Debate on Budget Policy Statement

I move, That the House take note of the Budget Policy Statement 2005 and the report on it of the Finance and Expenditure Committee. The debate on the Budget Policy Statement today is an important debate—even more so because this year is an election year. This debate will centre on leadership: economic leadership, social leadership, community leadership, and ultimately, of course, the most important thing the New Zealand people look to in this election, and that is political leadership.

The Budget Policy Statement sets out the overarching fiscal parameters that will guide Budget 2005. As a Government, our fiscal strategy is unchanged from last year. That strategy is to enable the Government to continue long-term fiscal objectives of maintaining prudent debt levels, tapering down, by 2015, to 20 percent of GDP. Also, our objective centres on maintaining operating surpluses sufficient to both satisfy our capital pressures and priorities and maintain the New Zealand Superannuation Fund. This Budget Policy Statement debate is also about a review of the Government’s achievements and the critical state of our economy, and our nation, as compared with a different state—that of the Opposition.

I want to start by looking at the economic facts as we see them today. Economic growth is strong and is being maintained at 4.6 percent in the 2003-04 year. The rate of unemployment is the lowest in the OECD, at 3.8 percent. In fact, if we look at the 5-plus years of achievements of this Government, we see that over 264,000 jobs have been created by this Government since it took office. If we look at the cash surplus we see that, for the first 6 months of the financial year to December, it stands at $100 million. We have an operating balance excluding revaluations and accounting changes of in excess of $4 billion for the same period. Once we take into account capital investments, which are essential for economic and future growth, and investments in the New Zealand Superannuation Fund, which are all essential for fiscal stability, the cash surplus is a more realistic interpretation of the current fiscal state of this Government.

Of course, National claims that a $5.8 billion tax cut can be afforded by this country, but we know that to do that—if we want to keep the Superannuation Fund; and Dr Brash says he does—we would have to increase overseas borrowings, and it is likely that under National we would face the same sorts of deep, dividing, and horrendous cuts in expenditure that we had in the 1990s. National wants to cut public expenditure. Labour, of course, wants to boost savings rates, build infrastructure, and build investment in our economy.

I say to the people of New Zealand that we should look at what independent people say about the state of our economy. From my own area of Christchurch, the Press of 11 January notes, under the heading “Economy humming”, that: “South Island regions are proving their worth to the national economy, securing four of the top five places in a regional growth report.” If we look at the Waikato Times of 30 October, we see a headline: “Businesses predict good yields”. The article quotes the ANZ National Bank chief economist, John McDermott: “It’s been a fantastic business cycle, business has been expanding for five years, …”. They are facts; they are facts that are undisputed; they are facts that independent commentators of course have endorsed.

Let us now look at the areas of achievement in health and at the health dollars. We have a health spokesperson over there on the Opposition benches. I think it is Judith Collins, who of course crows about what National will do. The problem is that she provides no detail. Let us look at health. Health spending has gone up by 40 percent in the past 5 years. That is a fact; that is undisputed. Around 3.7 million people now belong to primary health organisations, and 2 million of them already get cheaper doctors’ visits and subsidised prescriptions. I will stack that fact up against Judith Collins and her health policy any day—because she does not have one. Already, under-18s and over-65s enrolled in our primary health organisations are benefiting. This year, 18 to 24-year-olds come into the scheme and next year 45 to 64-year-olds. In 2007, 25 to 44-year-olds will enter the scheme so, by 2007, people enrolled in primary health organisations will get cheaper care across the board. There has been $200 million invested in fighting meningococcal meningitis. That is a fact, and that is happening. Over 1.15 million young New Zealanders in this country will be immunised. We have doubled the public funding for knee and hip replacement operations. Every member of Parliament knows the number of constituents who have knocked on our doors with knee and hip problems, and now they are being helped. We are investing in mental health.

I want also to focus for a moment on law and order. There was $39 million put in, in the 2004 Budget, to fight the P problem. There are more New Zealand police on the streets than at any other time, but the last National contribution to New Zealand’s police force was a Bill English proposal to gut the New Zealand Police.

Those are achievements, and this is about economic, social, community, and political leadership as exhibited by this Government and this Prime Minister, compared with a lacklustre crew over there with no performance, no policy, and a leader, I have to say, who has lost the plot. Members should not believe me for saying that. The reference point I take for the Leader of the Opposition losing the plot is an authorised biography—for those who do not know, “authorised” means the author reads it, ticks it off, checks it for factual accuracy, and approves it before it hits the presses—written by his mate, a National candidate, which gives the reader a wonderful insight into the character and nature of that Leader of the Opposition.

I say that I will be amongst the people who buy the most copies of that book. I will distribute it in my electorate, and I encourage every Kiwi to read it—it is a cracker! I say that it is a thrilling read, a gripping read. I thought Evil Knievel was an adventurer; but he is nothing on Don Brash—not a thing. The biography is a gripping read, and I say that people should read it. In fact, I say that we should go to Peter Jackson after reading it and tell him to forget King Kong, because we want a movie on Dr Brash. I refer to political leadership, when our record on the Budget Policy Statement is compared with that of National’s. I read the review of the biography, which talked about Dr Brash getting so stressed working on the 1998 Budget that he went to work with mismatched shoes. I want to know whether he tied the shoelaces of both shoes together. If he got so stressed out by helping with the 1998 Budget, I have no idea how he would cope as Prime Minister. We have a word for somebody who would go to work in Waimakariri in mismatched shoes: it begins with “p” and it is a plonker.

There is another anecdote that gives a very interesting insight into the leadership capabilities of “the man who would be king”. As chief executive officer of the Kiwifruit Authority, he would go through the drive-through at KFC and live off KFC food. As Mr Brash is a decisive fellow, of course, he would look at the menu and think: original, or hot and spicy? He might have taken hot and spicy but, as we know, he would have tended to feel slightly uncomfortable about that choice the next morning.

This book gives a great insight, and I would welcome Dr Brash to get up in this Budget Policy Statement debate and talk about the achievements over the last 5 years of a National Party that he has failed. The biography gives a wonderful insight. This Budget Policy Statement gives an insight into our Prime Minister and into the achievements of this Government. But the only counter to this Budget Policy Statement and the Budgets of 2004, 2005, 2006—and on they will go—is an authorised biography that shows the make-up of the man. I recall one quote in the biography that puts Dr Brash in touch with the real world. In fact, the author said that after a good feed of frozen corned beef and peas, “in a sense, Dr Brash entered the real world.”

