Hon BILL ENGLISH (Minister of Finance)
: I move,
That the Appropriation (2009/10 Supplementary Estimates) Bill and the Imprest Supply (First for 2010/11) Bill be now read a second time. This is an opportunity, about a month after the Budget, to reflect on just where the New Zealand economy is going and what needs to be done to get it into shape. It is a common view that the New Zealand economy was getting along
all right until late 2008, then it got hit by the global recession, and now we are recovering from that recession. That is only part of the story. The other part of the story is just as important, and that is the story about what happened in this economy from about 2004-05.
What happened was that our earning capacity shrank. In the 5 years from 2004 the tradable sector of this economy shrank by 10 percent, and our spending capacity grew—in fact, it grew by about 15 percent in the 5 years from 2004. Clearly, that is unsustainable. We cannot continue to maintain an economy where our growth in spending and consumption is significantly faster than our growth in earning capacity or, as happened, our shrinkage in earning capacity. The country has done what any household or individual does when it spends more than it earns; it has borrowed to cover the difference. That borrowing has now become really quite extensive. One measure of it is called the net international investment position. It is a measure of what New Zealand owes to the world. What we owed to the world back in 2000 was about $90 billion; currently, we owe around $170 billion to overseas lenders. The forecasts that take into account the impact of the recession tell us that by 2014 we could owe the rest of the world $250 billion, or, in American numbers, around a quarter of a trillion dollars.
The symptoms of that became particularly obvious in the second half of this decade. We saw a property boom, a boom in speculation, in which many New Zealanders were caught up. That property boom was financed by our banks borrowing overseas—in effect, our households borrowing, with our banks as the intermediaries. We also saw a big upsurge in Government spending from about the middle of the decade. Both of those combined together pushed interest rates to pretty much record levels since the early 1990s and the exchange rate to the highest 5-year moving average since the Second World War. The effect of that was to suppress our export sector. It is no bigger now than it was in 2002, and there have been no net new jobs in the export sector for 10 years. As I explained in question time today, in the pure export sector we have had about 40,000 fewer jobs over recent years. So New Zealand has borrowed to cover the difference between a shrinking earning capacity through a shrinking export sector, and a fast-growing spending capacity through out-of-control Government spending and a property boom.
The borrowing that adds up to our net international investment position is a concern. It is not an immediate, pressing issue, but it is a concern, for the same reasons that extensive debt bothers a household, a family, or a business. First, we have to pay the interest. That shows up through our current account deficit. This economy, when it rolls out of bed on Monday morning, has to meet the interest bill on $170 billion owed to foreign lenders before it does anything else. Before we can buy back assets, before we can invest in our own businesses, before we can make the capital investment that might create a new job, we have to spend the first 6 or 7 percent of GDP servicing our debt to foreign lenders. The second reason we worry about it is simply that it represents a vulnerability in a world where lenders are getting grumpy. I do not think there is any doubt about that. If we follow the financial markets from day to day, we see regular headlines now about countries and businesses within countries that are struggling to borrow the money they need from global financial markets. Of course, New Zealand does not want to get into that position.
The Budget we have just had is one step—and I would say it is only one step—down a path to reducing our vulnerability to our overseas lenders if we possibly can, which will be a long-term job; increasing our growth rates; and ensuring we get a recovery that helps to rebalance the economy. The Budget started that process of rebalancing. We made it clear that we cannot afford to have another cycle where people spend too much,
borrow excessively, and speculate on property, and investment and the export sector effectively shrink. That is simply not on for New Zealand in the next 10 years. So we made a decision in the Budget to change the incentives through the tax system. The changes in the tax system are unambiguously aimed at discouraging excessive consumption and property speculation, and encouraging, through lower tax rates, more investment, more jobs, and more savings.
But that is one part of the programme. Another part of the programme, as expressed in the Budget, is that we have to get hold of the quantity and quality of public spending. Although households have been spending more than they earn for a fair bit of the last decade, until 2008 the Government was actually bringing in more revenue than it was spending, and was running surpluses. That position started reversing from Budget 2008, before the global financial crisis. As the Government has decided to absorb the shock of the recession on its balance sheet, and as it has decided to protect New Zealanders from the sharp edges of recession, it is now running up deficits and running up debt, which is contributing to New Zealand’s vulnerability.
So the Budget does focus on containing the growth of Government spending. By and large, pretty well everyone in New Zealand accepts that now is the time to do that, after 10 years of plenty in the State sector. Probably the members of the Labour Opposition are the only people in the country who believe that the Government should keep the spending tap open and let it flow, regardless of the quality of that spending, and send the bill to the next generation of workers through borrowing. The Budget sets out the limit on the growth of Government spending. It also includes around $1.8 billion of reprioritising of Government spending—that is, shifting spending from low-quality and, in some cases, quite ineffective programmes to high-quality, more effective front-line services.
The business of rebalancing the New Zealand economy is, in my view, about a 10-year job. The early signs are promising. Households are not going on a spending binge and they are not rushing back to the housing market. They are being careful about their borrowing, and the good news on the earning side of the economy is that our terms of trade are about as high as they have ever been—that is, the prices we are getting for our exports have lifted significantly over the past 2 or 3 years. The early signs are that we will have a rebalanced recovery—that is, sustainable growth through earning more from the rest of the world, and consumers, households, and a Government that are trying to contain their spending and consumption. A feature of the Government’s economic policy over the next few years, and of a whole lot of decisions made both within and outside the Budget, will be that we continue to pursue the theme of rebalancing the economy. Some of these issues are not new for the New Zealand economy, but, certainly, in the second half of the last decade they became significantly worse, and the damage caused in that period will take some considerable time to undo.
I am pleased to move that these bills be read a second time. They are the legislative expression of decisions made by a Government with a clear sense of direction and a long-term plan, and built on the resilience we have seen from New Zealanders through this recession. New Zealand has handled the bad times fairly well, and we are in a great position over the next 4 or 5 years to make the best use of the better times.
Hon DAVID CUNLIFFE (Labour—New Lynn)
: I move,
That the words after “That” be omitted and the following substituted: “this House has no confidence in the National Government because these Supplementary Estimates fail to redress the underlying problems and omissions from Budget 2009, which remain uncorrected by Budget 2010, namely the triple deficit of grossly inadequate national savings, made worse by the halving of KiwiSaver incentives and the indefinite deferral of New Zealand Superannuation pre-funding; a deep, persistent and dangerous current account deficit,
driven by a growing net investment imbalance and a financial sector that is almost entirely foreign owned; and an innovation deficit made worse by scrapping the research and development tax credits and the Fast Forward Fund; resulting in increasing reliance on commodity trade that is highly exposed to price fluctuations.
The supplementary estimates record changes in appropriations made during the previous fiscal year to ensure that all expenditure is transparent and all funds are appropriately dealt with. In other words, they record changes to the direction of fiscal travel since the previous Budget was brought down. Accordingly, we must look to the supplementary estimates to see whether any action was taken by the Government over the fiscal year following Budget 2009.
One thing is also clear from the Imprest Supply (First for 2010/11) Bill, which has been introduced without prior notice in this debate. That is that there is no mention of the Pacific Economic Development Agency, which the Minister of Finance has said does not contain a guaranteed appropriation. Yet if it was not to have that appropriation, we would expect to see that spelt out somewhere in this Imprest Supply Bill, which it is not. The bill simply provides a blanket authority for all of the Budget lines set out in Budget 2010, which included an explicit appropriation for the friends of the National Party, dressed up in a 57-word proposal under the name of the Pacific Economic Development Agency, an agency that will come back to bite the Minister on many occasions.
Budget 2009 was remarkable for what it did not do. After 9 long years in Opposition, and the spur of the most significant international financial crisis since the Great Depression, Bill English looked every bit like a deer caught in the headlights. Had it not been for Labour’s far-sighted and well-timed stimulus package in Budget 2008, the casualties of that road kill would have been tens of thousands more New Zealand jobs.
Budget 2009 did precisely nothing to help New Zealand workers. It did nothing to address the rising costs of living, such as the price of food, power, rents, and rates, and nothing to offset the loss of overtime, wage rises forgone, and businesses drying up due to a lack of domestic and export demand. It did nothing to heal the hurt of communities torn apart by massive lay-offs and plant closures. Indeed, it made only one major decision, which was to postpone—it said for a decade but in reality it was indefinitely—pre-funding of New Zealand superannuation. Having wrecked KiwiSaver and the research and development tax credits almost immediately on taking office, in order to fund the previous round of upper-income tax cuts, National did not even appear interested in a plan for jobs and incomes, or in rebalancing this economy. Instead we were forced to watch while the so-called “do-fest” of the Job Summit produced a “cycleway to nowhere”, and a 9-day working fortnight scheme that was so badly patronised by business that the Government itself canned it in the middle of a recession.
While the Government was PR-spinning, real New Zealanders were losing their jobs, incomes, and hopes. Unemployment rose from 3.4 percent under Labour to 7.1 percent, and 60,000 Kiwi breadwinners and families were robbed of their security and future. There are few social ills crueller than unemployment, and New Zealanders deserved more than spin, more than a so-called rolling maul of short-term responses. They deserved a real, credible, strategic plan to create and protect jobs and rebalance this economy. They did not get it in Budget 2009, and they do not have it in the supplementary estimates, which are the subject of this debate.
The interesting thing is that there is now broad agreement across the floor of the House that the New Zealand economy is grossly unbalanced and that urgent change is required. Even the Minister of Finance has described New Zealand’s net international liabilities as New Zealand’s greatest single vulnerability. The reality is that New Zealanders are beset by a triple deficit. We do not save enough to wean ourselves off an
almost total reliance on foreign capital. As a result our net international indebtedness, as the Minister has pointed out, is approaching 100 percent of our gross domestic product. That is $40,000, in round figures, for every man, woman, and child in New Zealand. Every New Zealander owes $40,000 each to foreign lenders, while the Government does nothing about it. By far the majority of that debt is private debt, not Government debt. So although fiscal prudence remains important, no amount of trimming the Government’s sails by cutting night classes and accident compensation benefits will turn the boat round and solve the crisis, which is the lack of private savings in this economy. National has produced no solutions to this crisis, and, indeed, it has made it worse.
New Zealand does not export enough to consistently close a yawning current account deficit, which is forecast to blow out again from 3 percent to over 7 percent of GDP, according to Treasury estimates. It makes no sense to sell public assets like Kiwibank or private assets like dairy farms simply to make up the difference, because we are not paying our way as a nation. Selling our best assets means fewer income streams down the track, and eventually a “doom loop” sets in when we become simply unable to catch up or to keep up. Opening up the Overseas Investment Commission to further liberalisation simply makes that matter worse.
Thirdly, New Zealand does not innovate enough to sustainably lift our productivity, wages, and international competitiveness. Instead, under this Government, we appear to be falling back on the age-old habit of being price-takers on a commodity price path that resembles the orbit of a yo-yo. Adding value to our extraordinary primary produce through the ingenuity of our farmers and scientists, and enhancing our natural environment in doing so, go hand in hand with improving the sustainability of our earnings and underpinning an outstanding quality of life.
Accordingly, what Labour was looking for in these supplementary estimates was the kind of plan that Labour would have put in place to improve savings, exports, and innovation, and to rebalance this economy. Let us consider a couple of the key elements very briefly. Fact: Labour brought in KiwiSaver, which meant that ordinary Kiwi workers could put in 4 percent of their wages and get 10 percent back as a total contribution to savings, thereby allowing them to retire in security. National cut those benefits in half in its first few months in office. Why? That was to pay for tax cuts for upper-income earners. Fact: Labour pre-funded New Zealand superannuation so our old people could be secure in the dignity of their retirement. Fact: National has postponed, indefinitely, pre-funding superannuation because it did not have the responsibility to take a long-term view. Fact: National did nothing in Budget 2009 to turn round the savings gap. Fact: Labour will lead on savings by 2011 through new, safe savings products that Kiwis can depend on by restoring and strengthening KiwiSaver and by immediately resuming pre-funding of New Zealand superannuation at a level we can afford.
In respect of the current account deficit, Labour recognises that existing monetary policy settings penalise exporters. One can expect further announcements from Labour on this in the coming weeks.
Hon PETER DUNNE (Minister of Revenue)
: It may surprise David Cunliffe, the member who has just resumed his seat to know that when all of the rhetoric is stripped away, there would be substantial agreement with the core proposition that he presented. I certainly agree that New Zealand does not export enough, that we do not innovate enough, and that we do not save enough. It is easy to say those things. The challenge becomes one of implementing policies that will achieve change in those areas, and that is where I start to part company with the member who has just resumed his seat.
I am probably in the unique position of being able to give a somewhat dispassionate analysis of what has happened since 2008. I say to the previous Government that at the time that the 2008 Budget was prepared, the depth of the international global recession was not readily imaginable. Members will recall a fateful week in October 2008, in the midst of our election campaign. It began one weekend with the Irish Government announcing that because of the depth of the international recession, it was going to immediately guarantee all bank deposits. Around the world people thought that was a very far-fetched decision. By the end of the week every Government, including ours, was doing the same in respect of its own nation. The point of my saying that is to underline the speed and the depth of, and the lack of clear vision leading up to, this crisis. So when our Government changed in November—a few short weeks after that calamitous week—it clearly needed to take stock and to make a series of changes to the existing settings to get New Zealanders through the situation.
The member made a telling point that I want to come back to. He talked about unemployment. The experience of New Zealand in previous recessions, under both Labour and National Governments, has been that the first casualty was employment. People went on to the scrap heap. The fact that this year in this recession, contrary to predictions of a much higher level of unemployment, New Zealand’s unemployment rate has topped out at around 7 percent is a deliberate tribute to the policies put in place after 2008 to cushion that impact, to keep people in jobs, and to make sure that we did not suffer the level of unemployment that bedevilled us in the past.
When the Budget was brought down in 2009, it was against the backdrop of a rapidly deteriorating revenue base. We had gone through a decade of Budget surpluses; we were now into a period of prolonged deficit. We wanted to preserve the social core that I have just spoken of, and to position this economy for the transition through the recession last year to recovery this year and beyond. The measures contained in that Budget, which led to the initiatives that were able to be taken this year, have positioned New Zealand very strongly for the future.
