Government changes to the Emissions Trading Scheme strike the right balance between protecting New Zealand jobs, halving the cost for families and households, and doing our fair share on climate change, Finance Minister Bill English says.

"The changes we have agreed with the Maori Party are about making the ETS workable and affordable, so that the New Zealand economy and Kiwi jobs are not put at risk - as they would have been under Labour's scheme.

"We have halved the cost of the ETS for families and households for the next three years by reducing increases in power prices and fuel costs.

"At the same time, the changes to industry are designed to protect jobs by ensuring that our businesses are encouraged to stay here rather than move to other countries.

"The agreement also provides businesses with certainty about how the ETS will affect their investment decisions."

Mr English says no amount of hand-wringing and petty political posturing by Labour will change the fact that its scheme would have cost Kiwi jobs and damaged the economy.

"Labour speaks with a forked tongue. It talks vaguely about the need to support jobs, but its policies - including its ETS and its unaffordable borrow-and-hope spending promises - do exactly the opposite. By contrast, this Government is about supporting jobs and fostering economic growth.

"With the support of the Maori Party, our changes are about New Zealand doing its fair share on climate change, but at the same time not being out in front of the rest of the world and paying a huge economic price.

"They will ensure we don't destroy people's jobs and cripple the economy by jeopardising key industries such as agriculture and fishing," Mr English says.

The real risk for New Zealand as it emerges from recession is that it reverts to the mediocre economic performance that has marked much of its recent past, Finance Minister Bill English said today.

“Over the next year or so, I hope we have a very robust economic debate – about whether, as a country, we want to do better than just muddle through,” he told the Cullen Law Breakfast Club in Wellington.

“By muddling through, I mean an economy that grows a bit here and there, which stops and starts. It’s the kind of economy we have had before.

“In that time, our incomes fell relative to other countries and we drifted. That’s the risk we have now, as we prepare to come out of recession.”

Mr English believes New Zealand can do better than that.

“That’s why this Government has set out a comprehensive programme that will start to rebalance the economy around exports and investment.

“We recognise that this will not happen by allowing government spending to run out of control as the previous Labour government did.

“To climb back up the world income ladder, we need businesses to have the confidence to invest and create jobs. The Government’s role is to make that as easy for them as possible – particularly with the New Zealand dollar at current high levels.”

As New Zealand moves out of recession, it is important to tackle these medium and long-term challenges head on, after a decade of lost opportunity, Mr English says.

New Zealand has rated well in two international business and economic competitive surveys, but the Government believes it can do better, Finance Minister Bill English says.

In the World Bank’s Doing Business Survey, which ranks countries on 10 measures relating to the ease of doing business, New Zealand retained its second place behind Singapore in the year to June 1, 2009.

And New Zealand moved up four places to 20th out of 133 countries in the World Global Forum’s annual Global Competitiveness Report. This measures institutions, policies and other factors determining productivity levels.

"It is pleasing to see these business and economic competitiveness ratings, but we believe there is room for improvement,” Mr English says. “That is why we have launched a series of reviews aimed at cutting red tape and creating an environment where business can thrive.

"As the World Bank report says, onerous or poor regulation deters investment and stifles growth. This Government is committed to increasing productivity by removing superfluous regulation that grew unchecked in recent years.

"Creating better regulatory conditions lifts business confidence, which in turn flows through to investment and jobs.

"Having a simple and transparent regulatory environment also helps attract international investment and we need to ensure New Zealand remains globally competitive," Mr English says.

The Government is currently reviewing 15 pieces of major regulatory legislation, including the Resource Management Act, the Overseas Investment Act, the Building Act and legislation covering the electricity and telecommunications sectors.

"We would expect changes from those reviews - as they are implemented - to flow into the results of future surveys."

The Government has passed legislation extending the Retail Deposit Guarantee Scheme and changing some of its terms and conditions.

The Retail Deposit Guarantee Bill passed its third reading unanimously in Parliament today.

The current Retail Deposit Guarantee Scheme ends on October 12, 2010. The new scheme will start on October 13, 2010 and end on December 31, 2011.

