Right, kia ora, good morning everyone. Thank you for joining us today and a warm welcome to our members who are tuning in on the live stream from across central region. For those I haven't met, my name is Amanda Wood, I'm the Acting Chief Executive of the Wellington Chamber and Business Central.
We're very excited to hear from the Minister shortly, but before we do we've just got a quick bit of housekeeping that we need to go through. So in the event of a fire please use the nearest exit which is just out there and gather either out on Lampton Quay or near the exit to the car parking building on Johnston or Waring Taylor Street. If there's an earthquake stay inside and move away from the windows.
And the women's toilets are just out by the kitchen and the men's if you go through the lift area and to your left you'll find them there. Looking ahead we've got our next Beehive to Business with the Honourable Scott Simpson on Tuesday the 7th of October and then our Annual Wellington Address on Wednesday the 22nd of October. So all the information on those events are sitting on your chair and the pamphlets.
Before we kick off I'd also like to acknowledge Ambassador of France Laurence Vaux who's here today and Ambassador of Ireland Jane Connolly and Ambassador of Italy Cristiano Megapinto and Ambassador of Korea Chang Seed Kim. So Honourable Simon Watts Minister of Climate Change, Energy, Local Government and Revenue has a wide ranging portfolio and here in Wellington local government and commercial rates are currently a key issue for us highlighted in our Greenlight Economy Report and I think there's a couple of copies of that out there if you're interested. Now the Minister's wider responsibilities across energy tax and sustainability also have a big impact on business and we're looking forward to hearing from him today.
Before I hand over I'd like to thank our partners Alan and Clark for their support in bringing the Beehive to Business series to life. It's great to have them alongside us for these conversations. Please welcome Matthew Allen to say a few words.
Thank you Matthew. Thank you Amanda. Look it's a real pleasure today to be able to welcome the Honourable Simon Watts to the breakfast.
Simon you have got a hefty backpack of portfolios that's for sure as we've just heard, Climate Change, Energy, Local Government and Revenue. So in short you're holding the levers on some of the most critical issues shaping not just Wellington's business environment but the whole country's future. Now Wellington is this wonderful place where policy makers, innovators and business people all rub shoulders and sometimes bump heads.
We get the best of innovation and ideas here and have huge inherent advantages as noted in the Chamber's recent publication with Alan and Clark and Infometrics. Now while that publication did highlight some economic indicators we're not so good in compared to the rest of the country, what it did do was highlight some significant advantages including a highly educated and skilled workforce, a compact and liveable city environment with a strong creative and knowledge economy, a vibrant cultural scene and significant government and tertiary institutions presence among other things. But with that comes charging and making sure energy stays affordable and reliable, that our city can withstand whatever climate change throws at it and that local government actually works for businesses not against them.
And ith rates and infrastructure costs frequently up for debate you can guess there's no shortage of opinions in the room. The report that we've developed for the Chamber provides quite a clear agreed way forward for Wellington's economy and quite keen to have some discussion about that today. We've seen some good news moves by the government already around water reforms, promoting electricity competition, investment in solar and geothermal energy etc and we're quite keen to hear what comes next.
How will you and the wider government help businesses innovate without being stuck in endless regulation? How do you balance the urgent need for climate action for a range of voices and strident voices of that that you're faced with? Wellington's business community thrives when government and businesses are in sync so we're looking forward to hearing your plans, your challenges and most importantly your commitments to support us as we navigate some future challenges together. Please join me in giving a warm Wellington welcome to the Honourable Simon Lotz. Well tēnā koutou katoa everyone, very good morning, great to be here.