In addition to the problems that the Opposition spokesperson on finance postulated at the beginning of his speech, three other issues consistently affect the New Zealand economy. First, we have a highly skilled but highly mobile labour force. Outside Ireland and Luxembourg, we have the highest rate of any OECD country of our labour force living overseas, and we do not have the luxury that those countries have of being able to spread their workers around their European Union neighbours. Second, we have significant levels of debt: $170 billion, on current estimates. It does not actually matter whether it is public or private debt; it is all debt that has accumulated in the ledger entry against New Zealand. Third, we face chronic fiscal problems in terms of balancing our Budget.
The challenge that the Government faced, and the reason why it embarked upon what was to become a major programme of taxation reform—a tax switch, if you like—was to rebalance the economy in such a way as to give us a fighting chance of improving our productivity and savings record, of boosting our export growth, and of creating a positive future for New Zealanders, so that they would feel inclined to stay here and build this economy, rather than go and assist other nations to build their economies. What has happened since the Budget? The profound changes to personal tax rates, the restructuring of the property investment regime, and the move to increase the GST rate, with full compensation being provided to affected parties, have had a generally positive reaction around New Zealand, because New Zealanders have seen these measures as being steps in the right direction.
When we look at the structure of the marginal tax rates we see that now, from 1 October, the top marginal rate payable by nearly three-quarters of New Zealand
taxpayers will be just 17.5c in the dollar. That is a profound shift from what it was 2 years ago. In fact, it is almost half the rate of tax that someone at that level of income would have been paying 2 years ago. That is a huge improvement. The biggest proportionate changes in tax rates have been at the bottom end of the scale, so that people on low incomes now get a much better boost from the tax system than they did previously. That has to be good news. We have stopped the rort of high-income earners being able to channel their incomes through trusts to minimise their tax liability, and we have stopped that rort by aligning those rates. That will mean there are more opportunities for additional capital to be invested in savings and further investment in order to boost the growth of the New Zealand economy. We have tackled the imbalances in the property market through the removal of depreciation, but we have not distorted the market through taking other, more punitive measures. Again, that is about giving New Zealanders an opportunity to make their investment decisions based on the quality of the investment concerned, not the tax advantages to be derived from it. It is little wonder that around this country at the moment people are saying this is a step forward, a balanced Budget tax package, and one that gives us some hope.
I note that that is causing the Opposition parties some particular difficulty. I note that Mr Cunliffe was in Palmerston North recently. He basically said the Budget has some good elements, and a reversal of the Government’s GST hike is unlikely if Labour takes charge after the next election, but exempting fresh fruit and vegetables from GST is a serious option. He also went on to say he is not opposed to the reduction in the company tax rate, but he signalled—and here is the crunch—that the overblown property sector would come under further scrutiny if Labour returned to power next year. So a capital gains tax is back on the Opposition’s agenda. Let the Opposition members deny that; it has always been something that they have hankered after. It is signalled very clearly there. When we add to that other statements from the Opposition that the way to align the tax rates is to keep the top personal tax rate at 38 percent and boost the trust rate to 38 percent, then we are drawn to this conclusion: change the Government, and New Zealanders will pay more tax on their income, and they will pay more tax when it comes to a capital gains tax on virtually everything that moves, other than the family home. That is highly complicated and highly inefficient, but it is what the Opposition members are hankering after. The fundamental challenges that the New Zealand economy faces will not be dealt with.
A lot of people say we have to stop the bleeding of our population, of young people in particular, to Australia and to elsewhere. That is fair enough. One of the drivers—by no means the only driver—of that is what people perceive to be fairer and more equitable taxation regimes elsewhere. What we will see, if the changes that are being proposed by members opposite come to effect, is that the trickle that we have at the moment will become an absolute flood. There will be no incentive for young people to stay to make a future here, and there certainly will not be any incentive for them to return home.
So what we face with regard to this Budget, the progress from it, and the steps that will follow it is a generational change in the psyche of New Zealanders when it comes to thinking about their future. This Government is trying to say to people that it wants to give them a chance to have a positive future. It wants to give them some encouragement, so that they can do better than they are currently doing. We now see from the Opposition a grudging acceptance of that, but also a return to the old envy politics, where there would be higher taxes for higher tax earners—and we have seen the distortion that that has caused over the years. Labour’s putting up the top personal tax rate 10 years ago was the biggest single taxation policy blunder in this country’s history in that time. It has led to massive avoidance and evasion problems, which we are
now getting on top of. Those members want to return to that and to saddle the New Zealand population with a capital gains tax, as well. The country will face a stark choice next year, not just in political terms but in terms of its own future. I am very confident that young New Zealanders who are weighing up their options will not want to rejoin the race to the past that is being painted by members opposite.
I come back, as I conclude, to Mr Cunliffe’s scenario. New Zealanders need to invest more, to export more, and to save more, but we also need to have liberating policies that will achieve that, not stifling bureaucracy and controls that will prevent people from realising their potential. That is the challenge that faces this country. This Budget, this financial programme, is about giving New Zealanders that positive opportunity.
Hon TREVOR MALLARD (Labour—Hutt South)
: I move,
That the amendment in the name of Hon David Cunliffe be amended by adding the following after “fluctuations”: “and because the Government will not provide for the validation of borrowing by King’s High School Dunedin and the allocation of funds to the repayment of loans relating to the Performing Arts Centre at no net cost to the Crown”.
That is an issue that I have undertaken to bring up on every occasion. On this particular occasion it will not add time to the debate, but there is an issue of gross injustice for a particular school. It is one that members of the Education and Science Committee know a lot about. It is something on which we have received support from the ACT Party in the past. I have undertaken to bring it up.
There will be occasions when matters that would have otherwise gone straight through the House will be delayed as a result of an amendment of this nature being moved. I want today, though, to focus on one particular issue, and that is the declarations made by the Attorney-General, and their veracity. There has been some publicity recently about declarations—careless declarations, I think they could be described as—in relation to Jonathan Young’s declaration of pecuniary interest. He has moved to correct that. This week we want to address the issue of the hapless Chris Finlayson, who is already in serious trouble for the way he kept on changing his description of his relationship with a Supreme Court judge in whose favour he intervened, and especially because he did not inform either the Prime Minister or the Cabinet of—
Jo Goodhew: I raise a point of order, Mr Speaker. I seek your assistance in determining whether what is being spoken of here in the House at the moment by the member opposite is within the scope of the bill that we are debating.
Hon TREVOR MALLARD: The point I am getting to is whether the appropriation is sufficient for the inquiry that will result from the errors that Mr Finlayson has made.
The ASSISTANT SPEAKER (Hon Rick Barker): This is a bit of new territory for me. I will have to take a little advice from the Clerk. I was trying to sort out a couple of other technical details at the time the speech began. This is an appropriation debate. I would like to hear from Mr Mallard, if he has a point to make, why the personal declaration that the member is making reference to is within the scope of an appropriation debate. It seems to me at the moment that it is beyond the scope of the appropriation. If he can put forward an argument that it is within the scope, I am willing to listen to it. But at this moment I think he is out of scope.
Hon TREVOR MALLARD: I reiterate the point that I made, and it was about the next point that I was going to make: that it is important that the appropriations be sufficient to finance the inquiry, which could well end up being a royal commission of inquiry, into the approach that the—
Jo Goodhew: I raise a point of order, Mr Speaker.
Hon TREVOR MALLARD: I am speaking to a point of order.
Jo Goodhew: Oh, I am sorry; you did not say so.
Hon TREVOR MALLARD: I was invited to speak to a point of order by the Speaker. The point that I am trying to make, Mr Speaker, is that it is my view that there must be an appropriation for a commission, especially a royal commission of inquiry. The point that I am trying to establish is that there will have to be an inquiry set up by the Prime Minister or the Minister of Internal Affairs into that area.
The ASSISTANT SPEAKER (Hon Rick Barker): If the member is going to seek an extension to the appropriation for an inquiry, I think that is fine. But if the member is referring to pecuniary interests, as I heard him do before, then that is out of scope. So if the member wants to keep it to that, I will let him continue, as long as it is directed at the appropriation.
Hon TREVOR MALLARD: Get some more advice on it.
The ASSISTANT SPEAKER (Hon Rick Barker): The Clerk advises me that it is a public affairs amendment, and it is therefore in scope. Yes, I have got—
Craig Foss: I raise a point of order, Mr Speaker. Excuse me, Mr Speaker, but I also seek your assistance. The member opposite, Trevor Mallard—and thank you for that clarification—was also starting to reference members of our Supreme Court and matters that are under review there. I seek your advice, Mr Speaker, whether it was appropriate that those names are mentioned, as I think the member was going down that track.
Hon TREVOR MALLARD: It is not my intention to further mention that, and I did not, anyway.
The ASSISTANT SPEAKER (Hon Rick Barker): The member did make reference to the Supreme Court inquiries, but did not mention any particulars about it. He stopped one yard short of it. The member Craig Foss’ point of order is well made. The Hon Trevor Mallard has indicated that he has no intention of going in that direction, nor should he.
Hon TREVOR MALLARD: The only point that I am making in this area is that the Attorney-General failed to inform Cabinet of his intention to intervene, and he failed to inform the Prime Minister when he ran into trouble. That is the reason that he already has problems. The Attorney-General helped to set up a company in 2006 after he became a member of Parliament. He became a director of it then, and he has failed to declare it on any return since that date.
Hon Gerry Brownlee: I raise a point of order, Mr Speaker. I am aware of your previous rulings on this matter. I think the Hon Trevor Mallard was straying well outside the topic of the debate. He may well have just completely defied you with the statement he made in the House while you were in discussions with the Clerk. This is an appropriation debate, and those matters are not part of that debate. It is not a general debate; it is not particularly wide ranging. Relevance should be something that I think the Chair looks at in this debate.
The ASSISTANT SPEAKER (Hon Rick Barker): The ruling I gave earlier was on advisement from the Clerk at the Table. The Clerk’s advice was that the member had moved an amendment about those matters, which involved an appropriation. Therefore, the member was entitled to speak about them. That is the advice I got from the Clerk. I have cautioned the member that he is to speak specifically to that amendment and keep himself well constrained within that. As long as he does, then he remains within the ambit of this debate.
Hon Gerry Brownlee: I assume, then, that if I go to the Table I can pick up a copy of the amendment.
The ASSISTANT SPEAKER (Hon Rick Barker): A copy of the amendment should be on the Table.
Hon TREVOR MALLARD: There are two amendments sitting there. This debate is also on an Imprest Supply Bill, so it is very broad—it is absolutely broad.
Hon Gerry Brownlee: But why are they not on the Table here?
The ASSISTANT SPEAKER (Hon Rick Barker): I ask the Clerk whether the amendment is on the Table. If the member has moved it, the amendment should be available.
Hon Gerry Brownlee: Well, could I have one? Could you direct me to where it might be?
The ASSISTANT SPEAKER (Hon Rick Barker): Well, we cannot hold up the debate for that. I will ask—
Hon Gerry Brownlee: We can’t have a debate if members do not know what they are debating, for goodness’ sake. That is why we have bills on the Table.
Hon Steve Chadwick: I raise a point of order, Mr Speaker.
The ASSISTANT SPEAKER (Hon Rick Barker): I will just deal with this matter first. We have a slight difficulty. The member moved an amendment in the House and spoke to it at that time, so all members who were here would have heard it. There is nothing unusual about that. The amendment, as I understand it, is in typewritten form, and it should be on the Table. If it is not, then I will ask the Clerk to attend to it and make sure that Mr Brownlee has a copy of it immediately. But I assure him that the member, when he started his speech, read out the amendment to the House, and thereby, in reading it—as in a first reading—has now made it available to the House.
Hon TREVOR MALLARD: I raise a point of order, Mr Speaker. I just ask you for further advice on relevance here. I thought that part of the debate was the second reading of the Imprest Supply (First for 2010/11) Bill. Is that the case?
The ASSISTANT SPEAKER (Hon Rick Barker): As I understand it, that is the case.
Hon TREVOR MALLARD: Well, that is a very broad debate. It is about the financing of the Government for the first 3 months of the next financial year until the Budget goes through. I do not think there is a wider debate than that.
The ASSISTANT SPEAKER (Hon Rick Barker): I draw members’ attention to the motion moved by the Hon Bill English that the Appropriation (2009/10 Supplementary Estimates) Bill and the Imprest Supply (First for 2010/11) Bill be now read a second time. That is the question that is before the House.
Hon TREVOR MALLARD: I will go back to the point I was making, which is to ask the Government whether there is enough money allocated by the Imprest Supply (First for 2010/11) Bill to finance a commission of inquiry into the declarations made by the Hon Chris Finlayson. The Standing Orders are very clear; clause 4(1) of Appendix B, states: “Every return of pecuniary interests must contain the following information as at the effective date of the return: (a) the name of each company of which the member is a director …”. The 2008 Privileges Committee report makes it very clear that it is up to every member to ascertain, make clear, and understand their own pecuniary interests, and to declare them. The report concerned the Peters case, on that occasion. The Office of the Clerk has recently been quoted as stating: “Members are required to declare the name of each company of which the MP is a director …”, and, at the very worst, non-declaration “could be contempt of the House if an MP has knowingly provided false information to the House.”
I submit to the House the words of the then Leader of the Opposition, Don Brash, when he said: “Lawyers are the professionals we depend on in our society to ensure the accuracy of the documents that they sign. They should not sign documents knowing them to be false under any circumstances. For the most senior law official in the land, the Attorney-General, to have done so not once but on several occasions, is a serious matter. Mr Parker was right to tender his resignation. I commend him for that.” I will now quote the leader of the ACT Party, Rodney Hide, when he said: “I say to Helen
Clark that her Government now lacks integrity and honesty. I think that filing a false statement, a statutory document, when one is the Attorney-General and a Minister of the Crown is unacceptable. I think this issue does need a full investigation. I say to the House that it is an important job to hold Ministers to account. That is what Parliament does—that is our Westminster parliamentary democracy.”