Well, I say that this Budget Policy Statement is the real world, and along with the Budget it delivers to every New Zealander through health, law and order, employment—right across the board. What is the manifesto released by the National Party? It is the Brash biography. I have never seen Gerry Brownlee and the National Party look so depressed—but particularly Gerry Brownlee, apart from the time he arrived 5 minutes late at Pizza Hut to get the “all you can eat” pizza deal. I challenge National Party members to get up and tell us what they are going to put in front of the people of New Zealand to counter the Budget and to counter the Budget Policy Statement. Let us have a fight over that!

It is not really worth responding to that extraordinary diatribe. Let me just say that page 1 of the Budget Policy Statement states: “The Government’s objective is to increase New Zealand’s long-term sustainable rate of economic growth and to ensure—”

💬 Hon Trevor Mallard: I raise a point of order, Mr Speaker. I would like to congratulate—

The ASSISTANT SPEAKER (Hon Clem Simich): No, no.

💬 Simon Power: I raise a point of order, Mr Speaker. Not only was that interjection by Mr Mallard not a point of order but it was deliberately designed to interrupt the speech being given by the Leader of the Opposition. The Minister should either be made to withdraw and apologise or be asked to leave the Chamber.

The ASSISTANT SPEAKER (Hon Clem Simich): The Minister knows that that was not a point of order, and it should not have been raised. I will not require him to withdraw it, but I am aware that he was trying to break up Dr Brash’s speech. There will be no repeat.

On page 1 of the Budget Policy Statement, the Government states that its objective is to: “increase New Zealand’s long-term sustainable rate of economic growth and to ensure the benefits of growth are spread across society.” Well, how has the Government been doing? Despite the strongest commodity prices in a generation, despite good seasons for the farming sector, despite easy monetary conditions around the world, and despite a strong inflow of people following September 11, the Budget Policy Statement notes that over the last 5 years growth averaged 3.7 percent per annum, which is exactly the same growth rate as the average growth rate since 1993—and that was despite the adverse effects of drought and the Asian crisis in the second part of the 1990s. There has been no increase in the average growth rate in the last 5 years as compared with that rate in the 1990s.

The Budget Policy Statement makes it clear that there has been no improvement in the trend growth rate since this Government came to office, and that is not surprising. The Budget Policy Statement acknowledges explicitly that: “New Zealand’s recent growth performance can be attributed to past structural reforms that began in the mid-1980s, which have resulted in a trend increase in New Zealand’s growth rate since the early 1990s . . ”. What has this Government done to improve the situation? Absolutely nothing—in fact, worse than nothing! This Government has sharply increased the total tax burden. The real tax burden per capita has gone up from just over $9,000 in 1999 to almost $11,000 currently, in real terms.

Secondly, this Government has extended the range of incomes over which low-income people experience very high effective marginal tax rates—80c to 90c in the dollar. Is it any wonder that Treasury stated, in relation to Working for Families, that only 2 percent of sole parents might be encouraged off a benefit because of that package? The Government has increased business compliance costs. It has not reduced them; it has increased them. It has threatened future productivity growth by making the labour market less flexible than it was.

What is the result of all this? First of all, it is clear that the after-tax, real income of the average household in New Zealand has not increased over the last 5 years. It is also clear that the gap between New Zealand and Australia in terms of average after-tax wages is widening. In 1999 it was just over $5,000. Today it is almost $9,000 a year. Last month the OECD put out a report that looked at the living standards in developed countries. Countries were grouped into four income groups: high, high-middle, low-middle, and low. The high-middle income countries included Australia, Canada, the UK, Italy, France, Germany—the countries with which we are normally associated. But we find that in that report we are in the low-middle income countries, along with Hungary, the Czech Republic, Malta, Korea, and Spain. That is where we are, after 5 years of this Government’s operation.

When we look ahead we find that growth is projected by the Budget Policy Statement—not by the National Party but by the Budget Policy Statement itself—to be slower over the next few years. It has been 3.7 percent on average over the last 5 and the last 10 years, but it is predicted to be 2.5 to 3 percent over the next 3 or 4 years.

💬 Hon Trevor Mallard: Let Gerry Brownlee speak!

That is markedly slower than projections for Australian GDP growth, I say to Mr Mallard.

Perhaps aggregate GDP growth is not the best way of measuring growth. Let us look at per capita GDP. What we find is that for the last decade, per capita GDP growth has been 2.5 percent per annum. The Budget Policy Statement states that it will slow down to only 1.9 percent per annum over the next few years. There will be slower growth over the next few years, after nearly 6 years of this Government, than there has been over the last 10 years. In other words, the Government has failed miserably to increase New Zealand’s sustainable rate of growth, which the Budget Policy Statement notes as a key objective.

Nowhere in the Budget Policy Statement is there any indication that the Government intends to change its fiscal policy to improve the long-term growth rate. The Government seems intent on spending all the extra tax revenue it gets from growth and tax increases as fast as it gets it, and a massive expansion of Government spending is projected over the next few years. We know—because Treasury has calculated it—that the extra tax and extra spending is costly in growth terms. A Treasury paper written last November, and quoted in the Finance and Expenditure Committee report on the Budget Policy Statement, estimated that a lower and flatter tax scale could add between 0.5 and 1 percent to our per capita growth rate, a phenomenally large gain that would see us make rapid progress relative to other developed countries.

Tragically, the Minister of Finance disagrees with his own Treasury advisers and prefers to go on taxing and spending. Perhaps there would be some justification for that if there were any evidence at all that the additional spending would actually produce some social dividend. But we know that the Government has been wasting taxpayers’ money on a prodigious scale. Waste in the area of tertiary education appears to be absolutely enormous. We have been talking about Te Wānanga o Aotearoa. We also know—because my colleague Bill English pointed it out the other day—that in the last 4 years the Government has spent $1.5 billion on sub-degree courses that students have not even completed.

We know that there has been waste in the area of social welfare. Since 1999 there has been a 40 percent increase in the numbers of people on the sickness benefit and the invalids benefit. That is an incredible waste. There has been waste and bureaucracy in the health sector. Mr Cosgrove referred to the huge increase in Government spending on Vote Health in the last few years, but where is the significant improvement in the number of operations conducted, and where is the improvement in the health of New Zealanders? There has not been a measurable improvement in their health. The Budget Policy Statement is silent about this waste. It does not even attempt to question the huge surge in Government spending or the waste involved in that spending. This Budget Policy Statement is a testament to the failure of the Government’s fiscal policy.

It is no wonder that Gerry Brownlee left before he had to listen to that speech. The country is in such a bad state that that socialist bastion, the World Bank—

💬 Gerry Brownlee: I raise a point of order, Mr Speaker. You know that it is not appropriate for the member to refer to the absence of other members, particularly as he is a member who managed to have half a party leave on him before he managed to hold on to his ministerial warrant.