I want to firstly acknowledge the ambassadors, I was just sitting there in the room listening to the names and I heard France, I heard Ireland, I heard Italy and also Korea and so this is a little bit of a quiz, so at the end of this you need to work out the answers to this. So my wife works for one of the major multinationals of one of these countries, I've lived in one of these countries, my grandfather fought in one of these countries of World War II and I also, one of these countries, my favourite beverage after five that has bubbles comes very much from one of these countries as well, so I'll leave that with you as we work our way through, probably the most difficult quiz that we'll have all day but a good icebreaker anyway. Hey look, as noted we are very much at a turning point, I think not only is the weather, it just feels like spring has arrived and at long last, nor yesterday but the day before definitely, but that turning point of seeing those shoots of economic growth, that degree of energy in the arm, which I think we all absolutely need, is starting to become a reality and while it's very early on and things remain still very, very difficult for many New Zealanders, we can see a pathway of how the environment and our economy is going to and will improve and I think that is something that we should all be optimistic and positive about.
We've had it difficult, we all know the past but when we stand here today and think is next week, is next month, is next year going to be better than last week, last month and last year, my confidence is absolutely yes and so I think as we progress and think about the requirements in terms of the policy interventions and the way in which government and business and local government work together, get lined up, rowing in the same direction, we need to really make the most of where we're at because when those economic winds change and they will and they are really going to be as gusty as it was in Wellington yesterday, then we need to be ready as a country to harness that and to make the most of that because I tell you what, every one of these countries and others are already competing heavily as we are, this is a competitive global environment and we need to make the most of that. So I think that's the backdrop. The report done around green light economy, the path to a more resilient Wellington through private sector growth is a good example of that vision and the way in which we need to be taking a lead around having a clear vision for our capital city and I have the opportunity to spend a lot of my life here in this capital city and I enjoy it, not only in terms of just the backdrop of an ocean-based city which is beautiful in itself, the vibrancy and the energy of this city is something we must be proud of and we must continue to build and grow because in the context of city and regions across our country, we need all of our cities and regions bustling and vibrant and economically driving for that agenda and I think that is in front of us from where we are.
There's a number of key areas in the context of portfolios that I have, yesterday was a bit of a long day, I'll be fair, I got home about midnight, we've passed the forestry restriction bill which is basically not allowing exotic pine trees to be planted on productive farmland, a really, really important issue for rural New Zealand but I actually think all New Zealand in the context of thinking about protecting our communities, our businesses, local communities and rural areas around that challenge, so that came in last night. We did some expansion on the family boost, again a really important policy in terms of providing support to families with children and early childhood education, increasing that from 25% to 40% and increasing the income threshold from 180 to 230. As a result of those changes which are now in law, a hell of a lot more Kiwi families and those with young children will be getting support and that's really, really important because we've got a major challenge that we're doing obviously in terms of getting over the cost of living but as we move into that economic growth portion.
It'll be unsurprising that I don't talk about energy. Energy is I guess what you'd refer to as front of mind for me as Energy Minister. Not only is the focus around finding solutions to our two major problems and challenges, energy security and energy affordability, but we're obviously undertaking the review.
People are getting sick of hearing about this review and they just want to know what's in the review. I get that. We are now, and I'm looking at the days, a matter of days from the end of the month, so I can't give you the specific date yet, but we're in a good place.
We know what we're going to do around that and we're just making sure that we're in a position, but you will hear more from us in the coming weeks in regards to that. Why is that important? Because energy is a major, as you all know, a major driver of our ability to have a competitive advantage on the economic growth front. New Zealand should and must have abundant and affordable energy and we have the capability to do so.
We have one of the, you know, a pretty impressive energy system already. We have the way in, you know, our nodal pricing in itself is not to be, you know, other countries don't have what we have in terms of capability and we have a massive opportunity in terms of new generation. The build programme around new generation today is of the extent and scale of the Think Big era, right? And when you sort of reflect, and I'm obviously a little bit younger than that, but I know that the assets we have today because of the decisions made in that period have set ourselves up for success, but the scale of build at the moment is of that equivalency and so that is pretty significant.