David Parker stood down because there was doubt as to whether he had signed an incorrect statement. As it turned out, he had not; he was reinstated to the executive, but because there was doubt about that, and because he had not been sure, he was not reinstated to the Attorney-General role. It appears, on the face of the documents, that Mr Finlayson has signed a false statement every year since March 2006. His declarations cannot be accurate—
Hon Gerry Brownlee: I raise a point of order, Mr Speaker. The assertion made by the Hon Trevor Mallard is, I think, to say the least, outrageous, but also completely spurious. If Mr Mallard was in any way convinced by his own argument, quite clearly he would have gone to the remedy available to him in the Standing Orders. Rather, he is indulging himself, at the expense of the dignity of the House, in what is effectively an orchestrated attempt to take down a member, when there is no such case to answer. I have looked at the motion by the Hon Bill English. I am looking at the second reading amendment by the Hon David Cunliffe. I am looking at the second reading amendment by the Hon Trevor Mallard. Regardless of the claim that an Imprest Supply Bill allows a wider debate, the member himself has said that it is about the first 3 months of funding available to the Government. I think that where we are heading at the moment is well outside what would be expected in this debate, and the member does himself no credit by having completely failed to accept the remedy that is readily available to him, should there have been any validity in the comments he is now trying to put across to the House.
Hon TREVOR MALLARD: I think the assumption that the member is making is that the declaration of pecuniary interests is wrong. It may be that the Companies Office declarations are wrong. It may be that the declaration that has been made to the Chief Registrar of Electors—which I will get to soon—is wrong. I do not know which of the documents are accurate; they are inconsistent. Mr Finlayson has made three separate declarations. Therefore, I have chosen to bring up the matter this way, as is my right. I have not suggested a breach of privilege, because that would work on the assumption that the Companies Office declaration was right and the declaration made to the Registrar of Pecuniary Interests of Members of Parliament was wrong.
Hon Gerry Brownlee: It is a serious matter—
The ASSISTANT SPEAKER (Hon Rick Barker): It is a very serious matter—
Hon Gerry Brownlee: —and I think the member, in his protestations in that little offering to the House, has condemned his own course of action. He has previously said that he believes that those matters should be investigated. The way in which he can have that investigation—or could have had that investigation—is, firstly, to write to the member seeking a clarification. Mr Finlayson is a very senior lawyer who is very well respected in the profession, and I am quite sure he is not a man given to making mistakes. Secondly, had the member followed that course of action and gone into the issue of privilege, there would have been an inquiry, quite naturally, conducted by the Speaker. I think the problem we have here is that the Registrar of Pecuniary Interests of Members of Parliament requires that members act honourably in the disclosures they make in that register. So we are indulging Mr Mallard this afternoon in allowing him to impugn the reputation of a member simply because he himself has failed to follow the right process to get to the bottom of what clearly appears to be a matter causing him to lose sleep. It is a nonsense. It is outside the confines of this debate by any stretch of the
imagination or by any tolerance that might normally be allowed, and I suggest that it is inappropriate in this debate for those allegations to be laid on the Table of the House.
The ASSISTANT SPEAKER (Hon Rick Barker): I want to put a couple of things on the table. Firstly, I am not in a position to measure the rights and wrongs of this. Members who make statements in this House are entitled to do so, and they can be held accountable for them if they are found to have overstepped the mark, by claim and counterclaim. If the claims made are utterly without foundation, and they have affected a member’s reputation, then members who are so offended can take the matter to the Privileges Committee. Members do not have an untrammelled right to take a member’s reputation down in this House; that is clear. I refer members to that worthy book
McGee. On the subject of the Address in Reply and the Budget debates, McGee writes that in practice there is virtually no limitations to those debates on the grounds of relevancy. So according to
McGee and the advice I have received from the Clerk, this is a very free-ranging debate, without limits, and on that basis I invite Mr Mallard to speak. But before that I will hear a point of order from the Hon Gerry Brownlee.
Hon Gerry Brownlee: I raise a point of order, Mr Speaker. There is some absurdity in what you are suggesting, if I might suggest so. It would seem, then, that if someone came into this House and used his or her speaking slot to recite nursery rhymes during a debate like this, that would be perfectly acceptable. I think it would, in fact, be trifling with the House. I think it would be stretching the House’s tolerance for such an action to be taken. I think there is no difference, though, between that and coming into the House and deciding to run out a series of allegations designed to besmirch the reputation of a member, which is a style of politics well known to be the trademark of the Hon Trevor Mallard, and I think it is inappropriate in this debate. The Speaker is not bound by Mr McGee’s writings, much referred to though that large volume might be. The Speaker’s responsibility is to ensure that Parliament itself is not the subject of disreputable behaviour or trifling with the right to speak freely in this House. Indeed, the Speaker has a responsibility, equally, to ensure that the rights of members are not unduly trampled upon in the processes of this House.
The ASSISTANT SPEAKER (Hon Rick Barker): I will just respond to that before I call the Hon Trevor Mallard. All those things are very good, but I say to the member that, from my own experience, these debates have always been free ranging and wide ranging. On occasions it has been so wide that I have wondered what points members were trying to make. If members got up and recited nursery rhymes, I am sure they would receive public opprobrium for that. That is one of the constraints on the debate. But in this particular debate, if the member makes accusations, at the end of the debate the member will be held accountable for them. I am sure the member is well aware of that. Whatever he says will be noted, and he will be held to account for it. The member has received the warning from the Hon Gerry Brownlee to tread cautiously. I think he has received that loud and clear, and he has 3 minutes and 33 seconds remaining.
Hon TREVOR MALLARD: Thank you, Mr Assistant Speaker. On 9 March 2006, at 11 minutes past 1—and 33 seconds—there was an application to incorporate a company known as Te Puhi Trustee (2) Ltd. Associated with that is a document that is signed by one C F Finlayson of 42 Molesworth Street. That company has filed returns online since then on 20 February 2007, 17 April 2008, 27 April 2009, and 9 March 2010. Those returns are very similar, other than the fact that there was a change in the online particulars of directors to do with one C F Finlayson in the 2010 return. I say that only to emphasise the fact that in 2010, again, Mr Finlayson was aware of the fact that he was a director of that company, which he had not declared.
There is another matter that I will refer to, and that is the fact that Mr Finlayson enrolled on 20 June 2008 at 69 High Street, Island Bay. As at 5 minutes ago he had not
changed that enrolment. So we have a situation where someone is enrolled at one place, which must be his place of residence, and is declaring to the Companies Office another place, which must also be his place of residence. That is a matter, I think, for the registrar—
Hon Gerry Brownlee: Sounds like David Cunliffe.
Hon TREVOR MALLARD: No—that is the approach that Bill English has taken, but I understand that he has corrected that now. All I am saying about the Attorney-General is that, in the words of the then Leader of the Opposition, Don Brash: “Lawyers are the professionals we depend on in our society to ensure the accuracy of the documents that they sign. They should not sign documents knowing them to be false under any circumstances. For the most senior law official in the land,”—that is not quite right—“the Attorney-General, to have done so not once but on several occasions, is a serious matter. Mr Parker”—that is to whom he was referring—“was right to tender his resignation.” I want to know now whether the standards that National members say apply to Labour Attorneys-General apply to National Attorneys-General too. Is it all right for their Attorney-General to make false declaration after false declaration and continue to hold the role, or is he the most senior law official—not in the land, but in this Parliament—and should we expect him to uphold the standards of the House?
CRAIG FOSS (National—Tukituki)
: If I were a Labour list MP and if I were on the middle backbenches I would be very, very worried, because what we just heard was a member, Mr Mallard, going back to the default position of muckraking and being down in the gutter. That is exactly why Labour plummeted from having 9 years of power to being in Opposition now.
Recent polls, like the one the other night, show exactly why Labour members polled so badly at the last election. They had their officials going through old documents, mucking around in the gutter, trying to interpret things the wrong way round, and spending taxpayers’ funds along the way. They tried to dig up dirt on good members of this House and people who were members of this House.
I would be very, very worried if I were a Labour member. Even before that speech Labour members should have been worried. If one of the younger Labour MPs saw and heard what we just witnessed for the last 20 minutes, he or she should be very, very worried. I see about five list MPs on the other side of the House, and every single one of them is in dire straits.
When the public realise that some of their front-bench members are back at their default position, they should be very, very concerned indeed. New Zealanders are tired of that kind of rhetoric. They are disgusted by it. They have no interest in it, and recent events do not reflect very well on some of the more, let us say, pleasant members on the other side of the House. I am personally quite affronted by it. There are avenues one can take to investigate the matters the previous speaker was suggesting. Those avenues are open to every member, and it is interesting that that particular member chose not to follow them.
A few weeks ago the Hon Pete Hodgson had a go at our Prime Minister, John Key, about trusts. It was all rubbish, it was all a facade, and it was all chucking mud. But the best thing about it was that when he realised he was wrong, he announced he would not be standing for Parliament again. Perhaps that has set a precedent for Mr Mallard, given what he has been going on about. I apologise for having to address that issue for the last few minutes, but it cannot go unaddressed. I repeat that if I were a newer Labour member, or even one of the members who have been here for a while, I would be very, very concerned. The 30 percent poll rating those members saw on TV3 the other night has just gone below 30 percent.
I turn to the supplementary estimates and imprest supply debate. National inherited quite a shambles. We released the Budget almost a month ago, on 20 May. It was the Budget we would like to have produced in 2009, but the global recession that was hitting New Zealand’s shores compounded the recession that the previous administration had taken New Zealand into about 1 year before the rest of the world. That has made the job very, very hard. The decade of deficits was a mountain in front of us. There was rampant, out of control, unaccountable, non-responsive, unmeasured, and non-transparent spending. It was just out of control. There were underlying assumptions of continuing exponentially compounding growth in taxation revenue, and, therefore, spending by the public sector. The finance Minister, in his speech earlier, noted some of the facts around that. Anyone can remember it. Mr Cunliffe made a speech earlier, which was proof positive that the fiscal fairies are alive and well on the other side of the Chamber. The fiscal fairies are at the bottom of the Labour garden, or perhaps in the gutter with some of its members, as we have just heard.
The Budget has to try to address, and has addressed, some of the concerns and issues around KiwiRail. I will come back to asset management in a moment. I think KiwiRail owes the taxpayer about $1 billion at the moment, or maybe just shy of that amount. It is actually valued at something like $300 million, I think. The previous owners have done very, very well indeed out of the New Zealand taxpayer. It may seem old news, but the bottom line is that $700 million has been totally written off. It is not available for new hospitals, not available for schools, not available for roads, and not available for energy. Of course, there was an announcement in the Budget of $250 million of capital going into KiwiRail to try to fix up what was totally and hopelessly broken when the previous finance Minister totally overpaid for it. If members are wondering how the poor taxpayer was taken for a ride, I understand that the previous administration, whilst in negotiations for KiwiRail, called the owners to ask for the loan of a locomotive so that it could paint it in KiwiRail’s colours in order to have a press announcement. Meanwhile, in the other room, negotiations were going on, and, funnily enough, the price suddenly went up.
The Opposition spokesperson on finance spoke about the need to export. I am quite intrigued by this report in the
I recently featured in that newspaper. I went to the Manawatū recently and spoke to a paying audience of about 35 to 40 people. I think they paid about $25 to $30 each to cover costs. The local member representing the Manawatū had a bit of a go at me about it. He swore black and blue that Mr Cunliffe would be back but he would not be charging anybody to hear him. We noted that people get what they pay for. And it was of no surprise to anybody else; no one would expect to pay to hear Mr Cunliffe speak about the Budget.
Mr Cunliffe spoke to 25 people in Palmerston North. The headline in the
Manawatu Standard read: “Labour offers fresh reprieve to GST hike”. How is that going to happen? He said that defining fresh fruit and vegetables will be relatively easy. Apparently, Labour would exempt fresh fruit and vegetables from GST. Labour had 9 years to do that. When Labour installed GST at 10 percent, or increased it from 10 percent to 12.5 percent, it never once mentioned, thought about, or publicly proclaimed that it would exempt fresh fruit and vegetables from GST. Mr Cunliffe said, and this is where I agree with him, the New Zealand economy “suffered”—he used the past tense, not the present tense—from a toxic cocktail: “we don’t export enough, we don’t innovate enough, we don’t save enough.” Well, hello, the solution after 9 years is that we do not export enough.
Does anyone remember Export Year? That was the solution. Talk about it, make some badges, and put out some pamphlets. Does anyone remember Export Year? Actually, exports plummeted. The finance Minister shared with us in his earlier speech
that the export sector, the real sector of the economy, the part of the economy that creates jobs, creates wages, and keeps families in their homes with their mortgages, has been in recession since 2005—in recession since 2005. Quite how that stayed under the radar for about 3-ish years I really do not know. I find it somewhat surprising. Now, this Budget is trying to address that, to rebalance the economy, to rebalance our export incentives to real incentives, using the levers of taxation and better cash flow of investment, and improving access to credit. The previous speaker said that there was nothing in the Budget about credit. Actually, the 2009 Budget he was talking about at the time got New Zealand a global credit rating upgrade. When we owe the rest of the world about $180 billion, it is pretty important to try to keep those rates as totally low as possible.
An earlier speaker also talked about solutions. Labour will have a look at monetary policy. Labour seems to forget that in the last Parliament, initiated by the previous finance Minister, there was an inquiry into monetary policy at the Finance and Expenditure Committee. I am quite surprised that those people over there who have read lots of books about the economy, but not necessarily partaken in the economy, know better than the learned people with many years of experience, from across the spectrum, who came before the Finance and Expenditure Committee and said: “Hey, it’s the best we’ve got right now. We think it’s doing a pretty good job.” Not many of them seem to have read the price targets agreement, which we noted the other day during a public session at the select committee.
One final thing, as the Hon Peter Dunne alluded to, from the article in the
Manawatu Standard it looks like Labour would bring in a capital gains tax. It looks like Labour would campaign on a capital gains tax. Well, OK, let Labour members go out there and do that, but they should note that the value of everyone’s property has fallen by about 10 to 20 percent, or even 30 percent, over the last few years of the global recession. Labour will campaign on taxing the catch-up in people’s properties. It would put on a capital gains tax, when all that people are doing is try to catch up in terms of where their valuation has been over the last few years. I am looking forward to Labour campaigning on, apparently, axing the GST rise—but I do not know where the “Axe the Tax” bus has gone—bringing in a capital gains tax, and raising income tax levels to higher than they were prior to this Budget. Thank you.
