Debate on Investment Statement

We come to the debate on the Investment Statement, He Puna Hao Pātiki, 2018 Investment Statement: Investing for Wellbeing. There has not been one of these debates in the last eight years. The previous one wasn’t debated and I’m not sure that, in fact, there has been one before. This is a tight debate on the assets and liabilities of the Government and the management thereof.

I move, That the House take note of the report of the Finance and Expenditure Committee on He Puna Hao Pātiki 2018 Investment Statement: Investing for Wellbeing.

I am very pleased to lead off this octennial debate on the Investment Statement. For members who haven’t had a chance to review the statement thus far, I recommend having a good look at it. It was certainly a statement that the Finance and Expenditure Committee really valued working through. I think the value of it is that it’s a statement which is produced under the Public Finance Act once every four years. So, as parliamentarians, it sort of lifts our eyes a little bit from the day to day, week to week, even the annual Budget cycle and asks us questions about how we are actually using the assets and the liabilities of the New Zealand Government to ensure that we meet the needs of our fellow New Zealanders and enhance their well-being. That fundamentally is about what the 2018 Investment Statement Investing for Wellbeing is all about.

In a broad sense, it considers those assets and liabilities. It considers their condition. It considers how they are used, and it attempts to draw some conclusions about how they might be used in the future.

I just want to read a direct quote from the summary guide that Treasury produced around the Investment Statement, which I think sums it up really, really well. It goes like this: “Fiscal sustainability is not an end in itself. It is a tool to support the well-being of current and future generations, including helping to achieve social and environmental goals.” So it’s a stocktake: what do we have now, the assets and the liabilities; and then—most importantly—what do we actually do with that? I’m sure we could all think of individuals or companies or organisations who maybe have a good asset base but maybe they don’t actually utilise it very well. The Investment Statement is about pointing us in the direction of asking the “why” questions: why do we have these assets; what do we do with them for the benefit of New Zealanders?

The numbers are quite striking, and let me just touch on a couple of those. They’re worth going through to talk about the scale of the investments that the Government has on its balance sheet. So, as at 31 June, the New Zealand Government owned $314 billion worth of assets and owed $197 billion worth of liabilities. That’s a net balance of around about $117 billion, which works out, if you average it out, to about $24,000 per New Zealander. Now, of course, these aren’t liquid assets. It’s not money that’s just there to use, but it gives a sense of the value that we have on the balance sheet that we can in one way or the other utilise. Fifty-two percent of those assets, interestingly, are held in the social portfolios. That’s things like land and buildings, our hospitals and our schools, and the land that they are based upon. So, again, not especially liquid, but they are major assets, significant assets, and we need to think about how we best utilise them.

What’s really important about the Investment Statement is it does give us that sort of intergenerational lens to look at these assets. One of the things that Treasury does when they are putting together the Investment Statement is to consider the resilience of those assets to shocks which might arise, and within the Investment Statement there are a number of models in particular that Treasury runs through to determine New Zealand’s resilience to various shocks which could arise. So they consider, for example, another economic shock similar in scale to the global financial crisis, which, of course, hit 11 years ago now. They consider our resilience to shocks like a major event such as foot-and-mouth—an outbreak of that in the agricultural sector.

Of course, that was very poignant, because I think the Finance and Expenditure Committee met with Treasury a couple of months ago and the modelling around the foot-and-mouth outbreak was presented to us. Then, of course, more recently, we’ve had to really start to get to grips with an outbreak of Mycoplasma bovis—not quite as significant as envisaged in terms of foot-and-mouth, where they modelled an economic impact of $22 billion on the New Zealand economy, which would have led to a net debt increase of 22 percent, but very significant none the less.

It really does speak to the value of appropriate fiscal management, appropriate management of our balance sheet, because pretty quickly the Government’s been able to put aside nearly $1 billion to deal with that problem. So there we go. That’s that principle of long-term, sustainable fiscal management: not just managing the things that are immediately in front of us but being able to look ahead five, 10, 20 years to the next generation to make sure that Government is managing its asset base as appropriately as possible to deal with those shocks when they might come up.

Of course, one of the major ones—just thinking of my colleague the Hon James Shaw—is, of course, the prospect of climate change on the horizon. It’s not just a prospect; actually, a very real and current risk to New Zealand’s prosperity, and something that we need to think about in terms of our stewardship of the assets that we hold. So those are the sorts of questions that the Living Standards Framework does point us towards.

It’s also pointed out in the Investment Statement the state of some of the current assets that we oversee at the moment. What Treasury does is not just look at the age of assets but actually undertake a reasonably sophisticated analysis of the condition of the assets that we hold. Really, it’s kind of a bit of a check on Government’s management, but it’s also pointing us in the direction of what we might need to do in terms of future investments.

There are some concerns that come through our Investment Statement. So at this stage, Treasury is telling us that 20 percent of our hospital assets are rated in a poor or a very poor condition. Again, that’s not necessarily just about age; that can actually be about state of the buildings, how well they were put together, how well they’ve being maintained, and, ultimately, how fit for purpose they are for New Zealanders to use. Treasury also noted in its report that 38 percent of school buildings and 25,000 State houses are older than 50 years. Not every single one of those is necessarily going to be in a poor condition, but it points us to a bit of a risk in terms of our management of that stock and the need for a forward-looking Government to be putting appropriate investment in to make sure that that stock is kept in good condition for the benefit and for the well-being of all New Zealanders.

The next thing I want to turn to in respect of the Investment Statement is really looking ahead, and there’s a whole section—I think it’s part four of the Investment Statement—which talks about the path ahead. What it really focuses on is the work that Treasury is doing around the development of the Living Standards Framework. Now, this isn’t an entirely new concept. In fact, Treasury has already produced, I think, two versions of the Living Standards Framework; it’s a piece of work that has crossed both this Government and the previous Government. Really, what the Living Standards Framework is about is taking the concepts in the Investment Statement, that long-range intergenerational view of how we work for the well-being and the betterment of our fellow New Zealanders, and actually really measuring ourselves against those things.

One of the things in this House that we often get really focused on are sort of those short-term metrics that get put in front of us, and it’s not that they’re unimportant; it’s just that they don’t tell the full story. So, of course, every year we have the Budget in this House and we focus on the bottom-line numbers—the fiscal deficit or the surplus. We focus a great deal on GDP growth. But the work that Treasury is doing that’s in the statement here around the Living Standards Framework really asks the question: well, what’s that all for? What is the purpose of that? Are those the only measures that we can use to determine the well-being of our fellow New Zealanders? And of course the answer is no.

You can imagine, for example, that you have a family that’s on a very high income—if I can just draw a quick metaphor—but imagine that there’s a creek running through the backyard that’s heavily polluted and it’s making the family pet sick. Imagine that a couple of the kids have got mental health problems and can’t get the help that they need. You wouldn’t say that that family is existing in a state of well-being, even though there’s quite a lot of income coming in.

So the Living Standards Framework work being led by Treasury looks at the broader sweep of measures. It looks at our natural capital—things like our water resources and our forestry resources. Just think about the water resources and how reliant we are on those for our agricultural prosperity or for our power generation. We actually need to account for the value of those water resources. It looks at things like our social capital, the trust that we have in one another, and the value of the rule of law that we have in our country, which has an enormous economic value in terms of the investment that we might to have here. It considers things, for example, like our level of civic participation. Are we a successful society if people lack confidence in Government and our institutions and don’t participate in our democracy? It looks at our human capital: things like our cultural attributes, our knowledge, our skills, and the mental and physical health of our people, and physical and financial capital—things like do we have fit for purpose transport systems, electricity networks, and other core infrastructure.

The words on the front of the Investment Statement are He Puna Hao Pātiki, which translate as a pool for gathering flounder with a net. This is put forward by Treasury as a metaphor for being a source of well-being. Well, the Investment Statement tells us that New Zealand has significant resources that, with wise governance, we can use for the benefit and the well-being of all New Zealanders. I’m very pleased to present the Investment Statement and the report of the committee to the House, and am pleased that the Government is taking note of it in its development of the Living Standards Framework, which will form a key part of Budget 2019. Thank you, Mr Speaker.

Thank you, Mr Speaker. Look, I am happy to take a call on this debate into the report of the Finance and Expenditure Committee (FEC) on the 2018 Investment Statement. As has been noted already by the chairman of the committee, who has just resumed his seat, this is the second Investment Statement that has been presented by Treasury under the Public Finance Act. The first, of course, was in 2014, and it’s worth reflecting, in fact, that it was under the previous National Government that the first Investment Statement was put together and presented to the House. I do think it is a worthwhile document. Given that it’s a four-yearly document, it’s not one that has such a high degree of public awareness, and, obviously, only being the second such document, it is still a reasonably new document.

It was certainly interesting talking with Treasury officials and Mr Makhlouf, the Secretary to the Treasury, about this document and some of the ways in which it can be improved. One of those points that I particularly wanted to reflect on, that we discussed as part of the committee, is that the document itself currently, in most of its assessments, only provides a snapshot of the state of the assets in various iterations. That’s not entirely helpful to the House or to the public when we want to understand the trajectory over time. Of course, every Government over many years is dealing with replacing ageing stock in a number of areas, and that is a continuing piece of work. So it would be far more useful to the House, I suggest, if Investment Statements going forward don’t simply provide a snapshot without any context but provide that in the context of how that movement has changed over time and we can see whether there has been, in fact, an increased focus on asset performance under the various asset heads.

The other area where I think the Investment Statement could be significantly made more useful is if there were indications given of international benchmarking so that we could see, for example, where our net worth as a country—relative, say, to GDP to make it comparable—sits compared to other countries. Otherwise, again, they are numbers which are very interesting as far as they go but make it hard for the public to understand the trajectory and also the relative place of New Zealand in the world.