"The passing of the new scheme into law provides certainty for depositors, financial institutions and taxpayers," Finance Minister Bill English says.

"Depositors and institutions have more than a year of advance notice before the scheme changes and then a further 14 months under the extended scheme until the Crown guarantee ends on December 31, 2011.

"Crown retail guarantees have helped maintain confidence in New Zealand’s financial institutions, but they also distort the market and impose costs. 

"The current scheme was introduced as a response to the global financial crisis, but concerns about financial stability are now abating," Mr English says

The changes after October 12, 2010 are:

• Fees will be changed to reflect institutions' risk profile and to bring them closer to longer term normal market pricing. Thresholds in the current scheme will be discontinued and the fees will apply to all funds in the new scheme.

• Eligible bank deposits will be covered up to a maximum $500,000 per depositor per institution and eligible non-bank deposits to a maximum $250,000 per depositor per institution. The maximum in the current scheme is $1 million per depositor per institution.

• Deposit-taking institutions with a credit rating of BB or higher can apply to participate in the extended scheme. Institutions with a lower credit rating or no rating won’t be eligible despite being included in the current scheme.

• Collective Investment Schemes won't be eligible for the new scheme.

All depositors currently benefiting from a Crown guarantee will have their deposits covered until October 12, 2010. Whether or not they are covered beyond that date will depend upon whether their institution joins the new scheme, which is voluntary.

The changes are consistent with new Reserve Bank rules for non-bank deposit takers. Under those rules all institutions with deposits over $20 million will need to obtain a credit rating by March 1, 2010.

A list of institutions covered by the scheme beyond October 12, 2010, will be available on the Treasury website once applications have been processed. This will be regularly updated. A list of the new fees is also available on the website.

More information online: www.treasury.govt.nz/economy/guarantee/retailextension

Infrastructure Minister Bill English today welcomed the National Infrastructure Unit's release of a discussion paper on the state of New Zealand's infrastructure.

The paper, which includes a stock take of key infrastructure issues and challenges, will be used for targeted consultation. Feedback will be incorporated into the first National Infrastructure Plan, early next year.

"This Government is serious about getting New Zealand's infrastructure right – that means improving the quality of our roads, ensuring our electricity grid is up to scratch and upping our broadband speeds," Mr English says.

"To achieve this we are investing almost twice as much over the next few years than was planned by the previous Government. This amounts to $7.5 billion over the next five years, which will support thousands of jobs.

"We are also focused on better planning and executing of projects. The National Infrastructure Plan is part of that and this discussion paper is an important first step."

The paper covers the state of network infrastructure like roads, electricity and telecommunications, as well as social infrastructure like hospitals, schools and prisons.

"This document represents a starting point. It outlines what we know and describes the principles and likely direction of future investment.

"However, the National Infrastructure Plan will need input from more than just the government sector and we want groups with deep sector knowledge to contribute,” Mr English says.

"By early next year, we want a plan that identifies emerging bottlenecks and investment gaps and allows planners to set clearer priorities. That will help improve services to the public and give the industry greater certainty." 

To view the paper: http://www.infrastructure.govt.nz/plan

RETAIL DEPOSIT GUARANTEE - THE NEXT PHASE

This week I outlined the future of the Retail Deposit Guarantee Scheme. The current scheme ends on October 12, 2010. That scheme was put together in the midst of the credit crisis and an election campaign. Its wide coverage and moderate fees gave New Zealand's banking sector certainty in a time of turmoil.

The credit crisis has now largely abated. To reflect that we have made several changes to the scheme that will take effect from October 13, 2010 and run until December 31, 2011. You can read about the changes here .

The new scheme provides for an orderly transition back to relatively normal banking conditions and strikes a balance between the interests of depositors, institutions and taxpayers. For more information you can also click on the above video screenshot - or click here.

THE GOVERNMENT'S INFRASTRUCTURE PLAN

This month I gave a speech outlining our approach to infrastructure. Better roads, more secure electricity supply and faster broadband will help us increase productivity, grow exports and start narrowing the gap with our trading partners.