In the context of the broader review, you can be confident that it will focus on the key issues within the market, which were highlighted through the dry year effect that we had last year. Interesting, I was in Beijing two weeks ago now and I had a bilateral with the Chinese Minister of Climate Change, he's got a few big issues on his table as well, and we had lunch and he's saying actually China had a dry year as well last year and so, you know, he was saying we had a bit of challenges with our low hydro late levels and I thought, well, geez, if you had challenges, you know, in context, so, you know, but same challenges, different countries, just massively different scale, but that hydrological issue around dry year is not just a New Zealand issue, it actually is an issue facing many countries and think about us, Brazil, China, you know, with large proportion of hydro underpinnings, it is something that we must think about how we, in effect, mitigate that risk through strategic fuel reserves, which has been done through the Huntly Agreement with coal and actually just accelerating that build of renewables so that we have more optionality and also the great technology from a number of the countries sitting in the front row here around, you know, offshore wind battery technology as well. Another announcement we made this week just on offshore wind for those in the room that are involved in that sector, one of the key challenges highlighted in the select committee process was the fact that when you've got offshore wind buttressing up against, say, offshore seabed mining, there's an exclusivity issue, you know, one player doesn't want the other player to come in and encroach on their turf and so we've created an amendment that we'll put through when we do the committee, the whole stage of the bill, in the coming months that resolves that issue, that takes the exclusivity issue off the table and in effect empowers powers to the Minister of Resources, Minister Jones and I, the Minister of Energy, to in effect designate an area which protects that zone so that the certainty is in play for the investors to know that someone else can't necessarily come over top and take that away and I think what that reflects is just a willingness of government to listen to feedback, to be agile enough to change the legislation and to make the changes which in effect unlocks a significant opportunity for New Zealand around not only new generation around offshore wind but significant economic growth opportunities and I think, you know, that in itself is a good announcement and a good step, we just need to get a landing slot in the legislative agenda which is a bit like trying to, there's a lot of pipeline of legislation because the ministers are so amazing and they're doing all these bills but the problem is you can't get a slot to get your bill through so you have to be very good at negotiating with Minister Bishop which we're working on at the moment, we probably should get him another bottle of wine at some point Jack, just to encourage him to get a few more of our bills through but on other fronts as well, the key area is in the water space and local water done well, I mean we sort of, we sit here, well the 3rd of September sort of passed, that was the milestone date for all councils in this country to in effect submit their plans on a water services entity, right, we've got 68 councils, quite a lot of complexity and variation across the motu in the context of those councils, every one of those councils bar one Tasman because obviously they had a bit of a challenge with the weather and the fact that they've got an extension, every other council submitted a plan, virtually all of those councils have submitted a plan that is financially sustainable and that's not me saying it's financially sustainable, that's the Commerce Commission assessing their plans and saying that they are financially sustainable and so that process of validating that, that's because we receive draft copies of all of those plans, I can be confident to be able to make those type of statements, we're going to be seeing those being approved, so as of last evening, and this is announcing here today, the Waikato grouping which is 6 councils, 130,000 ratepayers is coming together to form a single water services entity, that is pretty significant in a New Zealand local government sense around consolidation, 6 councils coming together to form one entity and as a result more efficiencies for ratepayers, more optimisation and working together, more capability and competence across the water sector area and actually that decision has been made, it's been approved by DIA last night and as a result today they have the certainty that they can get on and actually do the doing and that's probably the most important thing, if you link that back to our economic growth, we need that shot in the arm of activity, we need certainty so that these businesses are doing the contracts and getting the money out the door to our tier 1, 2, 3 and 4 contractors who are really really struggling out there because of that sort of that lay period of decision making in the main across the board, but we do know that local government has the ability to unlock some of that activity and so you will see a number of those announcements coming out and again that is certainty, that is confidence, that is showing what local government can do around consolidation which actually sets ourselves up well for in the future when we think about post RMA, what local government will look like and do the local government entities have the confidence and capability to be able to envisage a world that's different to the current state and a world in the future that is more amalgamated, more consolidated and that the muscle memory that they will build through doing the water exercise creates a degree of muscle memory and confidence that they can go further and do not underestimate that power as we all know when you do change you've got to bring people with you and that confidence is often there and particularly in politics we're conservative and people will default to no it's too hard let's not do anything so the fact that we're having breakthroughs like that there will be 12 of those entities of that type of scale by the time we're in early November.