Having made those initial comments, it is worth noting that the net worth of the Government since the first Investment Statement—or, in fact, since the time the National Government was in place—increased by $17 billion. When that is reflected upon in the context of the years over that Government, what it actually shows is that during the period of the global financial crisis (GFC), the recession that was in place before the GFC when we took office, the Canterbury earthquakes, the Kaikōura earthquakes—to go through a period of considerable fiscal upheaval when the Government, in fact, had to turn around a poorly performing economy and get us back to a situation of strong economic growth that this Government has been fortunate enough to inherit. So, over that period, to see the net assets of Government increase by $17 billion, I think, is still worthy of comment.

The Investment Statement talks to the importance of resilience of the New Zealand economy and it talks, I think rightly, about the need to ensure that New Zealand has the headroom to deal with a wide range of potential financial shocks that can hit our economy at any time. While Treasury has modelled three such potential shocks in the document, under questioning at FEC they did have to concede that they were entirely reflective of a range of assumptions that Treasury themselves had decided to use. For example, they’ve modelled what they say would be the impact of a foot-and-mouth outbreak, and yet they have our international trade markets returning after six months. I think anyone who’s involved in the agricultural sector would suggest that to think that our export markets would have recovered after six months after something like a foot-and-mouth outbreak is, in the most generous interpretation, an optimistic view of the world.

So we would certainly take issue with some of the specifics of the modelling, but what we do agree with is that it’s utterly important that our economy has the resilience and the headroom to absorb not just one shock nicely paced after the next shock and where there are nice, recoverable gaps, but actually the ability to absorb—as often happens—a number of major shocks in quick succession. You only have to look at the period from 2009 to 2012 to see exactly that having happened in New Zealand.

So while Treasury has looked at a range of shocks which might happen one by one and assumes there’s always time to recover, in actual fact, we don’t know the size, the frequency, or the repetitive nature of these shocks. That is why it is so critical that New Zealand retains considerable debt headroom, so that should things turn bad—whether of our own making, whether of nature’s making, whether of the world financial system’s making—we have the space to adapt and protect New Zealanders, as we were able to do successfully during the period of the early 2010s.

The Investment Statement, on page 23, makes it very clear that the ability for New Zealand to continue to maintain and maximise its assets is entirely dependent on and underpinned by our economic growth. Our economic growth story and the ability for us to have strong, continuing, robust economic growth is fundamental to ensuring that our balance sheet—which is what this document is talking about—continues to be able to be a good story for New Zealand.

I think this is where we have considerable concerns over the direction that this Government is currently taking us in, because we know, actually, that decisions of Ministers and Government policy—and Treasury says this themselves in the document—are critical levers in determining whether we will (a) have the economic growth to maintain and grow our asset base, and (b) have the levers and the decision-making framework right to make good investment decisions.

If you look at already the early indicators out of what Treasury is telling us since this Government has been in office, we already see Treasury revising downwards their estimates of GDP per capita growth. We already see New Zealand’s GDP growth dropping. It was 4 percent per annum back in 2016; now, for this year, it’s looking to be around 2.8 percent. We were actually ahead of Australia for many years. Under the GFC, we were regarded as one of the leading lights in the world economy during difficult times. Now, we’re being seen as a “middle of the pack”, a bit of an “also-ran”, and “used to be good”.

You only have to look at business confidence—and the “falling off a cliff”, to quote one of the reports out recently—to see the report card that businesses have given this Government on its ability to manage economic growth. It is that growth that this document makes very clear underpins the ability of a Government to maintain and grow its asset base, because if the tax revenues from growth don’t flow through to the Government, then the ability to maintain and grow our asset base is significantly constrained.

I want to comment on two other aspects in particular. One is to comment, with interest, on the changing mix we’ve seen over time of the assets in New Zealand and the mix between the physical assets that New Zealanders can understand and touch and feel and see, and the financial assets. To see that change over a period of time is one of the really useful reflections of a long-run document like this that looks to report on our balance sheet and the mix of assets and how they’ve changed over time.

But the other comment I wanted to make and reflect on was the very interesting reports around page 60 to 65 of the document, where it looks at the performance of our listed companies—what we know as the MOM companies, or the mixed-ownership model companies—that the National Government put in place under our term in office. One of the core things of asset management and managing your balance sheet well isn’t just how much you can own and how old they are but whether you’re getting the balance sheet to work well for you. This document makes it very clear that as a result of the previous Government and as a result of the changes that are made, the performance of each of those companies through the mixed-ownership model has improved markedly. The return on capital has improved, the operating margin has improved, and the net profit after tax has improved, and that is because the National Government knew that often ownership structures and the structures you put in place to maximise the assets are important.

This ideology that says that only things that are owned by Government will ever be successful is fundamentally wrong.

💬 Hon Scott Simpson: It’s flawed.

It has been proven to be flawed time and time again, and yet, already, we see this Government coming in and cancelling private sector involvement in projects like Tāmaki redevelopment on the basis that only the State can own and operate housing. Well, this document tells us the story that good asset management is often about getting the ownership structure right, getting the expertise right, and driving performance of those assets.

This is going to be a very interesting document to look back on in four years’ time, as we see the impact of the economic vandalism of this new Government play out and their ideology take hold and destroy the very good gains that Treasury themselves have noted were achieved under the last Government and that have led to the $17 billion improvement in our net asset position.

It’s great to have an opportunity to speak today to the 2018 Investment Statement: Investing for Wellbeing. I think it’s important to start at the beginning here because we haven’t had this debate—as you yourself noted, Mr Speaker, at the beginning—for, well, ever, in fact, and this is an important document. I want to make sure that all New Zealanders who are watching or listening know what we’re talking about, because it’s easy, when you say “It’s an Investment Statement that measures the value of our assets”, to not even know what that is. So, for the sake of those following along at home, an asset is defined here as: “Government’s assets are the things the government owns. They include buildings, infrastructure and land, as well as funds to support our accident compensation and superannuation schemes.” So it’s very important that we’re not just talking about physical assets per se, but about the net wealth and well-being that we have in our country.

So on that score, New Zealanders, when we compare ourselves to the rest of the world, can be justifiably pleased about our relative standard of living, which is not about any one particular Government, but, over time, is about the fact that New Zealanders have been able to build up a pool of assets that support everything that we do in the country. This value amounts to $65,000 in assets and $41,000 in liabilities for each New Zealander. So that’s quite an interesting number to mention, because I could have said “We have $314 billion of assets and $197 billion of liabilities.”, but if we actually bring it down to an individual person’s level, we’re in net positive territory, and that is a good thing. That’s something that all New Zealanders should be pleased about.

But the trend over a period of time has been that our liabilities have grown from time to time, and our assets have generally trucked along at around about the level, per person, that they are now—obviously, growing in dollar terms, but proportionate to one another. So we can be pleased overall that as a country, New Zealand has a relatively high net worth, but we’ve always got to be careful about the management of the assets that make up that net worth.

What the Investment Statement largely does—it does two main things, and I’ll talk about both of them in the time that I speak today. The first of those is to assess the performance of the Government’s investment across a range of indicators, and then to look at it across—as Michael Wood said in his intervention—the longer-term intergenerational issues as demonstrated by the Living Standards Framework. Then, in the second half of the Investment Statement, it goes into specific sectors and areas and looks at how we’re doing at managing the assets there and what the future path might be, and I will return to a couple of those towards the end of my contribution because they are quite illustrative.

So the areas that the Investment Statement measures our assets on are their effectiveness, efficiency, sustainability, resilience, and adaptability. It then does that by looking at two parts of our assets portfolio: the social portfolio and the financial portfolio. The social portfolio includes all of the sectors that you would imagine would be in there—justice, health, education, the Department of Conservation, Housing New Zealand, and so on—and it obviously draws a number of conclusions from those.

If we just look at the first of those measures, which is that of effectiveness, this is where in the story of perhaps scratching just below that level that makes us pleased—the fact that we have a positive net worth—some questions have to be answered. So when we look at page 48 of the report, on how does the social portfolio of assets stack up on the efficiency graphs, well, this is where we have some real concerns because in four sectors, representing $62.77 billion, or 38 percent of the social portfolio’s assets, they have aged assets that—to quote the report—“adversely impact performance:”.

It will not come as a surprise to members of the House that, for example, in our social housing area, the housing portfolio is aged, with approximately 40 percent of assets greater than 50 years old. This is the issue that New Zealand and this Government, on coming into office, have had to face up to—that our social housing is old and aged and needs urgent updating. That’s why, among other things, we’re continuing to invest in making sure that we improve the quality of that housing and that we add to that housing stock—that we add to that asset base. But if we don’t take a long-term, intergenerational view of the assets that we hold, then this will continue to be a problem for us.

At the very heart of the Living Standards Framework and well-being approach—which this report goes on to talk about—is that we cannot just manage for the three-year cycle. We have to manage beyond that and do long-term, sustained investment, and housing is a critical area of that.

But the next area that the report goes on to talk about in terms of efficiency in the social portfolio is in healthcare, and this obviously has had quite a lot of attention in recent times. What the report tells us is that district health boards are reporting that around 19 percent of assets are in poor or very poor condition. That is the nub of the problem that we see played out at places like Middlemore Hospital, where we’ve seen the issues around the mould in the walls, or places like Dunedin Hospital, where people have to wear hazmat suits to go inside functioning parts of the hospital.

That is the situation that New Zealand now finds itself in, where we have a previous Government that failed to invest in these areas, and it is the very reason that in Budget 2018 we have invested $750 million in new capital spending for health because we’ve got to start to get on top of this. The comparable figure in Budget 2017 was $150 million. That is how we end up with assets in the position that we find them in today, where nearly 20 percent of the assets in our health system are in poor or very poor condition. We cannot allow that to go on. The only way of resolving that is long-term, sustained investment in our assets.

Then, in the education portfolio, for school buildings, 38 percent are 50 years old or older, and the report goes on to make the point that inconsistent maintenance across the portfolio has resulted in some assets being in poor condition. Again, not having enough information has been a major issue about that, but this will require a long-term, sustained investment in our school buildings to ensure that they are of sufficient condition.

So that’s just one example of what the report tells us about the state of our assets. It’s all very well to look at the high-level indicators and say “Yep, we’re doing OK.”, but only one step below that is a definition of the state of our social portfolio assets that I believe many New Zealanders would be very concerned about.