As well as almost doubling our investment in infrastructure to $7.5 billion over the next five years, we are looking at how to set clearer priorities and get the most out of our money. As part of this we want more innovation. To that end we are looking at how we can make greater use of private sector expertise (link to statement) when there are clear benefits for taxpayers and users.

The private sector is already contracted to build most of our infrastructure. Overseas experience shows that extending this through public-private partnerships can introduce new design, financing and maintenance techniques that provide better services and value to taxpayers.

SINGLE ECONOMIC MARKET WITH AUSTRALIA

Last week Prime Minister John Key and seven members of the Cabinet, including myself, headed across the Tasman to the Australia New Zealand Leadership Forum. The forum is an annual event that aims to foster closer links.

During the trip John Key and Australia's Prime Minister Kevin Rudd announced a lift in investment thresholds to make it easier for businesses in both countries to invest across the Tasman. The announcement followed discussions between Australian Treasurer Wayne Swan and myself on the issue last month. Trans-Tasman travellers will also welcome the leaders' announcement of plans to make border checks on trans-Tasman travel simpler and faster.

These are the latest of a series of initiatives aimed at eventually creating a single economic market with Australia. Closer links could result in big gains for our exporters and key industries like tourism. Watch out for future announcements.

CUTTING RED TAPE

As I said last month, this Government is committed to cutting the red tape that has been holding business back. Last week Regulatory Reform Minister Rodney Hide and I released the first Government Statement on Regulation (link to Beehive PR). It contains two key commitments:

• to introduce new regulation only when the government is satisfied that it is required, reasonable and robust and
  
• to review existing regulation to identify and remove requirements that are unnecessary, ineffective and excessively costly.

As I outlined in last month's newsletter , we are already well advanced on the second commitment with 15 reviews of major pieces of regulatory legislation underway.

GETTING AROUND THE REGIONS

When I get the chance I like to get out and about so I can hear from local businesses and their staff. This often gives me a better sense of how the country is faring than economic forecasts and advice from policy analysts.

During the recent recess I managed to get up to Northland for two days. As well as visiting local businesses I gave speeches and took questions at functions in Paihia, Kerikeri and Whangarei.

A few days earlier I was down in my own electorate for the opening of the new National Bank in Gore. The bank is one of the largest rural lenders in the South Island and the opening was a good chance to mix with members of the Southland farming community.

WHAT TO WATCH FOR

· Next week I'll be visiting Tokyo, New York and Boston to give presentations on New Zealand's economic plan to international lenders.

· The Reserve Bank will deliver its next Monetary Policy Statement on September 10.

· On September 18 I'll be talking to local businesses in Napier.

· In the coming weeks I will also release a draft of the Government's first 20-year-infrastructure plan.

I WANT TO HEAR YOUR VIEWS

I'm keen to hear your views. To comment on anything in this newsletter please click here . Your comments will be read by either myself or my staff and will be publicly available on the www.billenglish.co.nz website. If there are issues of particular interest to readers then I may comment on them in future newsletters. If you are not comfortable commenting in a public manner, you are welcome to email me at b.english@ministers.govt.nz .

To subscribe and receive this newsletter by email, click here.

Bill English talks about the very recent extension of the deposit guarantee scheme and other developements in the government's work to stabilise the economy.

Finance Minister Bill English will outline the Government's plan for economic recovery to international lenders during visits to Tokyo, New York and Boston next week.

Mr English will visit the cities between August 31 and September 6 with officials from the New Zealand Debt Management Office.

"The Government has a large borrowing programme ahead of it over the next few years," Mr English says.

"The aim of this trip is to assure international lenders that the Government has a realistic plan to control debt, lift growth and rebalance our economy towards greater investment and exports. Taken together these measures will put New Zealand on the road to recovery."

Based on Treasury's Budget 2009 forecasts the Government will have to borrow about $40 billion over the next four years to fund budget deficits.

"Governments all over the world are going to the market to borrow large sums to support their economies. To secure the funds we need to make sure we are out there telling our story.

"I'll be reminding investors that New Zealand's economic fundamentals are sound, our Crown debt is relatively low and we are well positioned to come out of the recession ahead of comparable nations."