At this point I'm conscious we want to do a little bit of Q&A so we've got a few more minutes but the other thing I just want to talk about is city regional deals. Now I acknowledge that Wellington was not one of those that was selected and that's okay because we're going to be opening up another process in probably next year, timing to be determined but we want to make sure we've got the Auckland conversations, we've got conversations going in the Bay of Plenty and also in Queenstown but I think the challenge for Wellington is to get itself and it's ducks in order now, get itself prepped around what that deal structure looks like, what does Wellington city and region more broadly want to have on the table and make sure you're ready for when we come out and ask for submissions next year so that to be honest it's a competitive process but your plan is one of the plans that is there for ministers to go well actually we should back that in the context of thinking about where we're at. Now that applies to every city and region in the country, I'm not being biassed but in the context of where Wellington did not submit then there's a real opportunity there and I think that's an area where as a grouping and a grouping of leaders in the room that is something that you can do because if I look at other counties say Bay of Plenty, the fact actually their model has actually not been driven by local government, it's been driven by the business community and the business leadership group in the Bay of Plenty with local government there in support and as enablement but the projects on that list haven't come from local government, they've come from the business leadership and the NGO and that group and they've stepped up and in effect driven that project and I think if you think about enduring certainty, take away the politics, local government, central government come and go, if you've got that leadership at those that are at a business sense within the community then the enduring nature of that is going to be very very important.
I'm going to leave it there, I want to get into Q&A, hopefully that just gives you sort of three key areas which we're working on, it's a sort of a bit of a sampler of what's going on even in the last seven days and you can expect in the coming, well it literally will be in the next two to three weeks, you know further announcements in the context of what we're doing on some pretty significant aspects of our energy market focused on resolving the problems that we encountered last year but importantly take away the politics, take away everything else, we want to make sure that we're taking and undertaking policy reform and changes that deals with the problems that the market could not fix and has not fixed and ensuring that we have an enduring confidence of that market moving forward for the next 10, 20, 30, 40 and beyond years and that degree of certainty that we can do and play in our role of government combined with listening and working with the industry ensures that we have certainty and an enduring certainty around confidence which should in effect provide and take some of the volatility out of the pricing and provide a price pathway for more abundant and affordable energy and get that energy back towards what was the long-run average price, production price in terms of energy in the country and that there means businesses have confidence to invest, to hire, to employ more people and to grow and if you do that then this place is going to be as amazing as it can be and I think that's the ambition, optimism in front of us so thanks for the opportunity, let's get into some Q&A. Thank you, so first of all we've got people online so it'd be really good if we could get at least one online question today but has anyone put your hand up and stand up and ask the question and we'll go from there. Tena koe Minister, nice to see you.
I have a question about waiting actually, everyone's favourite topic of the early morning meeting. So with the local government reforms you all are looking to introduce rates caps. Here in Wellington I know we've been working with the Chamber of Commerce, there's I guess around the country an issue but in Wellington we've particularly got it around rating differentials.
Are you looking at all at introducing differential caps as well underneath the overall caps and then a supplementary to that is we're also very keen to create some mechanisms where businesses can get together and basically fund different infrastructure projects like flow protection schemes or whatever. Are those elements that you're looking at introducing in local government reform and what's the timing on that? Thank you. Yeah first and foremost the priorities of local government are RMA reform and local water done well.