I don’t have a lot of time to go into the other half of the analysis around the financial portfolio, but I do just want to lift out one of those, and that is—actually, I’ll try and do two, if I’ve got time. One of those is the New Zealand Superannuation Fund, and one of the very first things that this Government did was restart Government contributions to the New Zealand Superannuation Fund because the value of that asset to New Zealanders has diminished as a result of the previous Government deciding that for nine years, they would put no Government contributions in at all. Some $20 billion, approximately, has been missed out on for future generations of New Zealanders because of a short-sighted policy that was all about making sure they made it into surplus, rather than investing for the long term, which is what this asset management approach that we are advocating here would do.

So, actually, with regard to the Superannuation Fund—now that we are getting on with it—around $7.7 billion of Government contribution is going in over the next four years. That is projected to see the value of that asset grow to $63 billion by the time we reach the end of that forecast period—$63 billion. That’s the kind of difference we can make when we look to invest in the long term, and that is the approach that underpins the well-being approach, the well-being Budget, and the Living Standards Framework that is in here.

So I welcome this report from the Finance and Expenditure Committee. I welcome their endorsement of that well-being approach. I say to all members of the House that these kinds of debates are a good opportunity for us to look to the long term—look past year-on-year Budgets, even—and look to what will make the biggest difference in the well-being of New Zealanders. To my mind, that is long-term, sustained investment in our social capital and in our physical and our natural capital. We can do that if we make that a priority, and that is what this Government is doing.

Thank you for the opportunity to speak in this debate. This is a very good document prepared by Treasury, and I think it should be compulsory reading for everybody in this House, every MP, and particularly for the Ministers and particularly the Minister who’s just resumed his seat, because I’m sure, if he read it fully, he would see that the Government books and the Government assets were left in extremely good condition by the former Government.

When we look at this document from Treasury—and I’m one of those MPs who, having been a Minister for quite some years, are very, very respectful of the advice from Treasury. Even if it doesn’t always meet political agendas, it is actually always carefully thought-out and considered.

One of the things that Treasury makes very clear in the document is that the Government should only own assets when, one, social and economic benefits outweigh the costs; two, the risk cannot be transferred to the private sector; three, the Government has most relevant expertise; and, four, the Government needs to be directly accountable. That is actually quite a tall order that I suggest that every Government and every Minister should put beside any of their big-spending plan decisions.

Well, I well remember one particular—some people in this House were very upset about the mixed-ownership model for some major assets, but, in fact, that particular mixed-ownership model was incredibly successful according to this particular Investment Statement. By selling down a minority stake to the private sector, to private mum and dad investors and others, in three generation retailers, Meridian Energy, Mercury Energy, and Genesis Power, and Air New Zealand as well, this Government—or the Government before, with us, and also the people; the Crown—was able to actually make a far better return on their investment, which actually means more money being available for things like schools and for things like law and order.

Coming to the huge chunk of the Government asset base, which is that represented by the Housing New Zealand Corporation, I see in the report that the report makes very clear that there is a problem with the oversupply of three-bedroom homes compared to those that are needed in the community. That was something that the previous Government, of which I was part, was deeply concerned with—to make sure that we were able to actually get people who could move into one- or two-bedroom homes into those and out of the three-bedroom ones, but at the same time to build homes that for larger families were going to be far more efficient and effective for them, taking into account that not all families come with 2.3 children, and nor should we expect them to.

So we could also say that it was very concerning today to hear from the Minister that we have a situation where the State tenancy register, or housing register, is the highest it’s ever been, with over 8,000 families in need. This is significantly higher than what it was last year. This particular statement from Treasury makes it very clear that there was a lot of work going on with replacing housing by the previous Government, and to try and state, as some have said today, that that wasn’t being done is actually quite false.

On page 102 of the report I see that the redevelopment activity of Housing New Zealand houses was accelerating, with a 1,421 replacement and new homes delivered in 2017 against a target of 1,339, and 1,400 replacements over this year were expected. There was considerable work going on—at the same time bearing in mind that it is very disruptive for people who have lived in a State house for some time to be asked to move into a different State house, often losing neighbours who they valued and community facilities that they knew well.

I see that Housing New Zealand, in this report, is planning for a 15 percent reduction in construction programme build costs by 2021. I would be thrilled to find out how that is possibly going to happen, because all I can see out in the building sphere is that those costs are going up. I’m also concerned about the fact that in the report itself, the Investment Statement, it states that low commercial returns mean that Housing New Zealand Corporation cannot afford to replace houses in the case of a stress event—for example, an earthquake damaging a significant number of assets. I think that is actually a very real concern, and it is something that we should be concerned about as a Parliament. I think the fact that Housing New Zealand can’t make much of a commercial return makes it even less likely that Housing New Zealand should be favoured over the private sector, who can, in many cases, ensure that they can take the steps that they need to. Certainly, I think that that is something that can be looked at, and I’ll certainly be asking some questions later this year about that.

In response to the Canterbury earthquakes, I see that there was a huge issue for Housing New Zealand in Christchurch in particular, and Housing New Zealand undertook a large initiative and programme to restore the city’s public housing stock to pre-earthquake levels by mid-2016. That is an enormous task that Housing New Zealand took on and achieved, and we have never heard anything from what is now the Government about that excellent work.

I think we can also see that some new stock for Housing New Zealand is being “challenged”—it says here in the report—“by land-use regulation,” I think that means the Resource Management Act. They’ve also said that Housing New Zealand is being challenged by building costs, and yet we also see in the report that Housing New Zealand is counting on a 15 percent reduction in building costs. I have no idea why that would be, and there’s no explanation around that.

I also see that the report notes that Housing New Zealand is challenged by capability and capacity in the construction sector as well as availability of funding. Well, we already know that Housing New Zealand is now going to be required to buy or to borrow in order to build more State houses under the Budget that’s just been announced and voted on just a month ago. That tells me that, actually, Housing New Zealand’s going to get itself into debt, and we already know it’s not making commercial returns that are of much use to it when it comes to repairing or to building new housing stock. I heard today that the costs—the maintenance cost repair and maintenance bills—for Housing New Zealand in the last year were close to half a billion dollars, at $490 million. That’s no new stock; that’s just repairing and maintenance. So I think these are very serious issues when you come to one of the biggest assets a Government has, which is the assets of the Housing New Zealand Corporation. These are serious issues.

We’ve heard the previous speaker, the Minister of Finance, talk about the dreadful state of New Zealand’s public health system. I actually think that is a completely unfair thing to say about our public health system. I have certainly experienced the public health system. I have been delighted with the careful and considered way in which decisions are made, and I have been delighted by the state of many of the buildings that I have seen in the public sector—bearing in mind that every building, every hospital, will have something that they want to improve.

I also see from the report—and this is the statement itself from Treasury—it notes that New Zealand’s health system was tied with Norway for fourth place in the world in a 2017 Commonwealth Fund comparative study of 11 OECD countries that looked at average care process access, administrative efficiency, equity, and—most importantly for New Zealanders—healthcare outcomes. That’s what matters. They noted, though, that there were, obviously, certain losses and various other challenges and some inefficiencies around the asset condition of some of the particular district health boards and also some of the controls of that. That is the sort of thing that happens in a big undertaking, and health is one of the biggest undertakings—in fact, I think it is the biggest undertaking of Government.

It notes also resilience, and particularly that around mental health and emergency management obligations. These are the things that happen, and should be taken account of, with every one of the entities that Government has.

Overall, I think it’s a very good report. It deals with a lot of issues in a very sensitive and sensible way without emotion and without hyperbole—which I think is often sadly lacking in Parliament—and it deals with things in a way which I think New Zealanders can have some comfort in. Treasury, and they may all be quite young chaps and “chap-esses”—and girls—but they are very sensible—

💬 SPEAKER: Order!

—people who are doing very, very well, and I support them.

Kia ora, Mr Speaker, thank you very much. I rise on behalf of New Zealand First to speak on the 2018 Investment Statement. The Investment Statement’s important because—and others have articulated it—transparency around Government and the way Government manages the assets and liabilities on behalf of the people of New Zealand is important. However, this document differs from all previous Investment Statements published because it uses organising principles from Treasury’s Living Standards Framework, and that, on many levels, is quite exciting. I know that the contributions today haven’t necessarily been that exciting, but the fact is that this report starts to move towards measuring more than just the value of things.

I want to just pick up on some comments by the Hon Amy Adams. The Hon Amy Adams, in her contribution, suggested that this Government inherited a strong economy based on an increase in assets of $17 billion—it’s not exactly word for word, but I think that’s along the lines of what she said. One might accept that statement at its face value. I think if you look into the books—the physical assets of what was handed over from one Government to another Government—probably we had an increase of around $17 billion.

However, you could also argue—and what is so great about moving to the concept of having a Living Standards Framework is you could also argue that this Government inherited a social account in extreme deficit when it comes to the well-being side of what is the well-being Investment Statement for 2018. That’s why it’s so interesting that we’re starting to get this shift away—and it’s great to have consensus across the House—and this move away from not just dollars and cents but also measuring the well-being, and how those dollars and cents are spent and how those assets affect the well-being of the people our nation.

I mean, one can add up all the prisons that are inside this document—one can add them all up and there’s a value to them—one could put into it the billions of dollars that some might suggest should be spent on an American-style mega-prison, and you could argue, as the Hon Amy Adams has said, that there’s a lot of buildings that are worth a lot of money, so therefore the country’s got a lot of assets and it’s in a really good financial space. One would have to discount the human capital that was then being incarcerated inside those walls and completely write off the value that that human capital has to the country, and therein lies the difference.

Therein lies the difference, and that’s why there is the living standards approach. It says here, “The Treasury has been developing its living standards approach since 2012”—so it’s obviously something that the previous Government supported; it’s obviously well supported by the previous Government because they started to develop it, so that’s wonderful that we’re all on the same page—“to ensure its analysis and advice considers the wide range of factors that impact on wellbeing.”, and that’s well-being across the spectrum.