Mr English and NZDMO officials will meet representatives from major financial institutions in all three cities. They will also meet senior ratings agency representatives.

In addition, Mr English will meet the chairman of the Bank of Japan, directors of New York's Federal Reserve and leading business people and economists.

The Government will extend the Retail Deposit Guarantee Scheme and change some of its terms and conditions, Finance Minister Bill English says.

The current scheme ends on October 12, 2010. The new scheme will start on October 13, 2010 and end on December 31, 2011.

"The Retail Deposit Guarantee Scheme was introduced as a direct response to international financial market turbulence. Immediate concerns about the stability of the financial system are now abating,” Mr English says. 

"Crown retail guarantees have helped maintain confidence in New Zealand’s financial institutions. However, they also distort the market and impose costs.  

"The planned extension will help maintain confidence in New Zealand’s financial institutions while achieving an orderly exit from the scheme.
It will allow both depositors and institutions to adjust back to a more normal business environment. 

"Today’s announcement provides certainty for investors and financial institutions. It also strikes the right balance for taxpayers.

"Depositors and institutions have more than a year of advance notice before the scheme changes and then a further 14 months under the extended scheme until the Crown guarantee ends on December 31, 2011."

The changes that will take effect after October 12, 2010 are:

• Fees paid by participating institutions will be changed to reflect their risk profile. These fees have been set by the Minister of Finance. They are intended to approximately match longer term normal market pricing. Thresholds in the current scheme will be discontinued and the fees will apply to all funds in the new scheme.
• Eligible bank deposits will be covered up to a maximum $500,000 per depositor per institution and eligible non-bank deposits to a maximum $250,000 per depositor per institution. The maximum in the current scheme is $1 million per depositor per institution.
• Deposit-taking institutions with a credit rating of BB or higher can apply to participate in the extended scheme. Institutions with a lower credit rating or no rating won’t be eligible despite being included in the current scheme.
• Collective Investment Schemes won't be eligible for the new scheme.

All depositors currently benefiting from a Crown guarantee will have their deposits covered until October 12, 2010. Whether or not they are covered beyond that date will depend upon whether their institution joins the new scheme. Participation in the new scheme will be voluntary.

“Some institutions may choose not to apply for the extended scheme and some won’t meet the application criteria. As credit conditions improve some institutions may decide participating is not worthwhile and elect to stay out of the scheme. In these cases depositors will not be covered after October 12, 2010,” Mr English says.

When the Government introduces legislation to enact the changes, it will be passed through all stages.

A list of institutions covered by the scheme beyond October 12, 2010, will be available on the Treasury website once applications have been processed. This will be regularly updated.

The level of fees will vary by both credit rating and type or organisation, and is set out in the table below.

 

More information online: www.treasury.govt.nz/economy/guarantee/retailextension

Better and less regulation is essential to boost New Zealand's productivity growth, international competitiveness and living standards, the Hon Rodney Hide, Minister for Regulatory Reform, and the Hon Bill English, Minister of Finance, said today.

The Ministers released the first Government Statement on Regulation, which contains two key commitments:  to introduce new regulation only when the government is satisfied that is required, reasonable and robust; and to review existing regulation to identify and remove requirements that are unnecessary, ineffective and excessively costly.

Mr English said the two commitments responded to the Job Summit's recommendation that the government delay introducing any new regulation that imposed extra substantive costs on business during the current difficult economic conditions.

"We have a clear plan to make New Zealand a more productive and higher income country and we believe that better and less regulation is essential to achieve that goal," Mr English said.  "In our current financial situation the quality of the regulatory environment is even more important."

Mr Hide said businesses were struggling to keep up with the new rules and requirements they were being forced to comply with and all New Zealanders paid a price for that. 

"We are committed to addressing the high compliance costs hampering the efforts of businesses to create jobs and support our economic growth," Mr Hide said. 

"We have begun to roll back a number of regulatory measures put in place by the previous government.  The taskforce set up to recommend changes to the Regulatory Responsibility Bill, which demands that regulators show restraint and respect for private rights and interests, will be reporting back to the Government by 30 September."