Dr KENNEDY GRAHAM (Green)
: “ ‘The time has come,’ the Walrus said, ‘To talk of many things: Of shoes—and ships—and sealing wax—Of cabbages—and kings—’ ”, and also the Appropriation (2009/10 Supplementary Estimates) Bill. This bill seeks parliamentary authorisation of the individual appropriations and changes contained in this massive document before us, involving 68 votes or so, and running to 921 pages. Not all will have read every one. I have, however, been through it pretty much myself; and, perhaps more to the point of the broader implications of this debate, I have followed the Government’s direction of the economy throughout the 2009-10 year to date, and the management of its public finances, with careful interest and with some sympathy. It is sympathy not because of any political empathy with its philosophical outlook but because of a sobered recognition of the enormity of the problems facing our country. On further analysis, that sympathy merges into an endless pity, because it is easily apparent that this Government is mired in an outmoded brand of economic orthodoxy that will be unable to solve those problems.
The supplementary estimates themselves make for sobered reading. The net position of the Crown’s income and expenditure is $3.1 billion worse today than anticipated by the Government in its Budget of May 2009. Government expenditure for the year is set to be $3.3 billion higher than originally estimated—up from $74.2 billion to $77.5 billion. Crown revenue and capital receipts are set to be only $0.2 billion higher—up
from $64.7 billion to $64.9 billion. So the net deficit will stand at $12.6 billion—up from the original estimate of $9.5 billion.
I do not hold the Minister of Finance personally liable for these changes. They reflect the vagaries of macroeconomic change affecting a small and open economy in times of global turbulence. Nor do I wish to comment on the relative priorities accorded to departmental expenditure patterns in the supplementary estimates, whether defence should have more or less than education, whether revenue should or should not come from gaming, how much should be advanced to student loans, or what amount should be set aside for Kyoto Protocol liabilities, even though the Green Party does have views on these things as well. My comment concerns the broader issue of the underlying tenets of belief on which the Government pursues its macroeconomic management.
We ventured our critique of this in February in response to the Prime Minister’s statement opening Parliament. National believes that the way to lift the country’s economic performance is through continuous growth—the Greens do not. When the Minister of Finance introduced this bill he spoke about sustainable growth. But in a global economy, whose ecological overshoot is already 30 percent, that is an oxymoron, and certainly for the richest countries, of which we still count as one. We agree with the Government that the New Zealand economy needs to be a smarter economy through upskilling, innovation on information technology, and adding value to our export commodities, but there the similarities end.
The Government is prepared to do two things that we believe are fundamentally wrong and will prove ruinous for New Zealand. Firstly, it has an outmoded perception of the relationship between the economy and the environment. It believes that it can balance economic opportunity with environmental responsibility—that is misguided. It was the President of the Maldives who cut through this commercial hubris. He said “You cannot cut a deal with Mother Nature”, and he should know. His islands are becoming submerged through the climate change that the neoclassical economic model has bequeathed us. Our mindless national contribution to the challenge of climate change is to set aside a modest $546 million in Kyoto indulgences for 2013 and to bicker over whether we are out in front of the Western pack with our emissions trading scheme, as if an existential challenge to humankind can be priced in our supplementary estimates.
One does not need to be a rocket scientist to know intuitively that the human economy is a subset, a wholly owned subsidiary, of the environment. The new emerging model of ecological economics on which the Green Party bases its economic policies is set to replace the neoclassical model pursued by neo-liberal Governments of modern times. Secondly, the Government is prepared to sell off our asset wealth to pay our way through recession. It runs amok with bilateral treaties that masquerade as free-trade agreements but which, in reality, have more impact through their free investment provisions. We now face the prospect of selling off not exactly our strategic assets but our valuable productive land to regional and global corporations. Not only does this surrender our sovereign control of New Zealand’s economic destiny, it also drives up the price of land for purchase by Kiwi citizens and increases the pressure on our private sector debt. This in turn impacts on the Crown revenue potential and affects next year’s Budget, and, through that, next year’s supplementary estimates.
In March during the 2008-09 financial review debate I spoke of the need for a new, alternative economic model for this country, and indeed for the global economy. This is known as the steady-state economy, based on the concept of a dynamic equilibrium. Unlike orthodox economics of the past 70 years, this model takes into account the natural resource base in the pre-productive process, and waste disposal in the post-productive process. If we do not do this, and this Government does not, if we retain the
orthodox economic model, and this Government does, we shall find—indeed, we are already finding—that growth proves to be uneconomic, since it is not sustainable in the medium term.
As I said in March, we have reached the stage where we must incorporate environmental indicators into our macroeconomic management in our national financial accounts. To that end I have produced a member’s bill designed to assist us all in approaching this. My Public Finance (Sustainable Development Indicators) Amendment Bill will ensure that in fulfilling its macroeconomic obligations under the Public Finance Act, the Government will have regard to the sustainable development of the country. The bill aims to consolidate and amend the law governing the use of public financial resources to ensure that the economic management of New Zealand is undertaken consistently with the interests of the sustainable development of New Zealand over the long term. Specifically, the bill will obligate the Minister to report to the House, in the context of the Budget presentation, a series of sustainable development indicators. These indicators, which will remain in terms of physical rather than monetary measurements, are already being produced by the Government Statistician. I pay tribute to the quality of the work being produced by Statistics New Zealand, in particular the 2009 report measuring New Zealand’s progress using a sustainable development approach. The bill will also have the Minister address the ecological footprint and the human development index as measurements of New Zealand’s progress over the longer term.
I mention this bill because if adopted it will affect the financial direction of the Government in the next Budget. It therefore stands as a signal to the Government today that there are ways in which the financial direction of this country, both in terms of the May 2009 Budget and the June 2010 supplementary estimates, could have been improved, and stands as a signal that they can be improved in the future. Thank you.
Hon Sir ROGER DOUGLAS (ACT)
: The Budget is now a month old. Frankly, the more one looks at its detail, the more inadequate it becomes.
After 20 months in power, the Government has a number of obvious traits—none of them particularly good. It intends to run the business of Government better than the previous Labour Government did—hardly a hard task or an ambitious goal. It is clear that National no longer believes very strongly in what it declares to be its principles—freedom, choice, individual responsibility, or limited Government. Its decision-making process is very clear. When faced with an issue that needs to be resolved, the first question it always asks is what the public will accept on this issue. There is no leadership; we are run by focus groups. The question the Government should be asking is what policy is in the best interest of the nation; then and only then should it ask the question of how to sell those policies to the public.
The difference between the two approaches is hugely significant. Under National’s current approach, we will never reverse Labour’s terrible policies. We will never catch up with Australia, and the Prime Minister, John Key, will be in danger of going the same way that Kevin Rudd has gone. In the end, only quality policies bring real returns to the people of New Zealand. The second question—asking what should be done in the best interest of New Zealand—would mean that catching up with Australia was only a matter of time.
We can turn New Zealand’s current problems, including lack of growth, into opportunities if we define clearly what we want to deliver to the people of New Zealand and how we intend to deliver it. The key issues facing this nation are the same that have faced this nation for 40 years—health, education, welfare, unemployment, crime, housing, etc. For 70 years Governments have tried to run these areas of people’s lives, with disastrous consequences. Public expenditure has expanded to over 50 percent of
GDP, and as a result it has caused low productivity and an excessive strain on taxpayers. At the same time, the Government’s management of people’s lives has stripped them of the possibility of getting ahead. Despite increases in our nation’s wealth, we see more people relying on the State for assistance.
Offering short-term answers to these problems will never solve them, nor will examining each of them in isolation work. The issues are fundamentally linked, and I believe that the people of New Zealand know it. The problems of poverty, lack of motivation, inadequate skills, alienation, and unemployment all reinforce one another. These problems create the conditions that lead to health problems, a lack of opportunity, and a lack of economic growth. These issues are central to any recovery in New Zealand, because they act negatively on rich and poor alike. They focus on the plight of the disadvantaged and the adverse impact that their situation has on the rest of us.
The only way of satisfying both sides of this equation is for New Zealanders to agree on some overriding objective. That objective would need to include the following element: an improvement in the living standards of all New Zealanders, particularly the disadvantaged. Such an objective would then allow any political party that wanted to, to integrate its thinking on growth, investment, health, education, welfare, jobs, equity, security, and social harmony. Such an objective also has the virtue of putting all New Zealanders, hopefully—and, hopefully, also the political parties—on the same page. We all want to help New Zealanders, especially the disadvantaged. We all share the same goal. Where we differ is over the means we adopt to help them.
This is where we can have our arguments. ACT likes choice in education, health care, and welfare. For example, we like people to be free to choose which school they send their children to. National, Labour, the Greens, and the Māori Party favour compulsion. They say that people can send their children to the school of their choice only if they are rich enough to pay private school fees or to move into their preferred school zone. ACT likes competition, because it promotes efficiency, better use of resources, and higher incomes, while giving people choice. National, Labour, the Greens, and the Māori Party favour monopoly. They like to have monopolies in health, education, and the welfare system—only one place to choose from and no incentive to improve efficiency. ACT likes self-reliance, whereby people are allowed to keep their own money through lower taxes or tax credits, which enables all New Zealanders to purchase their child’s education, health care, or welfare insurance. National, Labour, the Greens, and the Māori Party prefer dependency. After the people of New Zealand have paid their taxes, they simply do not have enough money left over to be self-reliant, so they are forced to vote for the party that they believe offers them the best handout. ACT believes that people should be able to get ahead through hard work, while the rest of the political parties want to tax success hard in order to create dependency.
Although income is important to the disadvantaged, it is not enough to remedy their situation. Their deeper need, which I believe that only ACT offers, is to have the incentives and opportunity to make real advances for themselves through their own effort. By helping them to achieve independence and to contribute to society, we can transform their future and everyone else’s with it. Disadvantaged people need access to education, health care, housing, and benefits that guard them against emergency, adversity, and disability. But forced education, where they learn nothing, life on a benefit, or Government-created jobs simply perpetuate their problems. Scope for constructive personal choice is basic to human dignity. The disadvantaged need the kind of help that puts people on their feet and able to make decisions for themselves.
The social cost of very low productivity growth in New Zealand over a long period of time has damaged the security and well-being of people at every level of New Zealand society. It is about time we did something about it. We need to stop
worshipping sacred cows that do not exist. We need to understand that without efficiency, improved equity, for example, is impossible to achieve. We need to understand that waste consumes resources that would otherwise have been available to improve equity levels throughout the community. Certainly, everyone involved in wasting resources—and there is plenty of that—collects a rent, dividend, or pay packet, but does so at the expense of the whole community, and we need to understand that. If we eliminate that waste, people, as well as money and physical resources, are forced to relocate in activities that produce a benefit for the community, but it is a nonsense to pretend that such a change to the status quo for them is a reduction in the overall levels of equity. The interest groups that make that argument are stating a case for gains to them at the expense of everyone else’s well-being. I think it is time we examined the $3 billion of special privileges in the Budget that go largely to businesses. If we got rid of those $3 billion of handouts—like film industry grants, etc.—we could reduce taxation dramatically in this country.
AMY ADAMS (National—Selwyn)
: I rise to take a call in this afternoon’s debate on the Appropriation (2009/10 Supplementary Estimates) Bill and the Imprest Supply (First for 2010/11) Bill. It has certainly been an interesting debate to listen to this afternoon. “Wide ranging” does not begin to cover the scope of what we have heard.
As a relatively new member in the House, I must say that it took me a little bit of time to get my head round some of the financial processes that we go through, year on year, in this House. It is worth clarifying for the benefit of anyone listening at home who is not familiar with the processes that this part of the financial programme is just about formally signing off spending that has already occurred in the 2009-10 year. That spending happened under Imprest Supply bills, and we now formally sign off on it because it was outside the votes in last year’s Budget. The Finance and Expenditure Committee had the opportunity to look at the supplementary estimates in a little more detail. It was a very interesting experience and it was certainly a help in getting our heads round how the process worked. The major increases this year in the estimates were primarily in the finance portfolio, of about $1.8 billion; revenue, of about $900 million; and social development, of $475 million. Those were the big three.
When we look at where that expenditure has occurred, it is interesting to note that all the big-ticket items are related to the global financial crisis and the uncertainty that it brought about. When we go through the briefings and break down some of those large numbers, we see that the big-ticket items are things like the guarantee and indemnity scheme, which was a reaction to the serious global financial situation that we found ourselves in. They are things like the massive increases in debt-servicing costs or the unexpected jumps in debt impairments and debt write-offs, both in the tax arena and in the social policy area. And, not surprisingly, there was a large cost for increased benefits, as we saw New Zealanders dealing with the fallout of the recession. I think it is entirely appropriate in this debate, albeit it is a wide-ranging one, that when we talk about the need to now sign off on that additional expenditure, we take a moment to look at where our economy has come from and where it is going. We have found ourselves in an incredibly fast-paced and changing environment, certainly since the National-led Government has been in office. That has been the largest contributing factor to the numbers we are looking at today.
I will start by looking at exactly where our economy was and what its health status was. Given that we are having Men’s Health Month, we should also have an economic health snapshot of where we are at. The economy in 2008, even before we went into the global financial crisis, was in a perilous state because of exactly the same sorts of imbalances that this whole House is now acknowledging exist. But let us not kid ourselves that these imbalances came about under the recession. The sorts of imbalances
that this country and its economy are really struggling to grapple with existed long before any international crisis. The biggest one of those has been the failure of our productive sector since the turn of the millennium to grow and expand as it should have. Since 2000 we have had a productive sector in decline. That is something I have mentioned in this House on more than one occasion, and it is something I will keep mentioning, because if we do not address it and acknowledge in this House that we have to get our productive sector in a healthy position, then we will never create the sort of economy we need. It has been said here, and I think it was the Minister of Finance who said it, that it is very easy to say these things, very easy to stand up and pay lip service to wanting to build exports, to grow innovation, and to support business. I do not think any members in this House would be brave enough to stand up and admit they do not agree with any of that. But the difference is what actions this House is prepared to take to make that happen. They are cheap words. They are easy words. If someone is not prepared to break the eggs to make the omelette, then that person should not be making those sorts of claims.
The economy that the National Government dealt with when it picked up the reins in 2008 was one where the productive sector had been neglected, abused, and abandoned by its Government. We were seeing the consequences of that. We were seeing a steady decline in exports. We were seeing exporters struggling to stay afloat. We were seeing more and more mum and dad New Zealand businesses shutting down, not taking on staff, not making a profit, and, increasingly, heading overseas to what they perceived as greener pastures. There is no way that we will ever get our economy to a place where it can provide sustainable jobs, good incomes, and a standard of life to which we all aspire, unless we are prepared to be honest with ourselves and say that if we do not create an environment in which business can grow, thrive, and prosper, then it will be a case of the last one out please turn out the lights. This economy is doomed if we cannot get that right.