Now I’m particularly thrilled about it because I’m working on the child well-being strategy with the Prime Minister, and the child well-being strategy will take some of the indicators that are inside this current document. It will add some other indicators and some other markers that we will have to measure ourselves against, and one of those will be: how is this spend of these dollars impacting on the well-being of children? So if we go back to the example that I’ve given, which is around building American-style mega-prisons, how would spending that many billions of dollars impact on the well-being markers for our children? Incarcerating a parent away from them, they then suffer as being the child of a prisoner, and so on and so forth—how does that spend impact all the way through? What are the ripples all the way through New Zealand society? That’s how starting to actually do measures on a Living Standards Framework starts to break us away from what has been sort of a fixation on merely the amount of dollars.

The Hon Grant Robertson actually mentioned this, as well. If we go to page 110 and have a look at the asset base that we have inside the Ministry of Education, for example. If we have a look at it there, it says in one of the figures—and it’s in writing on page 111—“On top of this, [the Ministry of Education] expects that $5.39 billion from baseline funding will go towards maintaining the existing portfolio. This includes funding redevelopments, and replacing ageing assets (approximately 74 percent of buildings are greater than 20 years old).” It also notes, however, in the paragraph previously that “Planned capital expenditure cannot be covered by depreciation”.

Now what was really interesting about the previous Government was that we used to have a fund that we set aside for all school buildings. Once they reached 45 years old, there was an assessment done on them. They were either refurbished or they were actually replaced. That fund was done away with in the last decade. I think it had to do with leaky buildings, and that’s why that fund was done away with, and so what we see is—and it’s what the Hon Grant Robertson alluded to. When one starts to make knee-jerk, short-term, narrow-vision, totally dollar-focused decisions, one doesn’t see the long-term stretch of how documents like this and Budgets over time and using a well-being investment strategy can protect us for the future.

Another example he gave of that was actually superannuation. It was the New Zealand Superannuation Fund. I also wear the hat as the Minister for Seniors, and the fact that there is $20 billion less than there used to be for the well-being of New Zealanders as they get older is unfortunate. It’s that type of well-being measure—how will this budgetary item affect, long-term, the well-being of our citizens?—which is the exciting part as we move forward.

I do just want to pick up on some of the comments made by the Hon Judith Collins, and it was around the conversation around Housing New Zealand. She pointed to some comments inside the paper—I mean, remember this is Treasury, and Treasury has come a long way. Their job is to look at the money—we understand that. You can’t take it away from them; that’s exactly what they’re paid for. But I would have to say that even in the past seven months, there has been a much more human face to Treasury. They really welcomed the opportunity to expand on the well-being concept and start to participate with the Government about how we can better frame this for the long term.

So it’s interesting that the Hon Judith Collins picked up around a lack of commercial return from Housing New Zealand and equated that, somehow, to “This Government should not support its citizens into social housing.”, or, at least, it should not own the social housing that it supports its citizens into, but, somehow, that should be paid to private providers. I’m struggling, inside this document—perhaps Judith Collins could enlighten me at some other time. But those citizens who require our social housing are being supported by the taxpayer. So the citizens that require social housing, that are going into Housing New Zealand homes, are being supported by other New Zealanders. If the money we pay for their social housing is then paid to a private provider, that becomes somebody else’s profit margin, as opposed to reinvesting in what is the taxpayer’s money going around in a taxpayer pool.

Then Ms Collins also levelled some criticism about the maintenance levels of the Housing New Zealand housing stock. I would have thought that the last thing that anybody from the Opposition would have got up to do just seven months into a new Government was to stand up and criticise the amount of money that has had to be set aside to maintain what are taxpayers’ assets. I would suggest that that shows a failing on whoever was running the place in the last decade, because they didn’t maintain the assets by which the taxpayer had placed in their care.

But I come back to the document. It’s a great document, it certainly is. I do think it’s good reading, and I would encourage every member of the House to read through it, but it’s the movement that we’re starting to make towards deciding that what a Government’s job is is not just managing the money; it’s making sure that our citizens have homes, that our children are safe, that our schools are able to cater for them, that they have teachers in front of them, and that the needs that they have can be looked after. That’s wider than just dollars, and so this is a start on a pathway towards greater well-being being recognised. Kia ora.

Thank you, Mr Speaker. It’s a pleasure to be talking on this 2018 Investment Statement: Investing for Well-being, and what was even more pleasurable was to see the previous speaker, Tracey Martin, who obviously spent some time looking at this report. I know that the Hon Tracey Martin has many interests, but her new-found interest in financial matters, I think, must be applauded and commended.

Mr Speaker, this is the second of these reports, and, of course, we don’t always get the opportunity to talk about these here in Parliament, as you noted earlier. The first one was released in 2014, and I’ve got to say that New Zealand is very, very unusual, because most countries around the world don’t actually do this. They do not actually go about, in a systematic way, assessing their assets and their liabilities and looking at the balance-sheet side of their business. Everyone focuses on operating expenditure, and rightly so. But the balance-sheet side of Government is just as important, as it is for companies operating in the market.

The report has picked up this new framework, which is called the Living Standards Framework, and, of course, it has four pillars of well-being—namely, capital, social, human, and natural. I think, to some extent, they provide a reasonable logic in terms of how we might go about assessing the balance sheet of the Government. It’s a new framework, and, of course, we’re working through a process of trying to understand it. Certainly, it raised some questions in the Finance and Expenditure Committee when we heard from the officials around this document, but I think that’ll be something that will need to be developed over time, and the logic of some of the linkages in that categorisation, I think, needs to be strengthened and worked into a framework that everyone is and can become comfortable with.

The result is it’s good news all round. In 2017, the net worth of the country in terms of the Government’s share of it was $117 billion, or $24,000 per person, made up of assets of $314 billion and liabilities of $197 billion. When you compare that figure to 2009, basically, the assets increased by $97 billion, from a figure of $217 billion. So, you know, assets have gone up by $100 billion since National came to power in 2009 till when we, unfortunately, lost office last year. That, on the face of it, is very good, and if you’re looking at it, it means that the country has a more robust financial structure, but it’s something that is a theme I’m going to return to later.

Looking at the asset breakdown, it’s interesting, because most people will sort of have a view on what the Government invests its money in, but 52 percent of the balance sheet is allocated to the social portfolio—land, buildings, and equipment used for the delivery of social services. Of course, we’ve heard a number of the speakers talk about education, social services—a whole raft of those types of operations.

The next significant category—and this is the one I don’t think people really appreciate—is the size of the financial assets that the Government owns. It owns them through a whole raft of entities: the New Zealand Superannuation Fund that the Minister was talking about before, ACC, the Reserve Bank holds a lot of assets and also debt liabilities, and the New Zealand Debt Management Office. There’s a number of other entities that hold a huge proportion of financial assets, quite rightly, in conducting their business, whether it’s in terms of their banking operations or, principally, through the investing operations of those arms—such as the New Zealand Superannuation Fund and ACC—into listed companies shares and other forms of investment.

The smaller and last main category is the Government’s commercial property, which represents about 18 percent of all the assets. I think that Treasury note—their sort of conclusion is that the Government’s balance sheet is currently strong, providing resilience in the face of adverse events.

I think one of the aspects that I found interesting that was covered in the report is actually how resilient is the New Zealand Government in the area of if we have further shocks, and, of course, we always have shocks. The conclusion was that New Zealand is broadly tolerant to plausible adverse events. Treasury ran three adverse events ranging in scale and differing scenarios between rural crises, earthquake risks, and the impact of financial sector meltdown, as we had during the Asian crisis and a number of others like those. We at the committee had quite a lot of discussion round that, because the assumptions used in those scenarios weren’t actually that evident, and, in some cases, the resulting outcomes didn’t seem well linked. It was a question we spent some time looking at. It’s very important that we do have robust modelling, but I do applaud that the stress testing was a function that had been undertaken. It’s a very important one to understand—risk.

The other aspect was around value for money. I think one of the areas where Government loves to spend money is in commercial property, and, as I’ve said before, commercial property represents about 18 percent of total assets of the Government. I think there’s always a tension between people wanting to have nice, flash offices, perhaps in regional areas, when in fact there is no need for the Government to build very good buildings—they could rent buildings. So we have this classic of “Do we invest in a building or do we rent?” I think this assessment around value for money, particularly in the area of commercial property, is a very important aspect, and it was one that we were keen that Treasury started to turn its mind to in terms of its focus around making sure that if we are investing in assets—hard, physical assets—there’s a good, justifiable reason for that. Procurement is also linked to that in terms of Government practices, and how we go about doing it in the way we conduct procurement, which is really, really important and will, of course, have a strong bearing on the outcome.

The one part of this report that I was very disappointed in—and I did say this to Treasury officials—is its lack of focus on the intangible aspects in the balance sheet. If you go out into the commercial sector now, every company—of substantial size, at least—will be turning its mind, if it hasn’t already done so, to the intangible value of its business. In most cases—in many cases, at least—the value of the intangibles will be far more significant than the hard, physical assets. When I looked at the balance sheet breakdown in here, the intangible component was only $3.5 billion and it was thought it was going to increase to just under $4 billion. I think that that view is incredibly conservative. In fact, I don’t think any blowtorch had been put on the value of intangibles, and I think it significantly understates the value of the Government’s balance sheet, not only in financial terms but in terms of assessing its intellectual value that the Government holds and also some of the other brands that New Zealand has round tourism, etc. I think, in the end, we’ve ended up with a very overly conservative valuation around that.

But the report also raises the question about what is the optimal right size of the Government’s balance sheet. I heard people from the Government side talking about increasing asset value and underspending and all that sort of stuff. Well, we do need to invest in hard assets, but we do also need to ask ourselves what is the best form of investment, and it may not actually be investing in hard assets. I think there’s much more choice around it. Part of it’s driven around the ability to fund investment on a sustained basis over time.

But there’s consideration of other financing options such as in property—I referred to the classic rent versus the owned—but also in terms of things such as public-private partnerships and mixed-ownership models, which offer other ways to hold assets without necessarily having to have 100 percent of the value sitting on your balance sheet.

