As I say, New Zealanders
will pay less at the pump than they otherwise would do. That's a good news part of the story.
>>Media: What's RBNZ's view on intervention at the moment? Have you had any discussions
with them or advice from them recently on that?
>>PM: We haven't changed our position. I haven't had any discussions with them.
>>Media: But you said you were concerned, and their policy previously was to take the
edges off the high dollar, if you like. Is it time?
>>PM: They have the independence to do that, and it just wouldn't be appropriate for me
to give them guidance. >>Media: Overwhelmingly people in our poll
said that they weren't going to leave KiwiSaver. Do you think that means that they are still
satisfied with the scheme, that there is still some credit?
>>PM: Yes, and that's because if you look at it, even with the changes we are making,
by the end of the savings period that people enjoy when they are in the scheme - whatever
that might be, because it varies by age - they will still end up with more in their account
than they otherwise would. Now, it's true that they putting in a bit more of it themselves,
so they are making a short-term sacrifice, but it is still a very good scheme and a great
nest egg. I think New Zealanders should stay committed to KiwiSaver. There are 1.7 million
people in the scheme and 20,000 joining a month. I think it is still a very valuable
scheme. >>Media: Should it be compulsory?
>>PM: Look, that's a matter for another day. We did not give that overly undue consideration.
In the end if we had done that, it would've increased the cost to the Crown. We're trying
to reduce costs at this time. >>Media: There are more reports of delays
to tradespeople, in particular, in Christchurch, and in payments from the EQC. Have you had
any advice on that? >>PM: Yeah. That issue has been raised for
me when I have been on the ground in Christchurch, and I know that's an issue that Gerry Brownlee
is taking up with EQC. In fairness to EQC, they are processing a lot of claims. The advice
I have had is that they have received 28,900 invoices, but 10,000 of them are still to
be paid. My only point is that while I accept that they need to do their job properly and
make sure they are satisfied that the invoices should be paid, that they are properly costed,
and all of that, there is pressure on the system and I do want to see them paying as
fast as they possibly can. In the end you've got a lot of quite small tradespeople working
out of these Fletcher hubs. They don't have big overdrafts and they are employing a lot
more people, so we need that cash flowing through the system. We've been giving every
encouragement to EQC to get those bills paid. >>Media: The business package for Christchurch
businesses ends tomorrow, or something - >>PM: Correct, tomorrow.
>>Media: You've given no consideration to extending that for some businesses?
>>PM: No. At the end of the day I accept and acknowledge that, again, some businesses will
not be as well positioned to transition out of that as others. I do think that that package,
which added up in the orders of hundreds of million of dollars, was an appropriate package
for the time, but, eventually, it was to buy people time to restructure their business.
At some point, it always had to come to an end. We scaled it down so that people had
that knowledge and could work around that, and I think most people now are getting quite
a small payment, relatively speaking. Unquestionably, it will affect some businesses; I accept that.
OK, see you later.