💬 Darren Hughes: What!

💬 Gerry Brownlee: I will explain. The Hon Jim Anderton, a member who is one of the least successful members of Parliament ever and the man who lost an entire party, was talking about someone being late to the Chamber—

The ASSISTANT SPEAKER (Hon Clem Simich): The member will please be seated.

It is no wonder that the people of New Zealand will never elect a party that has that man one step away—a corned beef sandwich away—from leadership. This country is in such good shape that the World Bank states that we are the best place in the world in which to do business. Also, we have the lowest level of unemployment in the OECD. I would like to know when National, in its 9 long years in Government, could claim anything resembling that kind of success. The answer is that it could not.

The fact is that this Government inherited a terrible economic and social legacy in 1999 from the National-led Government. But the good news in Michael Cullen’s Budget Policy Statement is that we are rapidly reversing the damage. The Opposition will be very lucky one day—many years from now, no doubt—if it becomes the Government, because it will inherit an astonishingly positive social and economic legacy from this Government, unlike the legacy we inherited and had to overturn.

It is a real privilege, therefore, to speak in support of the 2005 Budget Policy Statement. This is Michael Cullen’s sixth Budget Policy Statement, and the great news about the financial position of the Government of New Zealand, like the great news about the success of our economy, is that it just keeps getting better each year under his stewardship. The Labour-Progressive coalition Government’s Budget Policy Statement of 2005 confirms the quality of this coalition Government’s management of the public’s finances, and shows it to be among the most progressive in half a century of government in this country. The statement indicates that there is scope for additional investment in improving the quality of life for all New Zealanders.

💬 Rt Hon Winston Peters: Who wrote this?

I am quite proud to say that I wrote it. The statement indicates—[Interruption] Well, I recall times in this House when I watched some parties oversee the dislocation, dysfunction, and abandonment of a whole generation of New Zealanders. This Government is reversing that trend and upholding the well-being of so many New Zealanders now who under previous Governments, including 9 years of National-led Governments, had their quality of life simply destroyed.

The Budget Policy Statement indicates that we will be able to increase our already extensive infrastructure investment programme over the next few years, as well as our achievements to date. It also foreshadows a reduction in the central government’s domestic borrowing programme for the current financial year and scope to partially pre-fund some of the Government’s previously forecast borrowing requirements over the following 2 years. If that does not indicate wise and sensible stewardship, I do not know what does. Forecast accrual accounting surpluses are committed to known future capital investments, and in investing in the New Zealand Superannuation Fund, a policy that was put in place to protect the financial security of future superannuitants against the indignity of poverty in old age, this Government is making careful plans for the future. Most of what I hear from National Party Opposition members are their plans either to cut essential service commitment and investment or to reduce taxes, and they never say what on earth they will do about mobilising the economy in the direction we are heading at the present time.

The economy is in such good shape that the downcast members of the ACT party, some of whom are in the Chamber at the moment, who have sat on the Opposition benches since the day they entered this Parliament—it is quite instructive, really—will not be here any more after the next election. They will have succeeded in doing nothing in terms of Government in the whole time of their existence. Although they may be feeling downcast about that, I can say that the provision the Government has made for superannuation will enable them to retire in some dignity that they may not otherwise have had.

As I said, the Labour-Progressive coalition Government inherited an incredibly negative and gloomy economic outlook. We inherited a legacy whereby the Government’s net debt was equal to 21 percent of GDP in 1999. This Budget Policy Statement shows that now, in contrast, we are on track to being in a position where the Government’s net financial asset position is positive, not negative like it was in the 1990s.

We also inherited a terrible social legacy from National. That is now being turned round, and we can see that in so many areas of our social service investment. When National came into Government in 1990, nearly 150,000 New Zealanders were unemployed. Despite promising to halve unemployment levels, National managed to increase the level of unemployment. In fact, by the time it was thrown out in 1999, the number of unemployed was 4.4 percent higher than when it came into Government. That meant that 155,594 Kiwis were unemployed when this Government was elected. In just 5 years we have started a dramatic reversal in that trend and that damage. In the last 5 years the number of unemployed has dropped from 155,594 to 83,415. That is a drop of 46 percent in unemployment in 5 years. We have, in fact, achieved the promise that National failed to achieve in the 9 years that it led the Government in the 1990s. Of course, that unemployment rate is too high, but it happens to be the lowest rate in the entire OECD. With programmes to get every young person who leaves school into jobs, training, or workplace training, we will have a future that is entirely positive in comparison with the one we inherited from National.

Our regional economies have just recorded their 23rd consecutive quarter of annual economic growth—all 23 regions, all at the same time, all for 23 consecutive quarters. It is some kind of economic miracle. The regions are in such good heart that it is a pleasure, rather than the kind of austere ordeal I imagine it once was, for a politician to go to the regions of New Zealand and be warmly welcomed by local communities for the work being done from one region of the country to another.

Crime statistics released recently show that the huge upward spiral in the 1990s has been turned round, and crime rates are now falling. Social problems like alcohol and drug abuse are, of course, lagged indicators. In my considered view, the country is now inheriting the legacy of the years of neglecting in the 1980s and 1990s to invest in the future of our country. We have now had to pick up the tab for that—that is true. I know, as the Minister for Economic Development and the Minister for Industry and Regional Development, as well from heading the Government’s drug and suicide programmes, and so on, that that legacy is pretty onerous and has a huge human cost. I can say in all honesty that I look forward—not that I will be here—to future Governments looking back and seeing that the inheritance they received from this period of Government was much, much more positive than anything this Government inherited from the past.

Those unemployment figures that have come down, and the crime figures that have come down with them, are no accident. They are, in fact, closely linked. Dr Michael Cullen was well regarded as an economic historian before he entered politics, but one day the economic historians of the future will look back on his stewardship and say that this was a time when a very positive economic and social tradition was built up by this Labour-Progressive coalition Government. I think all parties in this House can celebrate the fact that the New Zealand economy is now on a path to positive development, with a momentum it has not had for very many years. We should all be very pleased with that, and I expect to hear many positive statements in support of it from Opposition members as they speak in this debate.

It just shows us how one can change one’s tune when one has the baubles of office, as Mr Anderton does these days. The amazing thing is that we have in this country a current account deficit that is worsening every month; a balance of payments crisis, as well; a massively overvalued dollar—it is about 20 percent overvalued—the highest interest rates in the OECD; banking now to be controlled by Australia; and a GDP per capita ranked at No. 25 in the world, but when it comes to income per capita, it is ranked at No. 37. Right there we see that New Zealand is a country that has so much overseas ownership that we do not even earn as people, in terms of profit, that which the stats say we as a country should enjoy. That is why we look at Australia. It is doing so much better than New Zealand.