Of course, most companies that are well managed will be looking at their balance sheet and making sure it’s optimally designed. If they can take cash out of it they will, and there’s no difference between those companies and the Government. On that basis, I think it’s very important that Treasury continue to look at that factor in the next report. Thank you very much.

Thank you, Mr Assistant Speaker, for this opportunity to speak in the debate on He Puna Hao Pātiki, the 2018 Investment Statement: Investing for Wellbeing. And I just wanted to start by picking up on some of the points made by the previous speaker, Mr Andrew Bayly, who was talking about how in corporate New Zealand—in fact, right around the world now—intangibles are being valued and reported on in corporate reporting. The fact is that in this Investment Statement that is an area that is pretty thin, but I would say that is actually probably the best articulation of the need to finish the work on the Living Standards Framework, because the point of the Living Standards Framework is for us to actually get a much more comprehensive and well-rounded view of the sources of value and what our assets actually are in this country.

So I’d just like to acknowledge the work that Treasury have done getting us to this point. It has taken about four or five years of work on the Living Standards Framework to be able to get to the point where we’re even able to say what we’ve said in this Investment Statement, which is quite different from the previous Investment Statement of a few years ago, and I’d like to assure Mr Bayly that the next Investment Statement will be at least as different again from this one as this one is from the last one because the Living Standards Framework and the underlying measures will be so much more developed than where they are today.

So I kind of see this as an important milestone in progress, but it is an incredibly complex area. I actually started my career in this domain, at PricewaterhouseCoopers in the UK in the late 1990s, when they were first starting to try and work out how to evaluate, measure, report, and assure intangible—or should we say non-physical or financial—assets as part of the corporate reporting process, and it has been an incredibly long road. Even here in New Zealand, we are only now just starting to dip our toe in the water in terms of the New Zealand corporate space, but that’s after 20 years of development in this field internationally.

So if you can take the work that you see in the private sector and then try to amplify it in both size and complexity to scale up to the level of a country, you can imagine why it is quite a significant challenge to be able to come up with a comprehensive report that actually includes all of the things that Mr Bayly is referring to, that covers all of our economic assets as well as our social and environmental assets as well.

So I did just want to start by referring to how the Investment Statement has changed and how it is likely to change again in the future, and it has to take account of the changes that are going on in society as well. It does that specifically referencing demographic changes in the coming decade, climate change and the impact that that is going to have on our economy, and technological change, particularly in the domain of artificial intelligence, workforce automation, and so on, and how those forces interacting with our economy are likely to affect our Investment Statement.

As Mr Bayly said, this report is pretty interesting not just for what it does show but actually for what it doesn’t show, and there is a reference that I’ll just choose to focus my comments on in the domain of natural capital alongside the kind of economic, financial, and physical capital that we’ve got pretty well covered and the social and human capital domains which are still—they’re kind of better covered in this report than they have been in the past, but still there’s a bit of progress.

But it’s actually in the domain of natural capital that we’re pretty thin on the ground, and there have been a few reports recently. There was the Our Land report that was released recently. There was the system of economic and environmental accounts that were released earlier this year as well. In all of these reports, including in the investment report, there have been significant gaps in our knowledge, whole areas that we refer to but then don’t provide data for because we actually just don’t have data for them and we don’t have good ways of measuring them or for gathering that data. But people ask: why would you have natural capital? What is natural capital? Why would you have it in the Government’s budgetary cycle as part of the Investment Statement? So I’ll just try and illustrate with a few stories that I think demonstrate the value of valuing nature and of natural capital.

So, first of all, in Tolaga Bay at the moment there is significant damage that has been caused by flooding, which is exacerbated by run-off from clear-fell forestry in the surrounding region. If you can imagine the clean-up costs from higher levels of river than there would have been otherwise and the cost of having to clean out the excess wood that has washed down into the valleys and down the river, the cost of all of that implies there is economic value in permanent forestry on those hillsides because the cost of the clear-felling causing that increased flooding is a direct economic cost. Therefore, the forest remaining on the hill is an economic asset, and some people would refer to that as kind of ecosystem services. And it’s a pretty, kind of, basic way of looking at it, which is, well, what’s the avoided cost of maintaining your natural environment—your natural asset base? But it would be one that I think would be evidently clear to the people of Tolaga Bay this week.

Another one is in the domain of climate change—a topic true to my heart. For example, we know that the cost of storm damage, or repairing roads and rail and airport clean-ups from the increasingly frequent and severe storms that are coming as a result of climate change—over the last 10 years, that clean-up cost has gone from $19 million to $90 million per year, in 10 years. So it’s quadrupled in size as an outgoing cost over the course of 10 years. Obviously, there are factors that you can zero out, like population increase and so on, but actually, the cost of those storms and damage as a result of climate change—that’s just happening in the transport space.

The third one, and I guess this is also particularly pertinent right now—and particularly our farmers will have something to say about this—is, of course, in biodiversity and biosecurity. The damage to our ecosystems and the sensitivity that our ecosystems have has a direct economic cost. If you think about the impact of Kauri dieback if that continues on and we lose our most precious tree species—the impact that that has on our kind of cultural sense of who we are but also actually in terms of tourism. If you say that myrtle rust could take out pōhutukawa and mānuka, then obviously, again, that starts to affect who we are and how international people think about us and mānuka honey and some of those products. And, of course, the big one is Mycoplasma bovis. The value of maintaining a healthy ecosystem has a direct economic value to us.

So it is an area that needs a great deal more development. We know instinctively that our natural environment is of core economic benefit, perhaps more so to New Zealand than to some other countries because of the nature of who we are as a country and our economy. That’s why things like the system of economic and environmental accounts that was released, why the Living Standards Framework, why the Our Land report, why Indicators Aotearoa—the set of comprehensive social and environmental indicators that Statistics New Zealand is working with alongside Treasury—are so important. I think that when we think about all of those things together in that domain of work, actually, that is the kind of the thing that we want to be able to see represented in the next investment report because, you can imagine, whether it’s the Bonn markets internationally who looks at these reports to get a sense of how confident they are in our economy and how we’re managing—that there is perhaps a great deal of risk that’s sitting there unquantified and currently not on the books.

So I really commend Treasury and the rest of the Public Service for their work in producing this. I’m very much looking forward to how it evolves in future years.

Thank you, Mr Assistant Speaker. It’s a pleasure to be taking a call this afternoon on the 2018 Investment Statement. A core part of that statement is the balance sheet. For the uninitiated, it is one of the first times we are giving one of these debates in the House. For the uninitiated, it is really just a simple “what you own and what you owe.”

It’s a statement of assets and liabilities in the same way that any business or farm or even household might do. So I turn to the balance sheet part of the statement and it says, “The balance sheet has been growing strongly in recent years.”, and goes on to say that the “balance sheet is currently strong, providing resilience in the face of the adverse events.” I ask members of all parts of the House: why would that be? Why would it be that the current balance sheet is so strong? The answer to that, really, is down to good management.

We had a strong and growing economy for the last few years of the National Government. We rebounded well from the effects of the global financial crisis and the Canterbury earthquakes. In the election year last year, we went into the election having six years of unbroken growth, with the exception of one quarter. We had an economy that was growing faster than the US, the UK, Japan, Canada, Australia, and the EU. We had an economy that was creating more than 10,000 jobs each and every month. The result of that strong and growing economy was that we were able to start paying down debt and improving the Government’s balance sheet.

Now, members opposite from time to time do mention debt. They do mention that during that time that we were in Government that debt did go up, and that is absolutely true. In the first few years we were in Government, debt did increase. The reason for that was because when we came into Government in 2008, we had a global financial crisis to deal with, and, actually, it was prior to that—New Zealand was the first country in the world that went into recession, ahead of the rest of the world. So we did have to take on a lot of debt and that obviously, affected our balance sheet.

Subsequent to that we had two Canterbury earthquakes—two Canterbury earthquakes. So those twin shocks, the Canterbury earthquakes and the global financial crisis, both contributed to higher unemployment across the country. That meant the Government had less revenue coming in and more going out. So what does that mean? It means that we have to take on debt if we want to continue to live up to our obligations of paying people a decent amount so that they can get by and they can be supported. It happened across the Western World. Balance sheets across the Western World all blew out as a result of debt increasing.

Every time during that time that we announced some sort of saving—some sort of saving to ensure that the balance sheet wouldn’t blow out any further—we had Grant Robertson across the House saying, “That’s outrageous. You shouldn’t be cutting expenditure; you should be increasing expenditure.” Well, that would have increased debt even more, so it’s a little bit rich to have members opposite from time to time complain that we took on more debt and made the balance sheet worse.

That brings me to the next point in this statement, which is “Seeking value for money”. Now, in the seeking value for money part of the statement it says, “Direct Government ownership is only one form of intervention. The choice to own needs to be rigorously assessed against alternatives.” I completely agree with that. That is exactly the case—it should be rigorously tested.

The problem is with the Government we have now they’re not doing that, and we’ve seen that recently. We’ve seen that in three ways. The Government have ruled out any sort of public-private partnerships in education, in health, or in corrections. If you think about it, that’s actually quite mad, because for every school around the country that I’ve met, their biggest headache is buildings—the biggest headache is buildings. It takes up a huge amount of time that principals could otherwise be putting into improving education for their students. Instead, they spend it on their assets.

It’s left the incredible situation that we have in Marlborough, where we have Marlborough Boys’ and Marlborough Girls’ colleges who want to co-locate. It’s what the community wants. It would be a public-private partnership. We have the incredible situation where the Government is saying, “No, we know best. The community doesn’t want it. The schools don’t want it. But we know best, and we won’t have co-location.” They should be asking, frankly, the local MP Stuart Smith and talking to him about what the community wants. Unfortunately, they won’t listen.

It also confuses me a little bit, because we do already have a significant amount of private involvement in the education system. Actually, if you removed private schools in the State-integrated sector, that would lead to a huge amount more that the Government would need to spend on education and would further blow out the balance sheet.