That is why this Government, when it came into office, had two immediate goals. The first goal was to deal with the recession as best as we could, and to make the impact on New Zealanders as little as it could be. We knew we could not avoid it. It was happening all across the world. But we could make sure that we maintained core entitlements to New Zealanders, which we have done. We could make sure that we delivered on our commitments to New Zealanders, which we have done. And we could make sure that we delivered the sort of platform for economic growth that we had promised New Zealand in the 2008 election campaign, and that New Zealanders had invested in when they voted for this National-led Government.
In the 2009 Budget and then in the most recent Budget, we are starting to see that programme roll out. I often describe this economy as a pretty slow-moving beast to turn round. In the words of the infamous Rachel Hunter: “It’s not going to happen overnight, but it will happen.” But we have to start by putting in place foundations for growth, and they are things like addressing tax and carrying out the biggest single reform of our tax system that we have seen for 25 years. Why are we doing that? Because it is one of the biggest incentives we can give to this economy. It is the biggest way that we can tell New Zealanders to work hard, get ahead, save more, and invest more, and their Government will back them. That is what tax reform is all about. It is not about more money to the Government; it is about incentivising the economy to be more productive and less consumption focused. That is how we will address the shortfall in personal savings, and that is how we will start to give business in this country the message that they can get ahead and that there is a future here. That is when we will see our best and our brightest returning home to base themselves in New Zealand.
I will make the point that when we talk about business, let us not think of it as some big ugly corporate on the stock exchange. The vast bulk of business in this country is small enterprises employing 10 or fewer staff. That is what we talk about when we talk about business. Do not buy into the lie that it is some faceless corporation. Supporting business is supporting the families and the people in our communities who get up every day and work very hard just to pay the bills, and that is what has been lacking. But with the sorts of tax incentives in this Budget and the sort of investment in infrastructure that will lay foundations for growth, we are putting New Zealand on the road to prosperity once more, and we are putting New Zealand into a space that will see economic growth delivered. In this Budget we are looking at growth projections averaging 3 percent for the next 3 years, and that is fantastic news. It will mean 170,000 new jobs, it will mean greater incomes for Kiwi families, and it is the sort of economic growth that will provide the outcomes that all New Zealanders want.
When we look at the infrastructure investment that this country was calling out for under the 9 years of Labour and that we are now delivering, we see that it removes some of those bottlenecks. It will see roading put in place. Roading projects like the Christchurch Southern Motorway, which my electorate has been calling for for 19 years, are now under way. I drove past it yesterday, and I saw the bulldozers rolling. It is a fabulous sight to see. We will see investment in broadband. I can tell members that in my communities in Selwyn it is the issue that my constituents raise with me most often. They cannot get broadband, and without broadband one cannot do business in a modern environment. So we can see that our investment in infrastructure straight away translates into setting conditions for economic growth and prosperity for New Zealand.
That is what this Government is all about, that is what we have been delivering since 8 November 2008, and that is what we will continue to deliver. We know that that is what New Zealanders want. They want economic growth, they want safer communities, they want raised education standards, they want less bureaucracy, and they want a Government that has aspiration, that has hope for them, and that knows that we can aspire to more in this country. We are not tall poppy knockers on this side of the House. We do not knock anyone who puts his or her head above the parapet. We tell people that if they are prepared to work hard, we will back them. This Government will get in behind any New Zealander who wants to get ahead. It is not just hollow words from us. We do not just stand here and make speeches; we get out there and do it. I am very pleased to support this motion.
DAVID BENNETT (National—Hamilton East)
: It gives me great pleasure to follow in the footsteps of that great speech from a very fine new member of this Parliament. She shows the new leadership that National has delivered to this country. I say “Well done!” to new members, like Amy Adams, who are delivering a very strong focus for National in the South Island.
When we look at the Budget and what is happening in the economy at the moment, we see that it is important to take a bit of a sideways step and look at what would have happened if National had not been here. If National had not been here, what would the case be for the New Zealand economy? Well, it would have been a continuation of the poor and misguided management of the previous Labour Government. It put our country into recession before the rest of the world had a financial crisis. It bought assets such as KiwiRail for a price beyond the value of those assets. It made promises at consecutive elections about buying the votes of middle New Zealand, without taking into account the long-term effect of those costs on our economy. That is the heritage we get from the previous Labour Government. It bought votes, it did not care about the future, and it banked on the rest of the country paying for it.
There was a wake-up call. The wake-up call was the world recession. It came to all countries, and it was deep and dark. That wake-up call has been something this Government has had to grapple with. We have had to deal with not only those international concerns but also the mismanagement that set us up in a very difficult predicament. If Labour had been in Government, it would not have known what to do, because it was just taxing and spending to buy votes at elections. It had no plan, no direction, and no foresight for what it wanted to see as a strong economy going forward.
But that would have left New Zealand in a very difficult position. New Zealand would have become the Greece of the South Pacific if Labour had been in charge. Labour members know that. They are sitting there and they know that they could not have dealt with that situation. They are looking across the Chamber and are asking themselves why they could not make those firm and right decisions that National is making now. The reason they could not is that they do not know. They have no policy, they have no direction, and they have no ability to make a direction happen for New Zealand.
New Zealanders are justifiably proud and supportive of their Government, because they know that it is the best Government for these very difficult times. New Zealanders know that under the leadership of John Key they have somebody who is an international politician of repute and is providing vision and clarity to a country that has been long lacking in those attributes because of the previous leadership of the last 9 years.
We are very proud to be part of a Government that is setting out a Budget that takes a balanced approach to where we need to go. I say balanced in the sense that we realise we have certain commitments, albeit made by the previous Government, albeit made for the wrong reasons. We still have to deal with them, and we are dealing with them. We are also balanced in the sense that we are looking forward to what we need to do to build a stronger economy so that we send the right signals and incentives and we do not have policy or make spending decisions based just on winning elections. That is a difficult balance, especially at this time, but we have managed to do that. We have done it in a slow but sure and direct manner. We have done it by making decisions that people can understand and live with. At the same time, we are sending the right signals and incentives to New Zealanders and the economy.
Hon Parekura Horomia: What’s this rubbish about?
DAVID BENNETT: That Labour member has just come into the Chamber, and he would have no idea what the economy requires. He did not even make a Budget bid when he was a Minister, so I do not see how he could be any help in making the economy work.
Hon Parekura Horomia: I raise a point of order, Mr Speaker. That is not true. I made several bids when I was a Minister.
Mr DEPUTY SPEAKER: That is not a point of order; that is a debating point.
DAVID BENNETT: If that member made several bids, we all missed them. That member would not even have known if he had made a bid, anyway.
When we look at what we need to do for New Zealand going forward, we see that we need to send the right signals and incentives—
Hon Parekura Horomia: What about the 400 people who have lost their jobs in Waipukurau in the Hawke’s Bay?
DAVID BENNETT: That Labour member is going on about 400 people who have lost their jobs, as he is all about creating fear. I ask him about the 40,000 who would have lost their jobs if Labour had remained in Government. That is the detail that those members on that side of the Chamber need to understand. We will not look at it like that. We will look at what we need to do for this country going forward and what we need to do to be competitive in the world economy. We need to have our people getting
a decent education, a decent job, and the rewards for working hard and making the right choices. Those are the factors that will lead to a strong country and a strong economy. Our future is in our people. We back them and we back their ability to succeed. We are sitting in what will be the best part of the world for the next 50 years. New Zealand is in the right place at the right time to take advantage of the world recovery, especially the recovery in this part of the Asia-Pacific region. But we need to give our people the tools to take advantage of it, and that is where we are going. We will send the right signals and incentives so that young New Zealanders stay in this country and build a future in this country. They may go overseas to get experience, but they will come back to make New Zealand their home and make this the strongest country we can be.
That is the future for New Zealand. That is where we are going. We have set the tax system so that people see those signals and incentives, and that is what the Budget was about. It was not about carrying on the past injustices of trying to make money out of property. The previous Labour Government continually abused that, and it asked why the Reserve Bank was putting up interest rates and kept blaming other people when it had 9 years to deal with that economic distortion. It did not have the guts to make the calls, but National has had the guts to make those calls. We have gone out there and given young people the direction they need. Young people want to get the best possible education they can and the best possible job they can. They want to make the most money they can, so they can have the goods and services they desire for themselves, their families, and their communities going forward. That community aspect is something we are building through New Zealand. New Zealanders are understanding that they have the opportunities that other countries have. We will not be looking across the ditch or anywhere else and saying that we cannot achieve those things. We believe in the future of this country. We are giving the New Zealand people the tools to take advantage of that future.
That is quite a different approach from what Labour would have done. Labour would have looked across the ditch, and it would have been abusive and jealous. Labour would have said that New Zealanders cannot do that and it is beyond us, and that we should accept what we have because this is as good as it gets. Labour would have redirected the money and told us that this was as good as we would ever get. That is the mentality that Labour wanted to build in New Zealand. Well, we want to see an ambitious and successful New Zealand, where that is not the mentality. We want a mentality such that we have the option of going out there and achieving our goals, and that New Zealanders can see that they can prosper and succeed on the international stage and they can succeed at home, as well.
That is the nature of the directional change that New Zealand has encountered since having a National Government. John Key is inspirational in that regard. As a leader, he emphasises and epitomises what New Zealanders can and will achieve. That is what the public of New Zealand like. They like to see that we can do these things. They like to see somebody who listens and makes decisions. They like to see a Government that makes the right decisions for people, based on the right commercial realities, not decisions based on winning votes at election time and on not paying for those things until somebody else has to in the future. That is the point of difference. That is why this Government is so strong and successful. We commend these bills to the House.
Hon MARYAN STREET (Labour)
: I rise to speak in the supplementary estimates debate. I will come to the previous member’s speech in a moment. This Budget and the supplementary estimates represent a Budget in search of a purpose. If this Budget and these supplementary estimates were an essay, I would probably give it a C-. I would give it a C- because it fills out the form, it follows the form, and it is written by somebody who knows how to write an essay, but it is completely lacking in coherence,
direction, plan, or in any kind of insight or foresight. It certainly lacks flair. It is pedestrian at best and it is damning for the nation at worst.
This is not an adequate Budget. This is the Government’s second Budget, and it is lacking in any proactive responses to the economic crisis. That group of people opposite know that this is not a Budget that will repair anything that is striking at the heart of New Zealand’s growth and prosperity. It lacks any proactive response to the economic crisis, to the global recession, or to unemployment in New Zealand.
There are problems with a society that drifts further and further apart internally, where inequality is exacerbated and not addressed, and where the rich get richer and the poor get poorer. Where those gaps increase and are not closed, there are problems of social dissonance that begin to match the problems of economic difference. That is well catalogued by people cleverer than me, and that is something that this Government seems not to have taken into account at any stage in the development and the drafting of this Budget. Under this Budget, the rich will get richer and the poor will get poorer. In a few years it will be entirely obvious that the roots of the social dissonance that will be created by the increasing gap between the rich and poor should be sheeted home to this Budget. Instead, the panacea offered in these appropriations is the same mantra that the National Party has been offering forever—tax cuts, tax cuts, tax cuts. That is in this term, and it will be followed by asset sales in the next term, if the Government is given a chance to do that. Let us hope the 80 percent of people in New Zealand who are clearly opposed to the sale of State assets will remember when it comes to the ballot box next year that this Government will sell State assets as quickly as it possibly can.
The Government has only two prongs to its economic development programme in the Budget: one is tax cuts, and the other is asset sales—not now, because the public are not quite ready for it, but we will soften them up for asset sales. The Government will do tax cuts now and asset sales later. But those tax cuts are a swindle. Inflation of nearly 6 percent—the 5.9 percent that Treasury has predicted—will gobble up any dollars that people on low and middle incomes will receive from tax cuts.
The tax cuts are also unfair. One-third of the tax cuts goes to the top 5 percent of earners, and 15 percent goes to 1 percent of the top earners. That is grossly distortionary, and it represents an impoverished, old-fashioned, and backward way of thinking, which says that if we give the rich more, wealth will trickle down eventually to reach those who are less well off. Well, since it was first posited in the 1970s, that has never worked as a way of maintaining social services, improving opportunity, and closing gaps between the haves and have-nots, and it will not work this time either. Those on the average income will get something in the order of $15 net a week, after the GST increase. John Key will get $218 net a week after these tax cuts. People on the minimum wage will get something in the order of $3, and with that they will have to accommodate and absorb increases in power prices, accident compensation levies, and supermarket prices because of the increase in GST.
Although the National Party’s hoardings up and down the country in 2008 promised it, there is no bright prospect for the future for most families. In the area where I live in Nelson, 76 percent of people have an income of less than $40,000. That means three-quarters of the people in Nelson who have an income of one kind or another earn less than $40,000.
The thing that really disturbs me, even more than the impoverished, old-fashioned, antiquated, outmoded, and much-maligned orthodoxy that lies behind this Budget, is the lack of a plan for growth. This Budget represents a series of lost opportunities. I have said it is old thinking. There is no imagination. There are no ideas, in fact, about how to move the economy forward. What is required is not just the step change that the Prime Minister keeps talking about. A step change is not adequate. A quantum leap is required
in our approach to primary production and the things that we do so well. Yet on the commodities market we remain entirely vulnerable to the exchange rate, and to low margins on commodity prices going out into international markets. Where is the investment in skills training and in tertiary education that is required in order to make this economy become a smart economy?
Of course, we are good at producing first-class, top-rate primary produce. I see that every day in the region where I live in Nelson. I say to members opposite that what I have also seen recently in Nelson are job cuts in fisheries, forestry, and, most recently, in engineering. Those job cuts are real; they are about real families losing jobs. We have a situation in Nelson where both earners in a family are out of a job for the first time in their lives.
Where is the imagination, where is the new policy, and where is the quantum leap in this Budget that will get us back into gear? One of the previous speakers talked about the fact that a lot of our businesses are small businesses, and that is true, but she neglected to identify the impact of the increase in GST on small businesses. She ought to get around more and talk to small-business owners about how they are feeling about the increase in GST, and how the pressure is on them to absorb it.
There are no new ideas in this Budget. It is impoverished thinking. It is not adequate for the times, and it will not move us one jot towards the kind of smart economy we require. Thank you.