For Dr Brash to rise in this House and give Australian, Canadian, and First World comparisons is to engage in a very serious exercise in deception. It was Dr Brash and his ilk who in the 1980s and 1990s went down the path that no other First World country would go down. Hence New Zealand’s demise in 2005. With all our pain and effort, we are still on a slide, and no one can deny it.

The last speaker talked about crime. If one does not intend to investigate crime and will not answer a 111 call, one will never know how serious the situation is in New Zealand. We in Tauranga have a P crisis. That is known to the police. One shady individual in the Bay of Plenty is supplying P to teenage girls in return for sex. It gets them all duped up and hooked up, and away it goes. I want to know whether we in New Zealand First have to name this man in Parliament before the police will do their job. For name him we will. The resources are not going there. The Minister of Police today proved categorically that he has no idea about what resources are going to Tūrangi, up to the Coromandel, to Whakatāne, across to Rotorua, and to Tauranga. We know that there are none. We know, for example, that Port Nelson has just had its resources closed down. In short, the Minister got up and gave assurances when, in fact, the situation on the ground is so much more serious.

What a week we are having. We have the Hui Taumata, where no young person is invited. Young people are out. It is a repeat of the failed “hui nō mata” of October 1984. I remember the “hui nō mata”. This Government has spent all that money; it has spent $1 million—and more—on the Hui Taumata this weekend. Can members imagine the audacity of spending that on a public relations stunt? The invites were all personal—one could not get in if one tried, unless one had an invite and was from the Labour Party. What a week we have had. There has been the Hui Taumata and Don Brash’s pyjamas. We have to realise that this is election year. The mandatory book about that great new leader has been released, and we found out that the meal of the day is corned beef and peas.Because his mum gave him a pair of pyjamas, despite the fact that they were pretty emaciated and holey, he decided to keep on wearing them, regardless.

The ASSISTANT SPEAKER (Hon Clem Simich): Order!

I am speaking on the Budget Policy Statement—make no bones about it, Mr Speaker. I have to deal with this. We have a Minister— [Interruption] Yes, the Budget Policy Statement covers things like the police. We have a Minister of Police who, for example, in one breath says he gives the police all the resources they want, and in the next breath says he never gives them all they ask for—and that was on the same day, in the same question time!

💬 Rodney Hide: He sees no problem with that.

He sees no problem with that. Anyone who believes the Minister of Police must be as thick as a whale omelette—and that is saying something.

I want to deal with other serious matters and touch quickly on Hui Taumata 2005, because a million dollars was dedicated to it. Members will recall that that funding was assigned last year. Why was it that the only way one could get involved in the Hui Taumata was to be a Labour Party candidate or supporter? What sort of conference is this? Over a million dollars is being spent on trying to placate the Labour Party membership at that hui. How can they claim to be representing Māoridom when they are so selective? What will be achieved from this week’s conference? Nothing will be achieved, actually, exactly as nothing was achieved at the Hui Taumata in 1984—and within 9 years of that the Labour Party was losing Māori seats right, left, and centre.

💬 Rodney Hide: Whom to?

They were losing to the very insightful, brilliant party called New Zealand First. Everybody knows which party it was. Every day, as Māoridom looks around the political scene at what is available, we see New Zealand First members coming back to the enlightenment of knowing that only one party represents all New Zealanders. Whether they be European or Māori, whether they be blue-collar workers or hard-working mothers, only one party stands up for them. That party is New Zealand First. It is not the ACT party. The ACT party’s latest line is to attack its coalition partner.

What did Rodney Hide say when he was first elected as leader of the ACT party? He said that his job was to make Don Brash Prime Minister. He is doing a fine job, is he not? I tell the New Zealand media that the polls prove that one cannot breathe life into a corpse. They tried it last year, in 2004, at Ōrewa. They could not move the polls on days 1, 2, and 3, but they kept on going, day in and day out, month in and month out, until they drove up the polls—but by the end of the year they were down again. It was the same story this year with Ōrewa II, with almost 200 news items on Don Brash’s Ōrewa speech before he had even opened his mouth. How shabby is that? They are trying to breathe life into a corpse, but it will not work, and the polls are starting to reel in double-quick time in 2005.

I say to the ACT party that it is sad that it is trying to copy the strategy of New Zealand First. That is what it is trying to do. Even John Armstrong mentioned that in today’s New Zealand Herald. ACT members went out there and sold themselves, sold their souls, and said that Don Brash was the ninth ACT MP—

💬 Hon Richard Prebble: No, the 10th.

No, he was the ninth, because ACT did not have Donna Awatere Huata. Sorry—Donna Awatere Huata was out of the fold, and ACT washed her down the drain as well. [Interruption] Oh, yes it did. Then ACT decided just last week that it had better get out of the cancerous-like arrangement with National—it would cut loose and be independent. But it is too late. Everybody out there who wants a change of Government and has been a financial backer of the ACT party knows full well that only one party can do that now, and that is New Zealand First. They are ringing us, asking for New Zealand First’s bank account number so that they can send us some money. They spent millions on ACT—and what happened? ACT blew the whole lot.

💬 Ron Mark: Bad return on investment!

Oh, it was a bad return on investment. They got a lot of pre-sales talk, no after-sales service, and no delivery at all in terms of policy. Time and time again ACT would say: “Back us, finance us, vote for us, and we will be in Government.”—and it never will. In contrast, it is a certainty—as no other political party leader can state in the way I can on behalf of my party—that when the dust settles in 2005, New Zealand First, unlike any other party, will be in Government.

I rise on behalf of the ACT party to speak to the Budget Policy Statement—

💬 Rt Hon Winston Peters: Leadership bid!

I say to the member who just interjected that, no, I do not intend to follow his lead in this matter. I think this is an important debate in which we ought to debate the budgetary policies of the Government. Whether the right honourable gentleman wears pyjamas, or some other MP wears pyjamas, is really totally irrelevant, and I do not want to go there.

Just before I do start speaking about the economy, let me, with the indulgence of the House, make one comment. I think it is appropriate, as this is the Speaker’s last day—I understand he will resign at midnight—to record that fact in the House, and to record that he has been a generally popular Speaker and we wish him well. No doubt—at a later stage, I understand, because he is moving to another, higher position—we will give him a warm tribute. But I think we should record in Hansard today the fact that this is the last day as Speaker of the Rt Hon Jonathan Hunt.