💬 Dr Deborah Russell: That’s not true. There are lots of places in Whanganui college. They don’t have to go to Wanganui Collegiate.

Well, the member opposite mentions Whanganui, and that’s actually quite a good example. There are a number of other schools around the country at the moment that will go to the wall unless the Government steps in and helps them, and that’s absolutely what should happen, because if they don’t do that, then all it’s going to do is put more cost on the New Zealand taxpayer.

I now want to come to the state of the balance sheet. During National’s time in Government, there was a $97 million increase in total assets, and that was a net worth increase of $16 billion. Now, we did that at the same time as the mixed-ownership model. We sold down stakes in three energy companies and also in Air New Zealand. Now, the reason I raise that is because what it shows is that you can both sell down assets and also improve the state of those assets, and also increase the amount of revenue you get from them, because that’s exactly what happened with the mixed-ownership model. It is a tragedy that that Opposition opposed that and won’t take it any further.

I want to turn now to the Living Standards Framework. I was quite interested in this, because part of that talks about natural capital. There’s been a case recently where natural capital has been talked about. I specifically want to raise a point in here which talks about “Natural capital … includes land, soil, water, … atmosphere, plants … animals, [and] minerals.” Isn’t that interesting—minerals. All of it sounds very nice, except when you consider what the Government’s done recently in Taranaki. They made a disgraceful decision to shut down the oil and gas sector.

💬 Hon Chris Hipkins: That’s not true.

There was no—well, it is true, I’m sorry, Mr Hipkins. They now have a death sentence. They’ve been told that there’ll be no more oil and gas exploration any further from now on. Gas will run out. Oil reserves will run out. They have an absolute death sentence.

💬 Hon Chris Hipkins: That’s not true either.

Yes, it absolutely is, Mr Hipkins. What’s going to happen if the oil and gas sector can’t continue to explore? It’s going to run out. It’s a pipedream if you think it’s not going to run out.

I want to turn now to a few comments made by my colleague Amy Adams. She had some concerns about the standard within the framework that’s been put forward. She mentioned in her comments that it only envisages for one shock to happen, whether it be an earthquake, another global financial crisis, or some sort of incursion, and as we all know from recent history, that’s not always the case. As I mentioned before, we had two earthquakes in Canterbury on the heels of the global financial crisis, so any standard has to recognise that there could be more than one incident at any time.

Unfortunately, that could happen right now. We have, unfortunately, had an incursion in relation to biosecurity, and that relates to Mycoplasma bovis. Amy Adams mentioned foot-and-mouth, and that’s a very good example. It wouldn’t take six months to get over—it’d be much longer than that, and, in fact, if you look at Mycoplasma bovis, that’s going to be a lot longer than six months. The Government themselves are talking about two years. That’s going to have a huge impact not only across the regions that are affected—particularly in my area of mid-Canterbury and South Canterbury—but across the entire country.

I just want to end by saying that this is a document that spells out how successful National was in our time in Government in getting the books back in order, and we’ll do that again in three years, when we’re required.

E Te Māngai o Te Whare, tēnā koe. He tino hōnore tēnei māku te tū ki te kōrero e pā ana ki tēnei pukapuka kātahi anō ka puta mai, arā, He Puna Hao Pātiki.

He aha tēnei mea te ripanga kaute? E ai ki te ture me whakaputa tētahi rīpoata, tētahi rautaki e whakamārama ana, pēhea te nui o ngā rawa, ngā rauemi o te Kāwanatanga, o te Karauna, pēhea hoki te nui o te nama o te Karauna, he aha ngā nekenekehanga o ngā tau ki muri, he aha te tirohanga whakamua.

Ko tēnei pukapuka He Puna Hao Pātiki e mea ana, i te mutunga o te marama o Pipiri i tērā tau, neke atu i te $314 piriona te wāriu, te nui o ngā rawa, ngā rauemi o te Karauna. Tata ki te $117 piriona te nama o te Karauna. He āhua pai tēnā—he pai tēnā—ki te tirohanga. Engari he aha ngā taimahatanga? Māku e kī atu. I roto i te iwa tau kua pahure, nā koutou ki tērā taha o te Whare, kāhore koutou i whai whakaaro ki ngā mea tika. Kāhore koutou i hoatu i te moni ki ngā mea tika. I roto i tēnei rīpoata, tēnei pukapuka, ka kitea—tata ki te 20 paiheneti o ngā hōhipera he taretare, he pakaru. Neke atu i te 38 o ngā kura me te 25,000 o ngā whare Kāwanatanga, neke atu i te 50 tau te tawhito.

Tēnā pea he āwhā kei te heke nei, tēnā pea he rū whenua anō, engari e pai ana. Kei konei mātou i tēnei taha o te Whare ki te whakatikatika i tēnei. Kua kite i roto i te tahua Pūtea kātahi anō ka puta mai, e hoatu moni ana mātou ki te hanga whare, ki te whakatikatika i te hauora, te mātauranga, ki te āwhina i ngā rohe, ki te āwhina i ngā whānau anō hoki.

Engari, e hiahia ana ahau ki te kōrero ki tētahi mea hou kei roto i tēnei pukapuka. Kei te wāhanga tuatoru, arā, ko te whakapai ake i te hono o te whakahaere ripanga kaute ki te oranga. He mea hou tēnei, he mea nui tēnei. Tēnei mea te oranga—e titiro whānui ana mātou ki tēnei mea te oranga. Ehara i te oranga o te pūtea, o te moni noa iho. He nui kē atu te oranga o Aotearoa-Niu Tīreni i te nui, iti rānei o te pūtea o te Karauna, i te nui, iti rānei o ngā rawa me ngā rauemi o te Karauna, i te nui, iti rānei o ngā nama o te Karauna mehemea kei runga, kei raro i te raina mehemea he whero, he pango rānei.

He aha te pai o te whakapau moni mehemea kāhore tātou e āta titiro ana, āta wetewete ana, āta tātari ana ki te oranga o te iwi? Mehemea e toko ake ana te oranga o te iwi? O te tangata? He tirohanga whānui ki tēnei mea te oranga. Ehara i te oranga o te moni anake engari ia ko te oranga o ngā rawa o kiko, ā-tāngata, ā-hapori, ā-ao tūroa anō hoki. Ka noho hei tūāpapa mō te oranga. E hāngai ana tēnei ki ngā mātāpono whakarite i roto i te Anga Pourewa Oranga a ngā taumata ora, arā, ko te Living Standards Framework a te Kaitohutohu Kaupapa Rawa.

Arā noa atu ngā āhuatanga ka kīa ko te oranga tae atu ki te whai whare, te whiwhi pūtea hoki, te whiwhi mahi hoki, whai wāhi ā-hapori kia kaha te pārekareka o te ratonga o te taiao, te mātauranga, te hauora me te taituarā anō hoki.

He tuatahitanga tēnei, he tīmatanga pai. Kia ora.

[E Te Māngai o Te Whare, tēnā koe. I am honoured to stand and speak about this newly published document He Puna Hao Pātiki.

What exactly is a balance sheet? The law says that a report, a strategic statement, is required, stating the size of assets and resources of the Government,of the Crown, as well as the extent of Crown liabilities, along with how we have fared in the past and projections for the future.

This document, He Puna Hao Pātiki, shows that at the end of June last year, Crown assets and resources totalled about $314 billion. Crown liabilities came to almost $117 billion. That sounds fair enough—it looks good—on the surface. But what are the challenges? Let me tell you. In the past nine years, those of you who are on that side of the House, you did not consider the right things. You did not resource the right areas. This report, this document, reveals that almost 20 percent of hospitals are dilapidated or in disrepair. More than 38 schools and 25,000 Government buildings are more than 50 years old.

We may well have storms ahead or another earthquake, but that’s all right. We on this side of the House are here to put things right. We have seen in the recently announced Budget that money has been allocated for building houses, for fixing up health and education, for regional development, and for family assistance.

But I want to talk about a new thing in this document. It is in the third section and deals with improving the alignment of the balance sheet to well-being. Now, this is something new, and it is a big deal. Well-being—we are looking holistically at well-being. It is not just financial well-being. It is not just about money. Well-being for Aotearoa New Zealand is not merely about the abundance or lack of Crown funds, it is not just about the plenty or paucity of Crown assets and resources, and it is not simply about the large or small Crown liabilities, whether we are above or below the line, or whether we are in the red or the black.

What is the good of spending money if we don’t look carefully, if we don’t consider thoughtfully, if we don’t analyse properly the well-being of people? Is there any improvement in people’s well-being? This takes a broad view of well-being, not just in monetary terms, but in terms of practical, personal, social, and natural well-being. These are the fundamentals of well-being. This is in line with the principles outlined in the Living Standards Framework as described by Treasury.

There are plenty of other indicators of well-being including homeownership, receiving an income, having a job, having a place in the community, and enjoying the provisions of the environment, education, health, and support.

This is a first, and it is a good start. Kia ora.]

It gives me pleasure to speak to He Puna Hao Pātiki, 2018 Investment Statement: Investing for Wellbeing. Despite what we’ve heard, I think everybody agrees that this is a very good document. This is the second time this has been done in four years, and it actually paints a very strong and positive picture.

The total Government assets of $314 billion against liabilities of $197 billion mean that our total net value is $117 billion in Government assets and the Superannuation Fund, and that’s around $24,000 a person. And, actually, that is a very good result. For a public sector and for a public entity and for a Government set of books, that’s a really good result, and that is a 97 percent increase in assets since 2009. In a time when we went through the global financial crisis (GFC), the massive Christchurch earthquakes, and even the Kaikōura earthquakes, the increase in that value of those assets is significant.

I do want to take a little bit of time to talk about the New Zealand Superannuation Fund, which the Minister of Finance commented on—how good it is that contributions are now being made. The simple reason that contributions were stopped was because of the GFC and the pressure on the Government’s books brought about by the Christchurch earthquakes, some hard calls had to be made—calls that any business in New Zealand would make. We’re now through that process. The books are looking incredibly good, thanks to nine years of a National Government, and there is some money to invest.