We've got to get those things, those two key projects done and done well before we try and spread ourselves too thinly on doing more reform in other areas. Why? Because we learned that from the last government, spread yourself too thinly, you end up you know taking a lot of hits which we will because this is complex reform and you end up losing your ability to maintain momentum and in the end you don't deliver anything. That has a massive cost for our economy and our country.
We cannot afford to store and to flip-flop on policy and so that's why Minister Bishop and I are so focused that get those two things done and done really well, embed them and then move forward to the next thing. We are doing the strategic consideration around you know what that model will look like post those changes and we are thinking you know more broadly around systems improvement as well but the specific point you noted in fairness is not the highest priority for us here and now. In regards to rates capping, well we all love rates capping and I can tell you what all New Zealanders love rates capping as well.
The reason why is because they want certainty around how big or what that increase will be and when you've got increases in some parts of the country at you know 20 percent plus and inflation running at two, you don't need to be an accountant to work out that's you know a bit of an issue and when you've got a fixed income and you've got challenges around cost of living it's a no-brainer right and so then you've got the overlayers like then they see the photos and the pictures of their money being spent on things they don't deem core or priority and in effect what they deem is nice to have and so that's the tension that we're dealing with. We'll have policy and I'll be taking policy back to cabinet for a decision before Christmas. I've got a team and a very smart and bright team of non-public sector, I've got external people including those from Australia that have built and designed the Australian models are involved in designing a New Zealand model that's that is fit for purpose for us.
Big thing for me is to say make sure we've got a clear you know the cap or that we put in place has to be at a point at which is sustainable and affordable for New Zealanders but it also needs to not act as a counter balance or a counter factor to our growth ambitions as well particularly when you know that different parts of this country some are growing some are not and we don't want that revenue constraint to constrain growth which is also our other priority. So there is mechanisms to achieve both and we're working our way through that but we're taking our time because again from a policy certainty point of view and you're having you know local water done well in opposition and Jack who's my advisor here was very much part of that you've got to do the work to make sure the policy is robust so that as and when you implement it it has its best chance of having enduring success without you know opposition saying well it's full of holes and we're going to repeal it and all that and then we go back we lose all that time so we are taking our time to make sure that it's done as as best as we can but we're also balancing it with that with people are going we're really hurting at the moment rates is a massive build for us particularly I think fixed income not all income but fixed income as well we can't afford these rate increases that we're getting and we need some help around that so that's where we're at. Hi just some questions from online one from Megan who says natural gas is a huge issue for manufacturing at the moment how are we going to get some certainty on supply and price going What's Megan's surname? It's all right I'll just call her Megan at the moment I'm sure she's not the other Megan I know but maybe it is and hopefully it is because we want to one of the criticalities around bipartisanship is getting agreement around gas and the role of gas and we first and foremost gas is a critical fuel as part of our diversity of our fuel mix in New Zealand we require it in order to provide firming capability we have a massive molecules problem i.e we do not have enough gas and we are running out of gas faster than what we thought it is a supply issue and the reality is as there's no sort of you know magic gas pipe that I've got sitting that I've just forgot to turn on it is much more structural than that the area of opportunity that we are investigating obviously Minister Jones is exploring the we've announced the 200 million dollar equity fund to in effect co-invest equity with developers to in effect find and get more domestic gas options we're going to be having more to say on that pretty soon around deal structures and getting that out the door to start getting those those wells being drilled to get that gas out because we do know the gas is there and on the flip side cabinet asked me in early this year to explore the opportunity around a LNG importation capability for this country when you think about the opportunities and options around diversity we need we need options and we need gas both for electricity and for industry and there are a number of industries in this country that do not have a pathway to in effect move from gas onto electricity or other sources either in the short or medium term or at a fiscal cost that is affordable for them and so we need gas one way or another as a government we're basically strategically saying well let's do you know focus on domestic and try and get more flowing in