Wood MichaelMICHAEL WOOD (Chairperson of the Finance and Expenditure Committee): 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 $24000 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 25000 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."