However, if you look at the net worth of GDP—so the value of these assets is about 30 percent of the net worth of GDP—there were some interesting comments made by Treasury, and I want to flesh this out further. When we questioned how this related to international comparisons, they said, simply, “We’re in a good space.”, but that was their instinct, not their knowledge, and I actually think, as we go forward, we need to get better and we need to transfer to measurable results against other countries to know how we stand.

In this document and in the Treasury briefing, they talked about stress testing—stress testing the financial resources and capability of our balance sheets in New Zealand to deal with shocks like the GFC, and like the Canterbury earthquakes. But, in this case, they’ve measured against a Wellington earthquake, foot-and-mouth, and another GFC. We questioned some of the assumptions about that in Finance and Expenditure committee and, actually, I’m left with thinking that more work needs to be done. We have the ability to manage one of those shocks at a time, but Treasury clearly told us that if more than one occurred, that would really stress us.

So in the new fiscal testing theory that they are using and the regimes they’re using, most of the financial investment decisions will now be measured with a fiscal stress test in them. They will measure them against what the likely shocks are in the next five to 10 years, and that’ll be part of a new tool.

I do listen to the other side with some interest when they talk about what happened to debt, what has happened to property, and how it was being looked after, and I do question whether, if they were in the same position over the last nine years going through the global financial crisis and the Christchurch earthquakes, they would have actually made any real different decisions. You see, the housing stock in New Zealand has over 25,000 houses that are over 50 years old, 38 percent of schools are over 50 years—they weren’t decisions that were made in the last nine years. Successive Governments have allowed an under-investment in long-term thinking.

I come from a background in local government where, in 2002, the Government introduced legislation for local government to look at long-term asset management. I actually think this paper and this document and the thinking will lead the Government—no matter what political party—to go down a similar path. As we try to make New Zealand more resilient, I actually think this is a very good second effort, and with refinement, in four years’ time I think we’ll have a far better long-term understanding of where we’re placed.

When we look at this document, the 2018 Investment Statement, on the face of it it looks somewhat tedious—just like a set of accounts, a set of numbers, a set of perhaps decisions to be made. But it’s the subtitle of this document that carries the real interest—the subtitle of this document that tells us what we are really about here in Government, and that is Investing for Wellbeing. I find this an absolutely fascinating document because it so clearly links the numbers, the figures, the assets, and the liabilities with our real purpose here, which is to invest for the well-being of our nation and of our citizens.

What I want to talk about is why this matters—why it is important that we talk about well-being; why it’s not just a word. You know, I was listening to our colleague Mr James Shaw before, and he talked about how, I think, in the late 1990s he was working at PricewaterhouseCoopers in London and they were starting to work on how to measure some of these aspects of well-being. I found that very interesting because at the same time as Mr Shaw was doing that in London, I was studying philosophy here in New Zealand, and then again in my doctoral work.

In that study of philosophy I read, in particular, Aristotle and the Stoics and many of the ancient accounts of the good life. There was an account of the good life there with a word that they used to sort of talk about what the good life might be. It was a life of Eudaimonia—a Greek word. As a Greek word, it can be translated into English. Sometimes it gets translated as “happiness”, but that doesn’t quite capture it. Sometimes it gets translated as “flourishing”—the flourishing life, the life well-lived, the life where potentials are explored, the life where people have the capacity to engage in the world.

Now look, the ancients often had an inwardly focused account of the good life. It’s really only in the later Stoics—people like Marcus Aurelius—that they started to have a focus on what it might be for a society to be a flourishing society. I think we can use both those ways of look at looking at the good life, both for individuals and for society.

What is it to have the eudaimonic life, the flourishing life? Again, the ancients had an answer that I didn’t quite like some of the time. They said the good life was the life of philosophical contemplation. I always thought that was nice for someone who had someone else to do the dishes for them. I always wondered who was going to do the work.

But there is a broader account of it, and again this one particularly comes from Aristotle, that the good life is the life lived by the autonomous man—man—living in his home with his wife, his children, his servants. Secure, with a place to live, an income, and activities that he was engaged in, and being part of a community—that was the good life and the flourishing life. For Aristotle, people who could do that—men who had those resources—were citizens of a society, and, of course, that explains why women were excluded from citizenship.

In the 21st century, we think we are all citizens and we look to make sure that each and every one of us can lead the flourishing life, can lead the good life, can lead the happy life of engagement. The way we do this is by making sure that each of us as citizens has the resources—the assets, the liabilities, the income—and the social structures around us of the health system, the education system, and the welfare system in order to be secure and to live the life of well-being, to live the good life. Once we can do that, we can choose so many different ways to live.

This is why I want especially my colleagues in the National Party to listen to this, because a person who is leading the flourishing life is a person who is free to make choices, to choose how they’ll live their lives. Whether they like living alone or living in a community, whether they like playing sport or playing the piano, whether they prefer watching, Jane Austen adaptations on BBC or Dancing with the Stars—and, for the record, Mr Assistant Speaker, I do both—those are choices that a person who is free, who is flourishing, can make.

This ancient account of flourishing was somewhat lost, and, in particular, in the 20th century in ethics and in political theory there was very much a utilitarian turn, a cost-benefit analysis, a weighing up of one for one. Frankly, if we just looked at the words “Investment Statement”, that is quite a utilitarian statement, very much focused on just the sort of straightforward cost-benefit analysis. But towards the end of the century we started again to have that focus on well-being, that focus on what life could and should be like, and so we turned from that row on row of figures into the rather more thinking about how we can live the good life. That’s why it is so important to link resources with the outcomes.

I think this document is absolutely fascinating because it so clearly and explicitly sets out to link the resources we have with living a good life, with living that life of well-being. On page 5 of this Investment Statement, we have an attempt at saying what well-being consists of for us. It says, “Wellbeing comprises tangible and intangible aspects of life experience, including housing, income, employment, community engagement, enjoyment of environmental amenity, education and health and security.” Aristotle would have been proud to see those words in a Government document in the 21st century.

They are really important aspects of how we live our lives. Now, this is not new work for Treasury, but what I find really fascinating about this is that Treasury was already engaged in its work when it started talking about the four capitals—the four ways that we might think about our resources. Again, here they are, sitting on page 72 of this excellent document. We talk about natural capital, human capital, social capital, and physical and financial capital. The work in this document expands and starts the work of expanding on those capitals until we get into a real sense of what well-being might be.

So the question we have to ask ourselves is: do we have the resources to create the flourishing life for everyone? And this, of course, is where the numbers become important, because what do the numbers tell us? Well, in supplementary questions that the Finance and Expenditure Committee asked of Treasury, we found that some of the numbers are telling us that we’re doing really fantastically well. So, for example, when we compare our net worth compared to our GDP, New Zealand does very, very well compared to lots of other countries. So our net worth in terms of a percentage of GDP is something like about 38 percent. That’s pretty impressive when Australia’s is negative 19 percent, Canada’s is negative 31 percent, and France is negative 130 percent. We’re actually doing well in that regard.

But the numbers do tell us some other stories as well—that we’re not doing so well in some other respects—and, in particular, the social assets are a problem for us. We know that our social assets are run down. We know that those social assets that we rely on to provide us with well-being, the social assets that matter to us in terms of whether we have housing and education and health—we know that there is a real problem in that social portfolio.

But the housing portfolio—and this is on page 48 of the report—has aged, with approximately 40 percent of assets older than 50 years old. The district health boards are reporting that their assets are run down or in poor condition and 38 percent of school buildings are 50 years old or more.

We have run down the resources we need to ensure that each of our citizens has the capacity to flourish, and that’s one of the critical things that this statement tells us. So that’s why it is really important for us to focus us on rebuilding our asset base in those social assets to ensure that each and every one of us—every child and every adult, no matter where they live in this country—can live the flourishing life, so that they can lead the life of well-being. I am so looking forward to seeing the future work that Treasury does on well-being—how to measure it; what it consists of—and I am looking to seeing those numbers linked to our physical assets, our resources, to ensure that we as the Government of New Zealand make it possible for each and every New Zealander to flourish.

Thank you, Mr Assistant Speaker. Well, I’m slightly offended at the comments of the last speaker, Deborah Russell, when she suggested that anything over 50 was run down or worn out. I’m not sure about—I’m over 50, Mr Assistant Speaker. I don’t know about you—you’re obviously a younger man than me—but saying that anything that’s 50 years or older is run down and decrepit? I’d have to disagree with that member.

The report is an interesting one. It states clearly the situation as it is today, but I think it is also useful and interesting because the main point for me is this report challenges us to think about the status quo or to challenge and question the status quo. It asks us to consider our assets and liabilities within a framework—within this Living Standards Framework—and that’s a different way of thinking. So that’s a good thing. I’m not saying the standards per se are the right standards, but I’m saying that challenging the status quo is a good thing.

If we look at our balance sheet we might think—it’s a little bit disappointing hearing some of the speakers on the other side conclude from this statement that we need to put more money into, say, housing or that we need to put more money into schools simply because they’re run down. That is not a conclusion that should be reached after you read this statement. The conclusion that we should be reaching is that we need to think differently about how to manage our assets and liabilities.

If I can go through a couple of those assets and liabilities which have already been changed in the last nine years—I’m referring to ACC, a very large asset on the balance sheet. As we know, that is a very large asset on the balance sheet and, as we know, that is a fund that is now fully funded, so that is a different way of dealing with ACC and it’s changed in the last nine years. So that means people who suffer from accidents, effectively, pay for themselves from the levies that ACC have collected in advance. We don’t collect the cost of the recovery of that person at the time. It’s already been funded, and that’s a very good way of fully funding the ACC.

Should we be funding the Department of Conservation differently? I know there is a lot of discussion around that. There is talk of charging for walkways across our conservation estates. That’s a good thing that we’re discussing, in thinking about different ways of managing that asset.

Should we be thinking about our healthcare, our hospitals? A lot has been talked about the hospitals as being old—some of them—and therefore concluding, incorrectly, that the health system is broken. The health system’s not broken. The buildings may be old, and the owners of those buildings may not be the right owners—because this statement questions who should be the right owner of these assets. Who should be the owner of $30 billion - odd of social housing?