that context and also I'll be reporting back to cabinet around that decision around LNG importation as well at some point before Christmas as well so you know that provides a degree of optionality what's interested just on the gas front internationally IEA International Energy Association have noted that actually with the significant amount of gas exploration coming online from both Australia and the US they're actually envisaging an oversupply of LNG globally in the next five years quite a good timing for us in the context of where we're at and the challenges we face also the fact that New Zealand is a buyer of technically if we were looking to import of gas in the European and US winters sorry summers in our winter and again you've got the arbitrage opportunity there around pricing had a good conversation with the Australian Minister of Energy Minister Bowen I acknowledge the team here from the Australian Embassy as well and you know there's some plenty of opportunities here I also met with the Deputy Secretary of Energy from the US when I was in Busan Ambassador a beautiful part of the your country and you know the US are pretty keen to get some of that gas flying as well so there's a lot of opportunities on the gas front but I do acknowledge it's really hard for businesses right now IKEA is in the room as well did I see Marcos or no yeah we got Marcos from IKEA he's got a SWAT team I think call them a SWAT team you know that's just they've got a really high intelligent technical team that are working with mid-size large size industrial gas users around efficiency taking opportunities out and trying to work with them and so if you haven't you've got a client or you've got a business that's really struggling with gas and needs some other ideas then get in touch with Marcos and he'll get his team on the ground to work with them and that's government support of technical advisory in an independent sense as well is there anyone else in the room that would like to ask a question before we take the last question from the online audience From Michael, how do you view the relationship between New Zealand's energy sector and the Virginian data centre industry? A massive opportunity for New Zealand it's a massive it's a mega treatment in the context of global economic growth as well something again we were talking with the Australian ministers, Treasury Charmers and Minister Bowen around because you know both New Zealand and Australia have a specific opportunity in the context of you know more broader five eyes as well with the strategic placement of our countries and the opportunities in data flow.
I think the opportunity for New Zealand first and foremost about 56 data centres both currently in New Zealand as of today that are built or plan to be built current draw in the energy grid around 0.6 percent of our total energy grid is used by data centres so it's not it's not significant in the context today but when you think about the opportunity around New Zealand being a net exporter of energy, I go further and say New Zealand should be and I said this at the investment summit earlier this year with the Prime Minister, New Zealand can and should be a net exporter of green electrons to the world right so we export energy but with a value add that we're exporting the data and the electrons from data centres in New Zealand that are in powered by renewable energy sources to the world and I think not only is that a value add it's also an opportunity for that capability and competence which is going to be a core advantage for any country in the future. Having that technical skill set around data, data analytics, you know the the aspect and the reliability of AI and all of that that we fed from these systems is going to be the competitive advantage and not only from a workforce point of view but your computing power capability and actually underpinning that your power capability and your generation capability and your resilience to produce that energy without being disrupted by other players in a geopolitical sense. New Zealand has a lot going for it in that space and I see that as a massive opportunity in an industry for New Zealand to cement itself as you know our headwinds in terms of geographical isolation and all those things those things that we sometimes say are disadvantages in this context are tailwinds and advantages for us and so we simply need to think about that.
A lot of interest coming internationally you saw the stuff with the announcements around Amazon the 7.5 billion dollar and that but there's a lot of players particularly even in north of Auckland and parts of the south that are looking around that Transpower and our grid operators are all heavily linked in as well because it's not only you know a good idea to build a data centre you need the power to do that but you also need the capability of the grid and the network to be able to handle that as well so. Excellent thank you Mr Watts and thank you in particular because you went to bed so late last night so having you so early this morning we're really appreciative. I was so excited about this morning I just couldn't sleep.
Did anyone know the answer to the quiz? Oh yes, anyone? Okay grandfather in Italy actually captured in cruise on the POW so yeah champagne obviously reams everyone likes champagne. Samsung and Dublin 7 by the Smithfield Distillery so there you go. Thank you everybody so I will leave you to your days.
I think the wind has died down and it's probably quite nice to walk back to your offices. Thank you.