I turn to the Budget Policy Statement. Mr Anderton gave a typical Government speech when—if I am paraphrasing it correctly—he basically claimed that the Government had found a terrible economic situation on coming to office, and had produced some sort of economic miracle and greatly improved growth. Indeed, we hear that speech time and time again from Government members. They have the view that if they repeat a statement often enough it must be true. If only that were so. Of course, our Prime Minister always talks about the wonderful growth this Government has achieved, in contrast to—as she phrases it—“the failed policies of the past”.

Well, I draw members’ attention to the fact that on page 12 of the Budget Policy Statement the Hon Dr Michael Cullen, the Minister of Finance, states: “I accept overall responsibility for the integrity of the disclosures ...”. He is saying that what is written there is true. I ask members opposite whether they know what the growth rate per annum has been in the last 5 years. That is interesting; none of them seem to be offering an answer. The answer is actually contained in the first paragraph on page 13, which says that in the last 5 years, the 5 years during which Labour has been in office, we have had—and I quote exactly—“annual growth averaging 3.7% per annum…”.

💬 Rodney Hide: That’s not bad.

Well, it is not bad, but that is the economic miracle—that is the extra growth that the Government says it should be re-elected on. We then have to ask what the terrible growth referred to by Mr Anderton was.

💬 Rodney Hide: It must have been bad.

It must have been bad. And what was the growth rate under the “failed policies of the past”? What was it in the previous 5 years? We only have to go to page 18 to see—and I repeat that Dr Cullen has signed a statement saying that these figures are correct—that average growth has been 3.7 percent per annum since 1993. In other words—

💬 Rodney Hide: It’s the same number.

I thank Mr Hide; that is why he is the ACT leader. Growth has actually not increased—not even by a fraction—under the Labour Government.

Dr Brash, in what I thought was an appropriate speech on the Budget Policy Statement, also pointed this out. He went further and made some other comparisons. In the last 5 years we have had the most favourable terms of trade in my lifetime—and I understand that by the end of the month I will be father of the House. There have never been more favourable terms of trade. The Minister of Finance told the Finance and Expenditure Committee and the House that the Government thought that the terms of trade may have undergone a structural change. What he is referring to is that for 100 years successive New Zealand Governments have had to face the fact that the terms of trade for an agricultural exporting nation got worse, on average, year after year. In the last 5 years, for the first time in 100 years, the terms of trade got better. Yet, despite that fact, when we read this document we see that Labour could not improve the growth rate by one iota. Given the fact the circumstances have improved, in relative terms things have actually got worse.

Members might say that that is a party political statement, so I will go back to the Budget Policy Statement to see what the Minister of Finance has signed off as his view of what the outlook for the economy really is. No doubt this is why he has not participated, so far, in this debate—because it would pour a bit of cold water on the Government’s party line. I will quote from page 24 of this document: “This slowdown results in almost a halving of the growth rate to 2.4% for the year to March 2006.” So the Government is saying that as a result of the policies contained in the Budget Policy Statement, the growth that has been going on for 10 years will now come to a halt. I would be interested to hear from Government members whom they intend to blame for that.

I will try to give the Government an indication of how badly it has performed—and the Rt Hon Winston Peters can feel good about this if he likes. The period in which there was 3.7 percent growth covered not only the National Government but also the time that Mr Peters was Treasurer. It even covered the Asian financial meltdown and the period when many parts of New Zealand had the worst drought for 20 years. Yet this Government, with favourable climatic conditions and favourable terms of trade, has not increased growth at all.

But it is worse than that, because the Government told us that its objective was to get New Zealand into the top half of the OECD. Dr Cullen told the Finance and Expenditure Committee that there was a problem with that. He has just discovered that the country ahead of us in the OECD, Italy, is quite a lot wealthier, and that our progression might take a while. Well, of course it will take an enormous length of time, because it has been accepted that if we want to rise up the ranks over time, we need a growth rate that is better than 3.7 percent.

This is the position that the ACT party puts to the Government: things are getting worse, and I invite Government members to say why. I will give them what I think are two reasons why that is happening. One reason is tax. Yes, the tax in New Zealand has gone up. On the same day that we had the Budget Policy Statement debated in the Finance and Expenditure Committee, a Treasury document was tabled, which stated that if we continued with a 15c tax rate for income up to $9,500, then lowered all income tax to 21 percent, it would cost $5 billion. The document then stated that that would improve growth by between 1 and 1.5 percent. To give members an idea of the impact that would have, the Business Roundtable made the interesting statement that if the United States had grown at 1 percent less than it did from 1870 to 1980, then it would be no wealthier than Mexico. A 1 percent improvement in growth is huge. Treasury basically said that if the Government adopted ACT party policy, it would be fair, it would be progressive, and we could afford it.

The second matter I will draw to the attention of the Government is the sheer number of regulations and laws that this Government keeps on passing and imposing upon business. If it wants to know the reason why it has not been able to increase the growth rate that was achieved by Winston Peters, it should realise that it is because of a combination of things: too much red tape, too many regulations, too many laws, and taxes that are too high.

Child poverty was today’s No. 1 issue at question time, and so it should be—and not just because our children are our future, I say for the benefit of Mr Prebble and Mr Hide. I will refer to Mr Prebble’s rudeness to submitters at the hearings on the Budget Policy Statement, although I was not going to do so. I was quite embarrassed by the way he treated genuine submitters from organisations like the Public Health Association, the Sustainable Energy Forum, Unicef, and the Council for International Development who were there to participate in the democratic process and who were genuinely trying to contribute to the Government’s Budget preparation process. Mr Prebble accused those worthy submitters of being lobby groups, and complained that his mates in the Business Roundtable and Federated Farmers were not getting more time to make their submissions. Well, I am grateful that all the submitters who asked to be heard did get equal time, because that is exactly what they deserved.

There is a fundamental flaw with the Budget Policy Statement process—and I hope Mr Prebble is listening to this, because he might even agree with this concern. It is a good thing that the Government produces its Budget Policy Statement each December. It is a very comprehensive document that enables the whole country to see what direction the Government is intending to take with the next Budget. It also provides as a bonus a December Economic and Fiscal Update, which is always revealing. I will come to that shortly. Submitters have the opportunity to make a submission on that statement. We were blessed with a wide range of submissions and some were very constructive. There were only 11 submissions, but it was very much a case of quality rather than quantity.

But the problem we have is that the Minister of Finance does not have to listen to those submissions. In fact, he can literally ignore them. They fall on deaf ears. He is not required to be there when the submitters make their submissions and he is not required to respond in writing to those submissions. Neither, I am afraid, is the Finance and Expenditure Committee. What happens is that, despite submitters going to a lot of trouble to put in their thoughts on the Budget Policy Statement, and despite the fact that we give those submitters a small amount of time to say what they have to say, when we produce a report on the process it by and large covers only the issues that MPs raise with the Minister. I for one know that I ran out of time in my 5 minutes to raise all the issues that I would have liked to cover with the Minister.