We here work in buildings, some of which are not owned by the Government. We have agencies and we have departments that reside and work out of buildings that are not owned by the Government, and that’s the way it should be. But why should all our doctors and nurses work out of a building that’s owned by the Government? It makes no sense to me at all that the Government should be the owner of our hospitals. It’s nonsense. As I say, we here, ourselves, don’t work and reside every day in a Government-owned building, even though we are Government employees and work for the State.

Similarly, Government after Government after Government have proven that they are useless landlords as far as Housing New Zealand Corporation is concerned. We cannot and do not know how to manage $28 billion to $30 billion - odd worth of houses that house 65,000-odd tenants. We’ve proven that.

💬 Hon Chris Hipkins: Well, National did, yes.

The problem with the opposite side is that they just cannot admit that Governments historically, including the previous Labour Government, were no better. In fact, this side would say they were worse. At least on this side we encouraged private sector involvement by way of community housing providers. An example—exactly the right example—is where private investment owns the houses but the social services that those tenants require and need are delivered. They’re still delivered, but the business of ownership is not that of the Government. In fact, in the Wairarapa we have no Housing New Zealand Corporation houses. They were sold about 20 years ago to a trust—the first community housing provider.

So my point I think I’ve made is that we need to continue to think about who is the right owner. Now, remembering of course that the Government spends about one-third—one in every three dollars in the economy is spent by the Government. We’re a big business. We should be thinking about our business. In fact, we should be thinking about what our purpose is. Is it to own buildings? Is it to own hospitals? Is it to own schools and social houses? I say no, absolutely not. It is not the purpose of a Government to build big, flash balance sheets with physical assets. ACC—absolutely the right thing; that’s exactly what the previous Government has done to think about the way things should be funded. Superannuation: another problem that we all face, on both sides of the House. It’s a longstanding problem and it will continue to be a problem as our population ages and more of us are older. So let’s think about a way of addressing that. Let’s discuss it and put it on the table. This document asks us to do that. This document asks us to think about the way we look at our assets and liabilities.

There is the New Zealand Defence Force. We could privatise our army, but I don’t think that would be a very good idea. Some might suggest that—I don’t know if the Minister of Defence would suggest that, but he’s got a lot more experience of that than me. Of course, there is roading and the New Zealand Transport Agency’s role in this economy. Why does the Government have to own all the roads? Why does the Government have to fund 100 percent all of that tarmac? Why can’t we use the private sector to help fund it? The same with the universities—we should be thinking about that asset. Is it a lazy asset? Do those universities own too many buildings? Do they own too many farms?

We need to question ourselves about what assets we should own and what our purpose is as a Government to support our citizens. Just imagine if we sold $30 billion worth of housing assets and gave it to the 65,000 tenants and said, “See you later. Find a place to live. We will still look after you. We will still wrap around those services. We will still take taxpayer money to support those who are most in need, but we do not need to house you.” I just wonder what those 65,000 people might say. So that’s the assets and liabilities. I think it’s a good document because it asks us to rethink the way we manage those things. But I do have a few issues with the framework, because now that’s suggesting four pillars, and even though we’d like to have all the pillars at the top—10 out of 10—that’s just not going to be the case.

So any decision that is made here, I ask: how do we get the ratios right? It’s going to be tough enough with the Reserve Bank looking after inflation and any other topic that Mr Robertson might task them with, because you twist one and the other one pops up—you can’t push them all.

So my question is—and it’s an interesting framework—how are we going to get those ratios right? To use Michael Wood’s analogy of the wealthy family with a dirty stream and the sick family pet and the mentally ill teenager, the wealth is important—it is really important. That family is going to be way better off than a poor family in the same situation, so wealth is important, but so is the dirty stream, so is the sick animal, and so is the mentally ill teenager. So we have to get a balance, and we have to account and measure for it.

Thank you, Mr Assistant Speaker. If there was any doubt in anybody’s head about where that particular member, Alastair Scott, sits in the economy, you’ve just heard it all: “Privatise everything. Privatise the schools, privatise the hospitals, privatise the prisons, the army, the roads, and the hospitals. The roads—privatise the roads. Let’s sell the roads off. Let’s sell the army off, as well, and privatise everything—the housing market.” He’s singing the song of the previous Government, who thought that was a really good idea, but it was a terrible idea, because the market doesn’t work for everybody. In fact, you just need to come to Rotorua and ask all of those people that are without houses and have been homeless for quite some time. The market has absolutely not worked for them, and that’s why the Government has to have a hand in actually looking after our people.

That’s why I’m proud of this right here: He Puna Hao Pātiki. It’s an Investment Statement; it talks about how New Zealand is going. While there’s one thing that I agree on with the previous member—it is actually a fresh look at how we’re doing as a country, as an economy—he seems to think that we need to relook at all of those things, like privatising it all. I fear that if in the future we change hands again, as a Government, that privatisation agenda is going to rear its ugly head all over again.

What this is is it’s actually an investment in the well-being of New Zealanders, and that’s something to be celebrated. When I sat on the Finance and Expenditure Committee and we welcomed this in, I’ve got to say, the first thing that I noticed was the big, bold title on the front, which is written in Te Reo Māori, and then, threaded throughout it are translations of Budget documents, of balance sheets. But it’s an indication that, actually, we’re trying to make Treasury a little more Māori-friendly, and isn’t that a good thing?

So, on that note, I want to acknowledge Trevor Moeke, who actually did the hard yards in making sure that this was a document that we were very proud of and that it reflected the bicultural nature of New Zealand. That’s it in a nutshell—it sets the tone for the whole document. So I want to acknowledge him, going forward.

This is actually a requirement of the Public Finance Act that we release this particular Investment Statement. It talks about the value of the Crown’s portfolios, all of our assets, all of our liabilities, and it does it with this new thing that we’re bringing in: the Living Standards Framework. Isn’t that refreshing, that we’ve got a new idea about how we’re going to look at our Budget sheet?

When I go out there and I talk to people about how we’re doing as a country, I say—actually, let me refer to one example of a couple that I know in my electorate. They are about to embark on family life. They both have good jobs, full-time jobs, so on the balance sheet they should be doing really well, right? Well, wrong, actually, because the balance sheet doesn’t tell everything. The balance sheet actually just tells you what the numbers look like, and, unfortunately, we know that the numbers don’t tell the whole story.

The numbers, actually, are just one side of it. The other side of it is how well you are actually doing. I think that if you were to ask this couple, they’d tell you that they’re struggling quite a bit. So while the Government might think that they look great on paper, actually, there are some real issues going on out there in the New Zealand society. It’s a concern, which is why I think that it’s important that we’ve moved our balance-sheet reporting to looking at it through a well-being framework—the investment for well-being.

This is Treasury’s work to ensure that we’re going to have a better understanding of the connection between the decisions made by Government and the well-being of New Zealanders. Both are really good things. Well-being is, as I’ve just said, a holistic approach to our balance sheet. It comprises both tangible and intangible aspects of life experience, and I’m looking forward to New Zealanders actually wrapping their head around the Living Standards Framework, which—on page 72 of this very hefty document here—talks about the four capitals: natural capital, social capital, human capital, and physical and financial capital, as well. If people haven’t heard of that, I encourage them to google it to have a look, because that’s the direction that this Government is moving in, and I wholeheartedly support it, too.

One of the other things that I wanted to talk about in this particular document is about how we’ve put in place a few stress tests. It’s been referred to by some members in the House today. But what good is a balance sheet if you can’t actually test it out and do a few hypothetical tests about how well it’s going to cope in the face of some adverse effects? We know that here in New Zealand we live on shaky ground. We know that volcanoes blow. We know that the earth shakes, the people move, and the buildings fall over. So what this investment for well-being statement has done is it’s actually stress-tested against three different tests.

One is a severe Wellington earthquake. We don’t like to think about that—that scares the children. But, actually, it’s a very good indicator because it’s very possible—and very probable, too. Also, the outbreak of a foot-and-mouth disease—we’re saying “foot-and-mouth” in here, but, as we know, as we’ve been listening closely to for the last month and probably even longer, the outbreak of Mycoplasma bovis has become a real problem. Actually, it’s something this Government is sorting out as we speak. But, actually, that’s something that you can have in your balance sheet and say, “Are you well-insulated against shocks like that?” Well, that was one of the stress tests. Another one was a major international economic downturn—how our balance sheet would stack up against that.

Well, you’d be pleased to know that the conclusion was that the balance sheet is resilient against those three stresses. I think that all New Zealanders would be happy knowing that we haven’t just produced the financial statement here, but that we’ve actually stress-tested it, as well, and that in the face of shocks like that, three of those stress tests were actually going quite well, and we will make it out the other side if we do have events like that.

I just want to take this opportunity to acknowledge what’s going on in Gisborne at the moment, as they’re trying to clear up their own backyard due to unforeseen circumstances—things that nobody could have ever planned. But, actually, it is a stress, and it is a stress on the Government’s books, and we have to make sure that we’re resilient against those kinds of stresses.

So this is a great document. This is an innovative piece of work. I look forward to the development of it over the next few years, and even longer, as we stress test it, and as we look towards measuring up the numbers to the well-being of New Zealanders. I think that it’s an innovative document that we all need to make sure that we support.

For those that have no idea, “he puna hao pātiki” actually refers to a pool for gathering flounder with a net. It refers to the well-being of our people, and that’s exactly what this Government is prizing itself on—bringing manaakitanga back to New Zealand politics, bringing love back to our people, because they’ve been missing for quite some time.

There are quite a few things in here that the document talks about. It cuts it up at the end of the document into different Government departments, and it puts out the statement very well so that people—well, average people; not people that are wrapped up in the bureaucracy of Wellington, but actually people out there, regular New Zealanders—can actually understand what this document is all about.

There’s plenty of things in here to be proud of. This is the Investment Statement that this Government, in its first term, is very proud to be putting forward, and I’m very happy to recommend this to the House. It’s a beautiful document. Thank you, Mr Assistant Speaker.