PESETA SAM LOTU-IIGA (National—Maungakiekie)
: It is my privilege to stand to speak on the Appropriation (2009/10 Supplementary Estimates) Bill and the Imprest Supply (First for 2010/11) Bill. Many people have spoken already about what this Budget provides. It provides opportunity. It provides jobs—170,000 over the next few years. But the context in which this Budget was produced was an economy that, under the previous Labour Government, was in a state of disrepair. It was an economy that was contracting in November 2008, that had had 4 consecutive years of export decline, and where the biggest show in town was Government departments. It was an economy that was overtaxed, and that crowded out investment in productive resources. So the economy that we inherited as a Government was in a state of disrepair.
Budget 2009 took some steps to address the problems of that economy, to move it along the road to recovery, and to rebalance it to improve economic growth and to move our focus towards exports and savings. The current forecast for New Zealand’s net external debt and liabilities is about $250 billion by 2014. Yes, it is $250 billion, or quarter of a trillion dollars, and that is astonishing. The Government finances face similar challenges, and we are spending more than we earn. Any householder knows that when we spend more than we earn, we must necessarily borrow, and some, like those across the Chamber, steal. The National Government will not steal. We are reducing our borrowing. We have produced a Budget in 2010 that will progress us towards surpluses sooner. The bottom line, as I have already stated, is to rebalance this lopsided economy towards productive business, productive investment, and exports.
So what does Budget 2010 do? First, it puts economic growth at the front of our agenda. Its overriding aim is to tilt the economy towards savings, investments, and exports. Secondly, it puts together the most comprehensive tax reform that this country has seen for 25 years, and that reform is about making the tax system fairer and promoting faster economic growth. Thirdly, it is about the fiscal outlook. Both our Crown debt and Budget deficits now are looking better than they did 12 months ago and, certainly, better than they did 12 months prior to Budget 2009. Why is that important? I put it to members that if debt spirals out of control as it has done in other countries, particularly European countries and the United States, it crowds out investment in jobs and investment in opportunities. It also could lead to a downgrade in
our credit rating, and increased borrowing saddles future generations with the spending of today. Finally, debt impacts businesses; it impacts businesses to the extent that the cost of borrowing increases, debt repayments increase, and, as a Government, we are not able to spend on areas where it is required, like health, education, and infrastructure.
Finally, this Budget is about reprioritising our spending and allocating new spending of $1.1 billion. We have moved that new spending to front-line public services. We have more police, nurses, doctors, and services that actually serve our communities, rather than more bureaucrats in Wellington. The number of them expanded under the last Labour Government. It is about quality spending on infrastructure, and we have put money into ultra-fast broadband and roads. I am pleased to see that State Highway 20, which goes through my electorate of Maungakiekie, is 6 months ahead of schedule, to budget, and to specification. Yes, we are building the roads of tomorrow. The spending on infrastructure also includes spending on rail. We all know that this Government inherited a trainset from the last Government. It was a bad investment. That Government overspent on the purchase price for KiwiRail. But the Budget is about delivering a network, and I am pleased that the Onehunga rail station, in my electorate, is about to be opened later this year. That is about investment, that is about decision making, and that is about making the right investments at the right time.
The Budget is about economic growth, and our programme now is forecast to deliver real GDP growth of 3.2 percent in the year ending March 2011. That 3.2 percent growth compares favourably with the last Government’s record. In Labour’s 9 years there was less than 1 percent year-on-year growth. In the most favourable economic conditions it achieved less than 1 percent year-on-year growth. That is appalling. As I travel through my electorate of Maungakiekie, from the factories in Penrose to Mount Wellington and right through to Onehunga, the word out there is that confidence is up; confidence in this Government is up. Out in the factories of Onehunga and Penrose people are glad that we are addressing some of the harsh policies of the last Labour Government. They are pretty happy about the 90-day probation legislation in that they are able to hire people on probation. They are happy about the tax cuts. There are not just personal tax cuts but business tax cuts. That matter has not been mentioned in this House with any degree of frequency. We can be proud of the 28c company tax rate. Our tax rates are comparable with those of other countries. We now have one of the lowest tax regimes in the world.
The Budget is about preparing for future growth. We have invested in infrastructure, but, as well as that, one of the key investments is in education. We are prioritising early childhood education. We are prioritising it especially in those communities that do not access early childhood education. I refer to the Pacific communities, where 85 percent of children are currently accessing early childhood education, and we would like to see that number rise to the mainstream percentages of mid-to-high 90s. It is a Budget that I support and it is a Budget that has been well received by New Zealanders.
Hon DAMIEN O’CONNOR (Labour)
: I acknowledge the speech from the previous speaker, who is an enthusiastic new member. It is a shame he did not stick to the facts; it would have made a bit of difference.
I refer to a sobering IMF report that has just been done on the New Zealand economy. It states that New Zealand “stands out as having one of the lowest saving rates and one of the largest net foreign liabilities positions of any advanced country.” But the National Government’s last Budget cut all efforts in terms of savings. KiwiSaver and contributions to the superannuation fund were cut. What, then, did the Government do this year? We have heard some pearls of wisdom in the House today. Mr English said that we need to create jobs in the export sector and that we need a growing tradable sector. I agree with those statements. However, Roger Douglas from
ACT said that we need to reduce taxation dramatically in this country. Then we heard Mr Dunne say that we need liberating policies. Well, if these three parties work together as a Government, we would think that there would be some cohesion and logical outcome from all of those statements.
So I ask what the Budget did to promote those statements, if indeed those members believe them. At the select committee one of the senior Ministers, Gerry Brownlee, was asked what growth targets the Government has. He could not admit in the select committee to any growth targets, because the Government does not have any. I go back to those statements made in the House just today. What did the Budget do for taxation? If we are to believe that lower taxes drive a better economy—perhaps through Mr Dunne’s liberating policies—maybe he believes that the flat tax, like a flat earth, is the nirvana that we should all seek, or that no tax delivers a perfect world. Well, it does not; we know that.
Let us go back to the naive belief that lower taxes deliver a better economy. In fact, tax went up for every single New Zealander in the last Budget. GST will go up to 15 percent. So every single item we buy will cost more, because of increased taxation. There were cuts made to taxation—cuts that delivered one-third of the total benefits to 5 percent of the taxpayers in this country. Those cuts were unfair. If we go through and look at the cuts, we see that those on the lower end earning zero to $14,000 received a 2 percent cut in taxation; moving up, those earning $48,000 to $70,000 get a 3 percent cut; and those on the highest levels, over $70,000, get a 5 percent cut. It was simply unfair, unethical, and, in my view, immoral. So there were tax cuts for a small number of people, but those people at the bottom end who got less will have any benefits of that gobbled up through increased GST, electricity costs going up, and inflation, which the Budget admitted would be at 5.9 percent by July of next year. That will cripple many, many people.
Mr Dunne was wrong. There were no liberating policies in the last Budget. In fact, tax did not go down, as Sir Roger Douglas would demand; it went up for the vast majority of New Zealanders. If we were to believe that lower taxes delivered better outcomes, why are Finland and Denmark, European countries that have strong sustainable growth, high incomes, good investment in research and development, better off than the low-tax countries, which include New Zealand? The IMF said that we are not as great as that, looking forward. We have some serious issues around savings and net debt. We are a so-called low-tax country. The Budget did not deliver a more sustainable future for New Zealand; it taxed the lower-income New Zealanders more and it cut taxes for people at the higher end.
Let us look at the tradable sector. If we are to believe Bill English—and I do agree with him—that we need to drive growth in the tradable sector, we need to ask what the Budget did for the export sector. Well, I think it is widely acknowledged that we need more investment in research and development. What happened? We had a commitment of $700 million for research and development in the tradable sector, but the Government swiped the money and came back with a Primary Growth Partnership proposal, which did nothing for 18 months. There was absolutely nothing for 18 months—
Craig Foss: Not one dollar?
Hon DAMIEN O’CONNOR: That is right, there was not one dollar out of the Primary Growth Partnership for 18 months. Three grants have just been made. What happened was that we had research and development tax credits in place. Every single business in this country could claim tax credits for research and development. The National Government wiped them out. It took them away. It has implemented a research and development grants programme. That is as bureaucratic as one can possibly get. The party that claimed to be stomping on bureaucracy replaced tax credits, tax cuts for
research and development, with a bureaucracy that delivers, if one is lucky, some grants for research and development. That is not the way to drive forward this economy for the export sector.
Quite recently, Mr Bollard increased the official cash rate. He put it up by 0.25 percent. That will do more to harm the tradable sector in the medium term than any benefit, any policy, that the National Government passed through the Budget. We will see, and already are seeing, the value of the dollar climb—because we have increased interest rates they flow across the board, and we are seeing the dollar climb. The export sector will get punished once again. I acknowledge the work that is going into the monetary policy reform that we will put on the table through Mr Cunliffe and Mr Parker. There is a lot of good work going on. We know that the export sector cannot continue to be battered around by a fluctuating dollar and by interest rates rising—and they will rise, as they did in the 1990s under the National Government—because the export sector that Bill English said we need to grow will be hammered as we move forward.
Another area where the Government could have assisted the export sector was with depreciation allowances. The Government eliminated depreciation incentives for new planting equipment. It took them away. If ever there was a way of increasing productivity, it is to encourage businesses to invest in new technology and new plant, but the Government took away that incentive. In fact, one could say that it created a perverse incentive, because it lowered the company tax rate. We are likely to see businesses that have the option of either taking out money through dividends or reinvesting back into higher levels of productivity take that money out because they pay less tax on it now. That is a bizarre policy for a Government that says it is encouraging the tradable sector.
The next area that we need to invest in is infrastructure. What did the Government do in this area? It shrunk the money going into health to a point where the rural areas are now suffering cuts in home care and cuts to age-care facilities—threats to the services that support the people who drive this export economy.
I will talk about education. I quote from a principal of a school: “In short, I feel that the 2010 Budget will do absolutely nothing to assist”—and I take out the name of the high school—“and this is particularly irksome when the Prime Minister has stated that ‘One of the Government’s top priorities is ensuring that a greater proportion of education funding goes to frontline services in our schools and less into bureaucracy.’ … I can say categorically that it won’t.” That is from a principal of a high school in a rural area. He knows the truth. The Government has refused to properly fund education through this Budget, which might support people who live in rural areas and who produce the export income.
In communication we committed $48 million. What has the Government done? It has said it will take a levy off all other broadband users and put the money back into the $300 million fund for rural broadband. That is compared with the $1.5 billion the Government is spending in the cities. That will not help the tradable sector. Neither will roading, where the Government has chopped money from provincial roads that are in the control of councils to put into projects around the cities.
AARON GILMORE (National)
: What people out there in the House just heard was actually voodoo. It was voodoo that Labour put forward in its belief that it has some bizarre idea of how to run the economy. It is actually economic illiteracy. What we see and hear from the Opposition is no understanding of basic economic principles. It is a bit like Groundhog Day; every time I stand here to talk about our Budget, I feel like I am saying the same thing again, and again, and again. Those members do not seem to get the fact that we inherited an economy that was in recession, year after year. Labour
does not seem to understand that. Its members cannot read, cannot write, or are just too damn stupid to be able to get there, I believe.
I believe that this is a good Budget. In fact, I think it is a great Budget. In time we will see some wonderful things. Up in the public gallery this afternoon a group of young people were standing there listening to speeches from this side of the House and that side of the House. They loved it, because this Government will reduce the debt they will inherit. Those people over there would rather borrow an additional $5 billion or $6 billion a year that young people in New Zealand, like my young children, would have to pay back in the future. Labour is on a bit of a sideshow. It does not really seem to care about future generations. All its members want to do is to borrow some more money and spend it on their little toy projects. They do not seem to care about some of the issues about getting the incentives right for New Zealand, getting the ability to put in place the tax structures that allow people to invest, to save, and to grow the economy. Every 1 percent increase in economic growth is worth $3 billion to our economy by 2014. That is $3 billion that we can spend on things if we have that money. Maybe it is an idea to have a discussion about that, but it is absolute economic voodoo, and illiteracy, to talk about—
Hon Dr Wayne Mapp: It’s stupidity.
AARON GILMORE:—and stupidity, Mr Mapp. It is absolute lunacy to be in a position to say “Let us spend money we do not have yet, on things that do not work.” Labour members are so focused on other things that are unrelated to the economy. They are focused on sideshows. They are not focused on the economy, they are not worried about economic growth, and they are not worried about interest rates. Every 1 percent increase in interest rates costs the taxpayer an additional half-a-billion dollars—$500 million. That is another $500 million that we have to borrow. Every dollar we borrow increases the risk of interest rates going up. We will still be borrowing about $10 billion this year, and that is not good enough. But we had a Budget put in place that allows us to be brought back to surplus by 2016. That is years and years earlier than the Budgets the Labour Government put forward.
We had a momentous moment a couple of weeks ago, but Labour members did not mention it, at all. You see, we had a thing called a current account surplus. When I was at university studying economics, people talked about what a current account surplus was. The important thing about a current account surplus is that it is when New Zealand is in surplus, when it is paying its way in the world. A couple of weeks ago we had the first current account surplus for one quarter since 2002. Do members know what was driving that? It was growth in exports. It was changes in the way people were using their money, and changes in incentives and in how the Government was spending its money.
We have heard again from members on the other side, voodoo, stupidity, and illiteracy about jobs and growth. Well, if the Government has to borrow money to employ somebody, that is actually wasteful. That is not a real job. In fact, the people in those jobs do not want those jobs, either. But I can tell members what real jobs are. In my part of northern Christchurch, off the coast there, there is soon to be one of the largest mussel farms in New Zealand. The previous Labour Government was completely against aquaculture. But aquaculture has the potential to make—I do not know—a billion dollars extra, or something in that order of that magnitude. That one mussel farm will employ approximately 200 people from my wider community. That is a wonderful thing for our local people. That is a great step forward.
The previous speaker from over there talked about issues of research and development. We are very fortunate to have today in the House the Minister of Research, Science and Technology, the Hon Dr Wayne Mapp, and I will talk about
some of the initiatives that have been put forward, and that are happening this year and beyond, in science. We have the ability in New Zealand to reposition real money into science, the ability to put in place about $300 million, which will be invested in real outcomes for real people to get real growth. I think that is really, really good.