So it means that the Minister is not obliged to respond to all the issues that we raise, and neither is our report obliged to cover all the issues that we raise. For example, despite a very comprehensive submission from the Council for International Development on New Zealand’s appalling level of overseas development assistance, there is not a single mention of that in the report. More to the point, the Government has not had to respond to the call by the council to stop shirking its responsibilities as an international citizen and increase our level of overseas development assistance to the 0.7 percent that the New Zealand Government has committed to, over and over again. This commitment goes back at least as far as the conference in Johannesburg when Rob Storey, on behalf of the National Party, committed to that figure. So that is a real problem. I think the solution is that the Minister of Finance should be required to respond to the issues raised in the submissions.

One issue he certainly should be required to respond to was the submissions that we had on child poverty, because, despite the Government’s sterling defence today of its actions, it is not doing enough to reduce child poverty. Child poverty is a crucial issue not just because our children are our future. Obviously, if we do not set them on the right path in life our own security is under threat. But let us be civilised rather than selfish in our attitude towards our young people; after all, the mark of a civilised society is how we treat our most vulnerable—and our most vulnerable citizens are the children who are growing up in poverty in New Zealand.

Let us face it: this Parliament and successive Governments do not have a good track record when it comes to tackling child poverty. Labour and National—and I should say ACT as well—prefer to squabble about getting New Zealand’s conventional economic performance into the top half of the OECD. I do not see anywhere near as much heat, let alone light, shed on the fundamental issue of the upbringing of our children.

Today, National’s Judith Collins tried to undermine the recent Unicef report, which reveals that New Zealand’s level of child poverty is actually the fourth-worst of the 26 countries in the OECD. We are ahead of only Italy, the United States, and Mexico, and that is because the report covered the period to the year 2000—in other words, when National was in power. National’s performance was appalling. Children growing up in poverty actually increased by 2 percent during those failed years of a National-led Government.

But it is not just National that should be indicted for allowing the number of children growing up poor to increase. From 1990 to 1993 the National Government was on its own, but from 1993 to 1996 it had an arrangement with Peter Dunne and his former United New Zealand Party of that time. Despite everything that United Future says about being family-friendly, child poverty got worse in New Zealand. Then, of course, it was the turn of Winston Peters and his wide boys from 1996 onwards, and again child poverty continued to deteriorate. When that party fell apart, it was ACT that National relied on until it was tipped out in 1999.

All those parties—National, ACT, New Zealand First, and United Future—are culpable for what happened. Labour is right to crow that it is doing something about child poverty, but it is only half right. For a start, it spent 5 years focused on economic performance, instead of on our young citizens in need. During that time, the Government literally built its surplus on the back of those poor kids. During that time child poverty did not get any worse, but neither did it get much better.

Only now is the Government finally implementing its Working for Families package, but in the process Labour is deliberately discriminating against children who are growing up in beneficiary families. How will those children feel when the kids next door get new shoes and a bike to go to school, when their parents cannot afford to provide them with a basic nutritious diet?

Let us face it, a basic nutritious diet is one of the building blocks for our young people. Today everyone is talking about the need to increase productivity, but how will we increase productivity when kids are still going to school without a full stomach from a decent breakfast, and at lunchtime kids are not provided with a decent lunch? At the same time we expect them to learn and we expect them to be able to have a command of reading, writing, and arithmetic, let alone a whole range of social skills. That is simply not possible and not fair, and this Government is not doing enough about it with its Working for Families package, both in terms of its extent and its scope.

We are left with a situation right now of employers—and I met a few last week—saying to me that they are having to run adult literacy classes for their staff, because children are leaving schools without those basic skills. The Government has the responsibility to make sure that no child leaves school in this country without those basic skills.

The Government also has some other responsibilities to ensure that we do have an educated, productive, civilised workforce in the future, and a key area is the whole area of energy sustainability. Unfortunately, unless I get an extension, I will not have enough time to cover that issue, but suffice to say the Budget Policy Statement does not do enough to face up to that reality.

The Budget Policy Statement for 2005, although it has a few positive points, is generally seen in a negative light by United Future. The first point I want to make is that the statement forecasts additional revenue from higher-than-expected tax receipts and other sources of more than $5,676,000 million for the period 2005 to 2008, in comparison with the May 2004 Budget, which was completed just 6 months earlier. Let us be clear about the matter. That is $5.68 billion over and above the amount that Treasury, and therefore the Minister of Finance and the Minister of Revenue, had expected to be collected just in May of last year. So between May and December the Government forecast an additional increase in revenue of $5.68 billion. Put another way, when compared with the last Budget, the Budget Policy Statement represents a $5.68 billion windfall to the Government—money it did not expect to receive.

Given those realities, I find Dr Cullen’s response to the new forecasts quite extraordinary. The Budget Policy Statement was released on 14 December 2004 and was accompanied by a press release from the Minister, which stated in reference to that windfall that his intention was to bank some of it and to spend the rest on new initiatives. There is no evidence at all that the Minister gave even one second’s consideration to the possibility that the windfall, which must have been in excess of his spending needs—even in excess of his wish list; those initiatives that he had foreseen at the time of the Budget—should therefore really be left in the pockets and purses of New Zealand taxpayers. It would have then been the hard-working Kiwi battlers, rather than the Minister, who were empowered to make the decision to bank some of it and to spend the rest. That is exactly what the Minister of Finance should have done with regard to the windfall.

The Minister is, after all—as I have consistently pointed out—collecting a great deal more tax than he was in 1999. His failure to index the taxation brackets for the 13 percent inflation that has occurred since 1999 means that, in real terms, he is now collecting around $900 million per year by way of an increase in the rate of taxation itself. That is hardly the kind of outcome that the people who had read in Helen Clark’s credit card commitments in 1999 that Labour was not going to increase the taxation rates would have expected. A further $900 million as a result of an increase in the rate of taxation was not in any way foreshadowed by the credit card. My interpretation is that it is actually a broken promise.

I do not believe for one moment, given the overall strength of this Budget, that New Zealand should accept the Budget Policy Statement. When Dr Cullen presented evidence to the Finance and Expenditure Committee, I asked him directly whether he gave any consideration at all to the possibility of tax cuts. His answer was no. Why not? Surely any Minister, having set a Budget that covered both income and expenditure, on receiving a $5.68 billion forecast windfall over the next 4 years would, and indeed should, have given detailed consideration to the possibility of a tax cut. But let us wait; it gets worse. I then asked Dr Cullen, if he were to continue as Minister of Revenue beyond this coming election, when New Zealanders may expect to see a tax reduction, even to offset the effects of inflation—in other words, to return taxation levels in real terms to where they were when he assumed office in 1999. The Minister essentially dodged the question, and he refused to set any kind of date. Instead, he just said that it would depend upon his judgment around fiscal circumstances and priorities in 2006 and beyond.