Measures supporting the delivery of the Government Statement on Regulation are:
- Departments required to provide annual regulatory plans of all known and anticipated proposals to introduce, repeal or review legislation or regulation
- Departments required to certify Regulatory Impact Statements and provide assurance that all policy options have been analysed and major risks and uncertainties identified
- Departments required to put in place systems for continually and systematically scanning existing regulation to identify possible areas for reform or further review
- Ministers required to certify that new regulation is consistent with the Government Statement on Regulation 

GOVERNMENT STATEMENT ON REGULATION - BETTER REGULATION, LESS REGULATION
Released by Hon Bill English and Hon Rodney Hide on 17 August 2009

Every day New Zealanders are affected by regulation in a myriad of ways.  We look to regulation to help ensure we live safer lives, get treated fairly, protect and manage our environment, have a competitive and efficient economy, and much more.

But regulation also has costs and can have unintended effects.  Outdated, poorly conceived and poorly implemented regulation can significantly hinder individual freedom, innovation, and productivity.  Reducing the burden imposed by such regulation will help unshackle our economy and give New Zealanders more ability to shape and improve their own lives. 

New Zealand needs to offer a better policy environment than can be found elsewhere if we are to overcome the economic disadvantages of our small size and geographical isolation, and attract and retain increasingly mobile talent, skills, capital, technology and entrepreneurship. 

This is why improving the quality of regulation is a priority for this government.  We believe that better regulation, and less regulation, is essential to assist New Zealand to become more internationally competitive and a more attractive place to live and do business. 

Our Commitments

- We will introduce new regulation only when we are satisfied that it is required, reasonable, and robust.

- We will review existing regulation in order to identify and remove requirements that are unnecessary, ineffective or excessively costly.

How we will deliver on these commitments

We have already:

- Begun a programme of reviews of the effectiveness of important regulatory regimes, particularly those that have a significant impact on productivity;

- Committed to introduce an annual Regulatory Reform Bill to make it quicker and easier to remove or simplify unnecessary, ineffective or excessively costly requirements in primary legislation;

- Established an independent expert Regulatory Taskforce to investigate the case for, and form of, a Regulatory Responsibility Bill.

We will also be looking for significant changes in the approach both Ministers and government agencies take to regulation.  To this end we will:

Resist the temptation or pressure to take a regulatory decision until we have considered the evidence, advice and consultation feedback, and fully satisfied ourselves that:
-  the problem cannot be adequately addressed through private arrangements and a regulatory solution is required in the public interest;
- all practical options for addressing the problem have been considered;
- the benefits of the preferred option not only exceed the costs (taking account of all relevant considerations) but will deliver the highest level of net benefit of the practical regulatory options available;
- the proposed obligations or entitlements are clear, easily understood and conform as far as possible to established legislative principles and best practice formulations;  and
- implementation issues, costs and risks have been fully assessed and addressed

Require there to be a particularly strong case made for any regulatory proposals that are likely to:
- impose additional costs on business during the current economic recession;
- impair private property rights, market competition, or the incentives on businesses to innovate and invest;  or
- override fundamental common law principles (as referenced in Chapter 3 of the Legislation Advisory Committee guidelines)

Ensure that Cabinet's requirements for assuring regulatory quality are treated as an integral part of policy development, and built into the policy process from the beginning

Ensure that all government agencies are fully aware of the commitments set out in this statement and understand the importance that the government attaches to them

Expect a culture from government agencies that:
- recognises the importance of productivity in enhancing New Zealand's economic performance;
- respects the value of individual autonomy and responsibility;
- does not see regulation as the first resort for problem solving;
- provides fearless advice on whether a regulatory proposal is consistent with this policy statement and meets appropriate standards of impact analysis and consultation; and
- continually looks for opportunities to make existing regulation more effective, easier to access and understand, and easier and less costly to comply with;

Require greater accountability from government agencies for the quality of the regulatory analysis they undertake, and for the consequences of poor implementation

Encourage New Zealanders to hold us to account where they believe we have regulated in a way that is inconsistent with the commitments in this statement.