We have seen some bizarre behaviour from Opposition members over there in the last few days, and we have seen that reflected in the polls. I am a bit concerned now about the people sitting over there in the Chamber, because in the polls that came out only a day or so ago, Labour would lose eight or nine MPs. The five members of the Opposition who are sitting over there would be very, very worried about that—I would be if I were they—and about the way they are going. Maybe they should think about that when people are talking about some of the issues to do with the economy.
It is exports that will grow our economy, and it is lower taxes. It is not about whether we put more money into buying a new machine, or about depreciation; it is about the bottom line that exists in the cash flow of a business. The decrease in taxes actually gives companies choices. It gives them choices about whether they want to invest in training, because the most valuable thing we have in New Zealand is our people. It is not our machines—anybody can buy a machine—it is the smartness of our people. If a company has less money to spend on people, and spends it on machines because the tax structure says that that is the way to go, then that is not the right way to go. But lower tax rates give companies the incentives to invest in people’s brains.
That is the major advantage New Zealand has in the world. We are a small country; we will never have the biggest, flashest machines in the world, but we can have the smartest people. A lowering of company tax rates encourages the incentives for that. The lowering of personal tax rates gives incentive to workers to say that they want to work an extra shift. They will want to work extra shifts because that will give them a bit more money in their back pockets. This Budget—and I will say it time and time again—puts in a place a system where workers, in families with two children, earning $50,000 a year, will pay no tax, and I think that is a great thing. It is a great thing, because those people will be better off in New Zealand than they will be in Australia. I think it is a good thing—despite any changes that may occur in a tax switching—because those people will still be better off in New Zealand than in Australia. That is what we have seen happen. We have seen migration results come through, since National has been in Government, where planeloads of people have come back to New Zealand and have not gone to Australia—
Dr Rajen Prasad: Planeloads?
AARON GILMORE: Planeloads of people.
Dr Ashraf Choudhary: They’re going down.
AARON GILMORE: We have had net migration. I say to that member over there that if he would learn to read a graph he would understand that that is what happens at this time of year. It is the middle of winter. He should look at the numbers. I encourage him to go to a few websites and understand that. We have put in place some wonderful things in relation to asset management. The member from Hamilton East, along the benches there, talked earlier about some of the great infrastructure projects—
David Bennett: The Waikato Expressway.
AARON GILMORE: —the Waikato Expressway, which he likes to keep talking about—but in my part of town in Christchurch there is a place where we have a wonderful new motorway. We have broadband initiatives going into place. We have had our northern motorway put on an agenda of projects after being delayed for years and years. We are using our assets in a smarter way, and I think that that is a good thing. We are looking at turning round and investing large amounts of money in our rail network because that is needed, despite the fact that the previous Government spent a huge
amount of money and had a lot of waste. I do not think that that made a lot of sense. We have spent large amounts of money trying to sort out issues we have seen in terms of switching—efficiency in the State sector. That is a good thing. You see, most bureaucrats will turn round and think they might not have been productive, but if money is at least spent on them and on the productive sector, that is a wonderful thing. If only we could continue to have a current account surplus—quarter, on quarter, on quarter—then we would be paying our way in the world; and we had the first ever current account surplus in 8 years. I am proud to be part of a Government that saw that happen.
We have an ability over the next few years to see some wonderful things occur. We have the ability to see growth, and to see our performance improve. Since the Budget appeared, about 5 weeks ago on 20 May, we have seen amazing improvements. We have seen an improvement in export prices. Those dairy farmers out there are looking at receiving $7 a kilo for their milksolids. That is a good thing. We are seeing improvements in growth in orders coming back to our manufacturing sector. I spent a number of years working in the export manufacturing sector, and I can tell members that it is a tough business—it is a tough business selling things from New Zealand to the Chinese, to the Indians, and to everyone else around the world. But our smart exporters can do it if they get the right Government policies, and our Government is putting in place those policies. We have, in John Key and Bill English, a pair of economic leaders who are putting in place an economy that will grow, and that will see a future for my children and my grandchildren to stay here for. I think that is a good thing. Thank you.
Dr RAJEN PRASAD (Labour)
: I acknowledge that wonderful warm welcome and smile that Mr Deputy Speaker has just given me; I wish I could return the same to Mr Gilmore, who has just spoken. I ask Mr Gilmore to remember that he is here because of only 39 votes, and when there is any downturn in the votes for that party he should remember that he will be the first to go. Mr Gilmore should remember that. Mr Gilmore plays with figures a lot, but perhaps the one figure he should remember is 39. There are only 39 steps—perhaps he should read the book—he should look at that, and put it anywhere he likes or next to his bed to remind himself about it.
Although Mr Gilmore talks about voodoo, I think the voodoo is within him. I wonder what it is about the argument that we on this side are putting forward so strongly that he does not get. I wonder what he would say to those people who cannot afford a decent life for themselves. I wonder what Mr Gilmore would say to those who simply want a decent life for their children, to those who want good early childhood education for their children, to those who want access to good primary health care, and to those who want a decent job. Do members know what Mr Gilmore would say? He would say to wait for the good times—wait for the economy to improve; wait till the rich have really become rich—and then that party will do something, because he definitely believes in the trickle-down effect.
Mr Gilmore is one of those people who just do not get the importance of balanced development, and balanced development will never occur unless both economic development and social development are brought together. Social development is about our people. It is about looking after our citizens, especially the most vulnerable. Perhaps it is also about reducing the gaps between the haves and the have-nots. But for that member it is all about exports and it is not about people, at all. It is just about figures and dollars, but it is not about people.
In a similar way, when Craig Foss was speaking it was interesting to hear how he had forgotten about the amount of resources his party is currently spending on trawling through the past. He was lecturing members on this side of the House—when Trevor Mallard was debating very, very aggressively, perhaps, an issue that was of concern to him, and simply bringing that to the attention of this House—that we should not bring
up the past. Mr Foss got very angry about that, and he said that we should not do that. But members on that side of the House trawled through the archives to bring to their Prime Minister quotes from the deep past, so that they may read them and remind us of what some members of the House might have said 10 or 15 years ago. If the member lives in a glasshouse he should not throw stones. Intense scrutiny might be something that that side of the House does not like, but they should get used to it because that is what they will get from this side of the House.
Perhaps more important, the problems of Budget 2009 have not been addressed by Budget 2010. We can ask a number of questions: did the jobs the Government promised in 2009 materialise? Did they? Where are they? Has the number of jobs gone up? The Government promised a cycleway. Did that materialise? How many jobs has that created? Well, not many. The Government promised that unemployment would be halted. Has it been halted? It has not. Has our savings record improved in this country? Have our savings increased? No, they have not. Did the vulnerable get the kind of assistance that they deserve in the shift of resources? No, they did not. Instead, the Government shifted resources from the poor to the rich, from low and middle income earners to high-income earners. The Government has had two cracks at this—in the 2009 Budget and again in the 2010 Budget—and the Government is borrowing to fund it. It is borrowing at a rate of knots—hundreds of millions of dollars are being borrowed to fund this particular shift. Where is the sense in that?
Day in and day out the Government uses the mantra that for 9 years Labour did nothing. If only the Government members were intellectually honest, they would interrogate the kinds of advances the Government of the last 9 years brought to this country. The Labour Government did pay off debt, it did save money, and it did increase our savings record. It did put money aside for our national superannuation scheme, for KiwiSaver, etc. Those members opposite might expected to be be fair about it, but, no, they are not.
Let us look more intensively at the Government’s programme at the moment. The point I want to make is that a country’s Budget is really a moral document. It expresses the values and philosophies, and morality, if you like, of the Government that proposes it. One can look at a Budget and find signs of a Government’s particular morality, and I want to look at the Budget from that perspective.
Let us look at the tax cuts. The mantra at the moment is that everybody benefits, but they do not. It is absolutely not true. If everybody benefits then why is the Government not able to take a typical family or a range of typical families and actually show us in real terms the effects of this Budget on them?
Hon Dr Wayne Mapp: We did.
Dr RAJEN PRASAD: Perhaps Mr Mapp might like to explain some of what I am going to tell him in a minute. If one is taking the example of GST and comparing that against the decrease in taxation, then that is one point. But I say to Mr Mapp that it is intellectually dishonest to disregard all the other increases that have already occurred and will continue to occur as a result of the Government’s tax programme. It is intellectually dishonest, and the member, as a former professor at a university, would accept that, as I would. It is simply intellectually dishonest to do that. When we factor in the increase in GST, we see that it takes money off people. Then we go a little further and look at inflation. The Government’s own figures show that inflation will be significant.
Hon Dr Wayne Mapp: Inflation is covered by wage increases.
Dr RAJEN PRASAD: Again, I say to Mr Mapp that the figures do not tally. The increase in wages will give an average worker $2 per week. That is what the effective increase in wages will be. It is intellectually dishonest not to add the extra accident compensation costs—it is unfair to do that. Also, if we take a typical family with
children, we see the extra early childhood education costs. If we add all those costs we can see that the average wage earner is not well off, so it is intellectually dishonest to say that.
The other point the Government makes is that it will create all these jobs. Well, the full tax package will create 10,000 jobs, a mere 6 percent of the 174,000 that were promised. I ask the member to consider what Mr Muldoon said when Think Big was put forward, in the same way that the member’s Government is putting forward its idea. Mr Muldoon was going to create 420,000 jobs. What did he create? He created barely 10 percent of that. He brought the country to its knees. We have seen the same kind of intellectual dishonesty from successive National Governments, and this is another one.
Let us consider the promises about not selling State assets. How can we trust that side of the House? The Government has said it will not sell State assets. It should read the polls. The country does not want asset sales. Now the Government is playing with words and saying it will not sell State assets during this term—certainly not KiwiSaver. The Government has tested the water. Mr English tested the water and heard very clearly that this country does not want sales of State assets.
Let us look at the way in which members on that side of the House talk about health. Mr Ryall gets up in the House week in and week out and tells us that there has been an increase in health spending in 2009 and 2010. In fact, there has been a decrease, and $186 million has been stripped from low-priority spending. Who are the people who experience that? It is the people with mental health issues. The district health boards have had a major reduction in funding.
KATRINA SHANKS (National)
: It is my pleasure to take a call tonight in this debate. I cannot start this speech without recognising the All Whites and what they achieved this week, and I recognise Ricki Herbert and what he has achieved as well. It is about New Zealand standing out from the crowd. When we look at the All Whites and try to analyse why they have done so well over the last 12 months, we see that their success started with Bahrain. It started with the Phoenix. It started with the investment that Wellington made in New Zealand Football.
If we look at that All Whites team, as my children and I did at 2 a.m., in the early hours of the morning, and reflect back on how they did it, what do we reflect back on? Do we look at the outstanding individuals? Do we look at the leader? Do we look at Ricki Herbert and say the team was well managed? Do we look at the captain and say he provided inspiration? Or do we look at the team? And do we say that, as a team, they all performed? Without the striker, they cannot get the goals. Without the goalie, they cannot stop the goals. So what actually made this team so successful? What made the All Whites stand out on the night? What made those New Zealanders stand out? When we look at that, what do we say? We say it has to be the team—it is the team that got them over the line.
We hear many people saying they did not even win—the score was one all. But in our eyes they are the greatest winners, because in our eyes they did not have the odds with them. The odds were against them. They should never have beaten that team—and they did not; we drew. But a draw for us was extremely successful. A draw for us was aspirational for a sport in which we have never before performed at this level.
When we look at the All Whites and look at New Zealanders, we think about New Zealanders being outstanding people and an outstanding country. Why is New Zealand an outstanding country and why do we punch above our weight continually? Why do we try to lead initiatives, and why do New Zealanders take such pride in their country? How do we do it? We have to say, right here, right now, that in John Key we have one of the best leaders this country has ever seen. We have one of the most aspirational
leaders. We have a leader who says to the people of New Zealand that being average is just not good enough; we can do so much better. We can raise our standards.
- Sitting suspended from 6 p.m. to 7.30 p.m.
JACINDA ARDERN (Labour)
: This Budget has talked at great length about the impact it will have on young people. It has been proposed that that impact will be a positive one. I want to look beyond what the Budget does and does not do for young people in the here and now, and discuss the impact that some of the decisions will have on future generations. After all, the measure of true leadership is not necessarily what is achieved in one 3-year cycle, but in the years beyond that and the legacy that is left.
I start, though, with the crucial period of zero to 7 years, and the incredible impact that the Budget has on these years. The longer I have worked in the area of youth justice, the more I have come to understand that so many of the solutions and the remedies, and so many of the interventions to prevent young people from going down a path that leads them to crime, lie in the period between when they enter this world and until they hit about 7 years of age. This should be the major focus of any Government that is genuine about early interventions. In fact, this should be the focus of any Government that is also genuine about issues of literacy and numeracy.
That was something that Labour recognised, and is why when Labour was in Government it set a very clear target around early childhood education. That target was that centres should have trained and qualified staff working in them, and the target should be that 100 percent of those staff are trained and qualified. We did that with good reason. Evidence suggested that in terms of outcomes, the No. 1 difference we could make for a child in an early childhood education centre was to ensure that that child was taught by a trained and registered teacher. That was the No. 1 thing that would make a difference to that child. In fact, cost-benefit analysis of early childhood education investment shows a benefit ratio of 12:1 in terms of, for instance, the impact it has later on in life in lots of different areas, including lowering crime rates.
Whether we invest in this area is simply a matter of choice, in my view. This is the choice the Government has made. Not only has it decided to cut $250 million from early childhood education, it has done so by targeting centres that have reached a level of having trained staff at 80 to 100 percent. That decision has left the centres with two choices: either to make their centre, their place of learning, less affordable for parents, or to reduce the quality of education that they provide for these young children. This has also put parents in a painful and difficult predicament. They are the ones making the choice between affordability and quality. We are talking about a difference of $20 to $30 per child per week, and that is a very real and hard decision that the parents of 93,000 children will have to make.
These changes have also had an impact on the students who are studying to become early childhood educators. I spoke with some recently on Waiheke Island who are already in training. One of the students said to me: “I’m wondering now why I should bother continuing with training, when there is little incentive to employ me now, when I’m regarded as not being a priority by the Government” and potentially she will be going to centres that will be trying to reduce the number of trained staff that they have. As I understand it, there are students who are now actively considering whether they are now unemployable because of their skills, rather than more employable. In fact, other disincentives have been put in place, such as the fact that there is now less support for those who are studying who may require support to do their placements of up to 7 weeks.