We are left in the unenviable position, as a nation, of wondering whether, if Dr Cullen continues as the Minister of Revenue after this year’s election, we will ever see a tax cut. Are we to wait until inflation hits 20 percent more than the 1999 level? Are we to wait until it hits 30 percent? When it has moved by 30 percent since 1999 will we still see people paying 33c in the dollar at $38,000 a year, and 39c in the dollar at $65,000 a year? At that point in time the average wage in this country will probably be $65,000 a year, and those earning it will be paying tax at 39c in the dollar, because that is the inevitable outcome of the Minister’s attitude towards these matters. I guess, to give Dr Cullen credit, he is at least being honest. He is clearly signalling to the people of this country that he does not have tax cuts on his horizon, does not think about them, and does not give them a moment’s consideration. I hope that at some point the media will pick up on that reality and will begin to fulfil their responsibility to ensure that the voters of New Zealand are fully informed in relation to Dr Cullen’s attitude.

Also, at a macroeconomic level the monetary policy effects as between banking and spending by the Government, and banking and spending of an equivalent amount by the long-suffering taxpayers, are neutral. We on the Finance and Expenditure Committee have asked detailed questions of Dr Bollard, the Governor of the Reserve Bank of New Zealand, in that regard. It is possible for tax cuts to be made at this point in time without putting pressure on inflation, and hence interest rates, provided that they are accompanied by a strong message to New Zealanders to use the extra money to pay down their debt—something that households at this point are, in fact, very keen to do. People have very high levels of mortgages, hire purchase payments, credit card payments, and debts of all kinds. Many households are really now stretched almost beyond breaking point. It does not help, incidentally, that from 1 April people will have to fork out another 5c a litre for gasoline. I think that if we were to cut taxes at this point in time, households would therefore reduce their debt levels, and that that would be very, very positive for the New Zealand economy in every way. I see no negatives whatsoever flowing from that. But no, the Government does not intend to do that. It has decided that it knows best, and it will therefore bank and spend the $5.68 billion windfall. Accordingly, in regard to the big-ticket items of tax cuts, United Future finds itself in fundamental disagreement with the Government.

There is another reality that I need to draw to the attention of the House. Let us suppose for a moment that, in addition to the Minister refusing to actually cut tax, there is also a fundamental unfairness in the existing taxation system. Should not the Minister in those circumstances ensure, first, that the taxation system is fair? After all, for Kiwis fairness is a fundamental value. Let us take a sole-income family on $60,000 a year as an example. Under the current system that family pays tax of $14,670 per annum. But under income splitting, which is United Future’s policy, that would be reduced to $11,700—a saving of $2,970 per annum, or $57 a week. Such an option is not presently available to couples under the New Zealand taxation system, but it should be.

The status quo is grossly unfair, for a number of reasons. Firstly, a family with dependent children on a single income of $60,000 is, as illustrated in the figures above, paying almost $3,000 a year more than an equivalent family where each partner earns $30,000 per annum. That is unfair, because those families’ needs are essentially the same. Secondly, the present taxation system means that people who have no dependants pay exactly the same amount of tax as people with dependants. Obviously the sole breadwinner in, say, a family of four—2 adults and 2 children—has an income need that is greater than that of a single individual. In addition couples who are self-employed, in farming or in business, and retired couples are already able to split their income for taxation purposes. So it is fundamentally unfair, therefore, that the only people who are not able to do that are working families with children whose income is derived from salary or wages. They are the only ones who are unable to split their income, and that is fundamentally unfair.

Income splitting for couples with dependent children would rectify and correct a fundamental anomaly in the present taxation system. Income splitting should permit a couple with dependent children to allocate their income for taxation purposes on a fifty-fifty basis. Each partner would then be taxed as if he or she had personally earned a 50 percent share, with a significant reduction in income tax. That would be fair.

It is with pleasure that I rise to speak on the Budget Policy Statement 2005. The published document records that the country’s finances are in very, very good shape. This Labour-led Government has overseen the wise stewardship of the economy under the wise leadership of the Rt Hon Helen Clark and her very able Deputy Prime Minister and Minister of Finance, Dr Cullen. The finances of the New Zealand Government are in the best shape they have been in for decades.

The amount of gross Crown debt owed by the Government equalled 35 percent of GDP when this Government came to power in 1999. That was down from a terrible 70 percent of GDP left by the National Government under Mr Muldoon in the 1980s, when $1 in $5 of tax was being spent on interest payments. This Government has reduced it further, from 35 percent of GDP to 24 percent of GDP this year, so that we are in the good position where only $1 in $20 of tax is being spent on interest payments, rather than $1 in $5. The position for net debt, which is net of assets that the Crown holds, is even better, especially when the Superannuation Fund is taken into account. As Mr Anderton mentioned earlier, it is projected in this Budget Policy Statement that within about 5 years net Crown debt will be obliterated and the Crown net position will be positive—which will be for the first time in decades.

Alongside that very wise stewardship of gross Crown debt, the economy has prospered. Unemployment is now down to 3.8 percent—something we should be saying “Hooray!” about in the streets. New Zealand now has the lowest rate of unemployment in the OECD.

💬 Helen Duncan: A good Government.

A very good Government. That means we have more than 250,000 more people in jobs, compared with 1999, and 100,000 fewer beneficiaries. In turn, this has contributed to New Zealand’s growth rate in recent years being amongst the highest in the OECD. Not only is New Zealand’s performance better relative to earlier decades but it is also better relative to OECD averages. Indeed, the performance of New Zealand compared with OECD averages is even more impressive than the comparison with New Zealand alone. The rest of the world has had declining growth rates while New Zealand’s growth has stayed amongst the highest in the OECD.

Against that background of strong finances, the Government in last year’s Budget announced that most of the additional money that was available to be spent by the Government would be directed to families with children. The Labour Government believes that that is the right thing to do, and I most certainly support it. One of the reasons why it is important to do so is that in the prior two decades, between 1986 and 2001, there was a lamentable concentration of wealth amongst the top 10 percent of New Zealand families. The top 10 percent of households garnered an increase in disposable income, in real terms, of around 30 percent. The next 70 percent of the population stayed relatively static, and the bottom 20 percent of households went backwards. During that period the income inequality in New Zealand increased most markedly, and amongst those who suffered most were families with children. FO That is why the Government is quite firm in its viewpoint that the tax concessions that are able to be made ought to be directed to families with children.