This Budget does not invest in the almost 3,000 kids in central Auckland who are affected by these changes. But there is an even bigger group again, in the younger
generation, who will be impacted by the Budget changes. In the area where I work for Labour, central Auckland, the biggest cohort of young people are the 20 to 29-year-olds. They make up almost 30 percent of the Auckland Central electorate. It is a significant group, and significant when compared with the rest of the country. This Budget, for them, was worse than just doing nothing. In many ways it will have an impact in the longer term. Young people are more likely to be unemployed than any other group; we already know that. Every time a recession emerges, and a crisis arises such as in the 1990s, or what we are seeing now, it is young people who become the most vulnerable.
We know at the moment that almost 40,000 young people aged 15 to 19 years are unemployed. That number is up by 8,000 from the previous year. If we take on the next cohort, the next age bracket, the number lifts to about 60,000. The Government claims that this Budget will help those young people. I contend that there is very little evidence to suggest that it will. On the forecasts within the Budget we saw that there will be roughly, over the life of the Budget, an increase in the creation of jobs of around 10,000. But that is gradual, and they are not just jobs for young people. When considering how significant the number is, it is only a drop in the bucket.
Some of the measures that we see in the Budget, which presumably are meant to help young people, are also contradictory. The Youth Guarantee gives a handful of places to some of our most vulnerable young people—those who are currently not in training, education, or employment. I applaud the notion behind what is trying to be achieved with those placements, but simply question whether it is on a size and scale that will change, or make a significant difference to, the young people who are what we call NEET—not in employment, education, or training. In fact, if we spread it across polytechs, some of the new placements that have been trumpeted by Steven Joyce, we are looking at about 23 places per polytech. It is not a significant number at all, when we consider that the Government at the same time has kept in place its caps on enrolment. Young people who are trying to upskill are being turned away from training and education, and that is an absolute shame and disgrace when we are in the middle of a recession that is still hurting these people.
In tertiary education we have also seen some significant cuts, but I do not think they have received the amount of attention they deserve. There is $349 million for student loan funding, and that will, of course, have an impact. The Government has tried to cordon off the sets of young people who will be affected by these changes, but they do predominantly, if we are honest, hit those who are the most vulnerable. There are limits on when migrants can apply for student loans, and there are also impacts for those young people who are struggling with pass rates at university. Arbitrary measures like that I think have unintended consequences and may result in detrimental effects for the kinds of young people whom we are not intending to target with these changes. I think again that there has been a failure to deal with the tricky issue that the young people who cannot get into institutions are the ones we should be focusing on, but ousting those who are already accessing education and training into an environment where there are no jobs does nothing to assist them.
But it is not just those decisions that are in the here and now. There are decisions that have been made that will impact on these young people for generations to come. It is one of my bitter disappointments that it is very hard to get a rallying cry amongst young people around the significant changes to superannuation. But these decisions will no doubt have a massive impact. Young people now probably are not thinking about the fact that the suspension of investment into the Superannuation Fund for the next 10 years, and also cutting the contributions to KiwiSaver, mean that our once-universal pension scheme runs the risk of becoming unviable in the long term.
An honest conversation needs to be held by the Government that is making these decisions and these changes with the younger generation about the fact that the Government obviously has no intention of the pension scheme remaining a viable system. That is something the Government should certainly be challenged on. Likewise it should be challenged about the changes to accident compensation. New Zealand has always benefited from a world-class, no-fault system, but that is being eroded for future generations.
I turn to homeownership. The basis on which our superannuation scheme is viable is that people in their old age will have an asset—their home. At this current rate, given our supply issues, and given the lack of affordability around housing, many of our young people will not have that asset in their old age. This, again, undermines the potential for them to securely retire to a level that we would consider adequate.
This Budget was all about priorities. Everything I have seen in this Budget, when it comes to young people, demonstrates to me that the decisions are short-sighted and also that the current generation and future generations were not a priority for this Government in the 2010 Budget.
Hon JUDITH COLLINS (Minister of Police)
: It is a great privilege to take a reasonably short call on the particularly good Appropriation (2009/10 Supplementary Estimates) Bill and Imprest Supply (First for 2010/11) Bill. This Budget has done something that I did not think was possible, and that was to be even better than last year’s Budget. It is a fantastic Budget. It is starting to put in place very clearly and succinctly a road map for economic growth, and it is also dealing with the issues that really matter to people.
It was interesting listening to the previous speaker, Jacinda Ardern. I am sure she was very genuine in what she said and what she thought, but never at any stage did I hear any acknowledgment that the money that is paying for all these services comes from the taxpayer. There is no such thing as Government money; it all comes from the taxpayer. When we give to one person, it means we have to take from someone else, unfortunately. The Labour Party has forgotten that a lot of the people it says it represents are the people who pay the bills. They are the people who have to get up every day and try to go to work and pay their taxes. When they see their money being wasted on every single little nanny State scheme that has nothing to do with their reality, they get very upset.
We all know that we want early childhood education, which is why so much money is going into it. We want good education for our children, and we want to know that when children get into trouble there is someone there to help them and someone to help their parents find their way through. But we also want to know that the real basics are being dealt with.
For instance, let us look at the law and order issue. Under National we have seen about 380 extra police from when we took Government in November 2008. That is a fantastic turn-round. In Counties-Manukau we promised 300 extra police, and we will have that by the end of this year, and we will have 600 extra police in New Zealand by the end of next year. That is the sort of milestone that this Parliament should be celebrating. We should also be celebrating the fact that we now have a Government that backs the police. Under the previous Government there was trial after trial about Tasers, for instance. It did not want to have Tasers rolled out, because it could hurt someone’s human rights! We have given out 720 Tasers to our New Zealand police. We are backing them to use them wisely, and they are doing a fantastic job at it. We are seeing people’s lives being saved because we are backing the police to do the right thing.
We are also putting victims first. We have established a victims’ fund to try to help improve the services for victims. We have given new powers to the police for on-the-spot protection orders so that they can deal with the victims of domestic violence and crime very quickly and in the interest of victims. We put $72.4 million into Fresh Start for young offenders. All of this money is continuing on from what we did last year.
In addition to the 11 new laws that we have passed in terms of law and order, a great deal of extra money has gone into defence, into transport, and into issues that help the economy as well.
The other thing we can say now is that we are making it worthwhile for ordinary Kiwis—the people who pay the bills—to work and to stay here in New Zealand and to contribute to the New Zealand economy. These are the people we need to have in New Zealand—the people who go to work every day, work their hardest, pay their taxes, and bring up their children. These people are not constantly in our prisons; they are good, law-abiding New Zealanders. We know these are the people who pay the bills. That is something Labour forgot after 9 long years of power. National has not forgotten it and we will not.
Hon STEVEN JOYCE (Minister of Transport)
: Firstly in this debate on the Appropriation (2009/10 Supplementary Estimates) Bill and the Imprest Supply (First for 2010/11) Bill I will say how proud I am to have the opportunity to support Bill English and John Key with this Budget. It really is a fantastic Budget. It puts economic growth front and centre stage, which is so crucial in this economy and in this country. I think it is so exciting that we finally have a country again where we are talking about how we grow the cake. All the debates now are about how we grow the cake, but previously it was all about how we distribute the cake and who was getting their share. At last, over the last year and a half, we have been talking about how to grow it.
The whole public debate has moved, and I think that is exciting for this country. A lot of credit goes to Bill English and his Budget, and not just Budget 2010 but also Budget 2009. The reason that the Budget puts economic growth front and centre stage is, firstly, that it tilts the economy towards savings, investments, and exports. We are already seeing that in terms of the renewed emphasis on our exports sector and the exciting stuff that we are getting, which is partially due to world events and partially due, no doubt, to the Government’s actions. Secondly, our major tax reform package is crucially important to helping families get ahead. It understands what my colleague Minister Collins said, which is that it is all about the taxpayers and giving them the right incentives to do more to get ahead. This tax reform package does that. It means that after 1 October this year people earning the average wage will face a top marginal tax rate of 17.5 percent. That is exciting stuff and it means that these people can at last say that if they work a bit harder and if they do some overtime, they can get ahead under their own steam. That is crucially important. People will really notice the effect that will have. Frankly, the consumer confidence figures that we are seeing after the Budget was announced already reflect that. These people have enthusiasm for the future.
The next thing that is crucially important is the improved fiscal outlook. That is very, very important because, effectively, keeping the fiscal books in a better shape reduces interest rates across the cycle, will keep the exchange rate under control, and means that we are not borrowing against future generations as much. We are getting back into surplus as soon as we possibly can—a couple of years earlier than we were going to. It is all about the control of expenditure. Ultimately, it is about living with this $1.1 billion cap in new spending. We do not have to go far to work out how hard that can be for some people, because most of the solutions the Opposition raises involve more spending. The trouble with more spending is that it keeps sucking the life out of the real economy of this country, and we cannot afford to do that. That is the fourth reason why this is a great Budget for economic growth.
It is right across the board. I will focus briefly on the infrastructure area. I have a passing interest in it, particularly the roading area. We have a big investment going, in particular the seven roads of national significance. They are very important roads for this country. They are the most clogged of our rural highways generally, and a couple of urban ones as well, and we are seeing real progress. If we go around our biggest cities these days people are saying that the transport stuff is really starting to work faster. The commitment that the Government has made has really accelerated that.
Hon Darren Hughes: Name one new project.
Hon STEVEN JOYCE: Well, we could name a few for Darren Hughes. There is Victoria Park. If he has not been there, it is a big—
Hon Darren Hughes: That started under us.
Hon STEVEN JOYCE: No way, sunshine. The Victoria Park contract was let under this Government.
Members will find that things move much faster too. People are saying that the Māngere Bridge duplication is moving much, much faster under the new Government. It is due to finish 6 months earlier that it was—in early August. Would that have happened under the Labour Party? Absolutely not on your nelly. There is no doubt about that. It is happening much, much faster. There was the old “TG”—there is more to say on that one soon.
Then there is the rail system. We had to rejig the rail system because Labour had committed, firstly, to buy it at a ridiculous sum of money, and, secondly, to spend whatever it took. In fact, I think it still wants us to spend more money on the rail. We have invested sensibly in a turn-round plan, which is $750 million over 3 years to make sure that rail gets moving, but in a responsible and commercial way that does not crowd out the private investment in the other modes. That is crucially important.
Of course, there is the investment in ultra-fast broadband and in rural broadband. Most recently, there have been about 30-odd expressions of interest for the Rural Broadband Initiative. There is a lot of excitement in rural areas about that programme, which is a big programme of $300 million. I look across the benches and I see the eminent Leader of the House, who is taking us through the electricity transmission investments, which are massive for New Zealand. The bit that still amazes me whenever we talk in Cabinet about Transpower is that it did not actually get done under the previous Government. There were these massive and important investments—
Chris Tremain: What were you doing?
Hon STEVEN JOYCE: What were those members doing for that entire time? I know what they were doing: they were rearranging the governance model. That was all they were doing. Now Transpower is investing massive amounts of money in New Zealand’s electricity grid. All this stuff helps. It is very exciting to see that happening.
We have a real opportunity, and I hope that one day the Opposition will grasp it. Members opposite are being a little bit negative, which is a bit of a surprise! I hope that they grasp this fantastic opportunity. New Zealand has a real opportunity to stand out from the crowd over the next few years. We are in the situation where we do not have as much debt as some other countries do, and we have not had the problems with the banks that some countries have had. As a result, New Zealand does not face some of the issues that the rest of the world is facing. We are also in a lucky part of the world in terms of our involvement with the People’s Republic of China. It is making massive investments, which is making an improvement in our trade figures. All these things are very important, but we also have a Government that is focused on economic growth.
If we take those three things together—the international outlook in our part of the world, the financial situation and the fact that we have not had to bail out our banks, and the Government’s actions in terms of promoting economic growth—it is an exciting
time for this country. All across the country we are starting to hear some great stories, whether it is Fonterra and the investments it is making, Zespri and what it is talking about doing over the next few years, or export education. I was lucky enough to be in Shanghai last week. The Chinese are abuzz with the export education opportunities in this country. I think it is very exciting.
We need a good, strong, steady hand on the tiller and somebody who understands the financial need in this market, and Bill English is doing that fantastically. We are being led by a Prime Minister who understands the importance of growth and of giving people the opportunity to do business. We are getting the opportunity to secure that brighter future, and we will look back in a few years’ time to Budget 2010 and say that it was the turning point.
The ASSISTANT SPEAKER (Hon Rick Barker): There are two amendments, and those amendments have to be put first before we come to the substantive motion. The first is an amendment moved by Trevor Mallard to an amendment.
A party vote was called for on the question,
That the amendment in the name of Hon David Cunliffe be amended by adding the following after “fluctuations”: “and because the Government will not provide for the validation and borrowing by King’s High School Dunedin and the allocation of funds to the repayment of loans relating to the Performance Arts Centre at no net cost to the Crown”.
||New Zealand Labour 43; Green Party 9; Progressive 1.
||New Zealand National 58; ACT New Zealand 4; Māori Party 5; United Future 1.
|Amendment to the amendment not agreed to.
The ASSISTANT SPEAKER (Hon Rick Barker): We now come to an amendment moved by the Hon David Cunliffe.
A party vote was called for on the question,
That the words after “That” be omitted and the following substituted: “this House has no confidence in the National Government because these Supplementary Estimates fail to redress the underlying problems and omissions from Budget 2009, which remain uncorrected by Budget 2010, namely the triple deficit of grossly inadequate national savings, made worse by the halving of KiwiSaver incentives and the indefinite deferral of New Zealand Superannuation pre-funding; a deep, persistent and dangerous current account deficit, driven by a growing net investment imbalance and a financial sector that is almost entirely foreign owned; and an innovation deficit made worse by scrapping the research and development tax credits and the Fast Forward Fund; resulting in increasing reliance on commodity trade that is highly exposed to price fluctuations.”
||New Zealand Labour 43; Green Party 9; Progressive 1.
||New Zealand National 58; ACT New Zealand 4; Māori Party 5; United Future 1.
|Amendment not agreed to.
A party vote was called for on the question,
That the Appropriation (2009/10 Supplementary Estimates) Bill and the Imprest Supply (First for 2010/11) Bill be now read a second time.
||New Zealand National 58; ACT New Zealand 4; Māori Party 5; United Future 1.
||New Zealand Labour 43; Green Party 9; Progressive 1.
|Bills read a second time.