As we heard from the Hon Steve Maharey today during question time, the effect of that on child poverty is most dramatic. It has been studied, and it was announced today during question time, that the effect will be that New Zealand’s rate of child poverty will halve—in fact, it will more than halve—so that rather than a greater proportion of families being below the poverty line, as measured by their being on half of the median income, that proportion will markedly improve. The report referred to was a 2005 Unicef report called Child Poverty in Rich Nations. It showed that in New Zealand in 2000, 16.3 percent of children were living in households below the poverty line. That figure had worsened by 2 percentage points during the 1990s. By contrast, New Zealand is absolutely charging forward so that, after the Working for Families package comes into effect, a very low percentage of children will be living below the poverty line.

We have heard some inaccurate statements in this House about crocodile tears being shed over the average wage rate, and it has been asserted that the average wage has not moved up enough between 1990 and 2004. The reality is that the quarterly employment survey shows that between 1999 and 2004 average household incomes increased from $663 per week to $770 per week. That is a very significant increase in itself, but that average in itself underestimates the true increases in income. The reality is that when 200,000 people are put back into work, generally they are the 200,000 people who are less employable than the people who were already in the workforce. Therefore, on average, they are lower skilled and lower paid. So the extra 200,000 people who are in work actually suppress the average wage, because those 200,000 people earn less than the average wage. So the reality is, in fact, much better than is shown by the quarterly employment survey figure, which, in itself, shows significant improvement from 1999 to 2004. A better measure is the total amount that is paid in salaries and wages to employees—to people working in New Zealand. That number increased from $45 billion in 1999 to $59 billion in 2004. There was a 31 percent increase in the total compensation or earnings being paid to employees over that period. That is a much more meaningful statistic, and it shows that the earnings of workers during that period have increased most substantially.

One of the other catchcries we hear from the National Party—we heard it again from Dr Brash today—is that crocodile tears are being shed over an alleged lack of performance compared with Australia. It is worth recording once again that the statistics do not bear out Dr Brash’s comments. In 1980 Australia was positioned at No. 10 on the GDP per capita rankings in OECD countries. New Zealand was positioned at No. 18. By the end of that decade, Australia had gone back six places from position 10 to position 16, while New Zealand went back only one place, from 18 to 19. In the 1980s, New Zealand’s performance, relative to Australia’s, was better. That was a decade of primarily Labour Government—and Mr Prebble and others played an important role in that, which I acknowledge.

But the 1990s saw an austerity visited upon New Zealand that was not visited upon Australia. The 1990s, the decade of National Government—andthe decade when Dr Brash was in charge of the Reserve Bank—saw Australia go forward four places in the GDP per capita rankings, from position 16 to position 12, while New Zealand went back by one place from position 19 to 20. So the big gaps arose during the 1990s when the National Party and Dr Brash were in control. In the most recent years, of course, the rate of growth in New Zealand has exceeded that of Australia, so that gap is, once again, being narrowed.

That was the Labour member for Otago, Mr Parker—who is otherwise known as quite an intelligent member, I think—reading out the speech prepared for him by the Labour research unit. Mr Parker did not believe that speech. He was shaking his head when he was reading much of it out, and he will be shaking his head later on when he reads his Hansard record.

But I want to correct one small thing for Mr Parker, which he raises sometimes at the Finance and Expenditure Committee—that is, the issue around New Zealand’s going further back in the OECD and Australia’s moving ahead. He talks quite a lot about that period as being in the early part of the 1990s, when Don Brash was Governor of the Reserve Bank. In one sense he is factually correct: Don Brash was Governor of the Reserve Bank, and it is true that New Zealand slipped further down the OECD ladder. Of course, what Mr Parker conveniently forgets is that all economies have lags and leads. There is quite a long lag effect when an economy the size of New Zealand’s is being restructured. We were one of the most closed economies in the world prior to 1984. Then the Roger Douglas - David Lange Labour Government of 1984 and the subsequent Jim Bolger Government of 1990 did an awful lot of reform work, but that took some time to flow through. Mr Parker, who as I say is a very intelligent member, knows full well that it would take some time for that to flow through to the economy.

I turn now to the Budget Policy Statement, and I will make a few statements on that. The first is that the Government has been having a fine old time in the latter period of this debate, talking about how it should be taking credit for the strong economy we are going through at the moment. Of course, the economy has not been any stronger in the last 5 years than it was in the 5 years prior to that. It has been growing at around 3.7 percent for the last decade. That is nothing new, actually. [Interruption] Basically, it has been exactly the same.

What has been changing, though—and I think this is a point that Labour would be well advised to have a bit of a look at—is what is causing the growth in our economy, which is that the growth is consumption-led. New Zealanders owe a lot of money. They are up to their necks in debt now. That is what is happening. They have remortgaged their houses. They do not have any money because Dr Cullen spends it for them, so they have had to get out there, remortgage their houses, and draw down on their credit cards.

We will be producing some quite interesting information for the House in the next few weeks that I predict will show the level of indebtedness this country has. [Interruption] Absolutely. That has led off the higher house prices that people have been able to draw down their mortgages on, but it has very little to do with anything the Government has actually done.

The message we should be getting from the Budget Policy Statement is quite clear: Michael Cullen is going to do a “Rob Muldoon”. He will come before this House on Budget day and say that he has spent the lot. There will be no room for tax cuts because he will have spent the lot. That will be the message from Dr Cullen. He will spend every dollar available to him, and any New Zealander who thinks that he or she may be getting a tax cut when Budget day comes around is sadly misguided, I am afraid. Despite all the attempts that Helen Clark tried to make through spin doctors when she gave her Prime Minister’s statement earlier in the year, despite putting up former Cabinet Minister John Tamihere to tell the public that, yes, there really would be a corporate tax cut, and despite Michael Cullen telling the media on several occasions that he would not be ruling anything in or ruling anything out, Michael Cullen came with his tail between his legs to the select committee and told us that it was one thing or the other: either he would spend the money, or he would give the corporates of New Zealand a tax cut and spend the money.

There will be no tax cuts on Budget day. The message from Dr Cullen will be that he has spent the lot. He will say that he has spent it better than we could spend it because he knows what is right, and this Budget will be the corporate equivalent of what the last Budget was, when Labour said: “We’ll tell you how to spend money. We’ll tell you what’s right for you.” But in terms of New Zealanders making choices for themselves, that will not be happening under this Budget.

Another thing that will happen on Budget day is that the Minister of Finance will come to Parliament and say to the people of New Zealand that he is the only New Zealander who understands the operating balance excluding revaluations and accounting changes—the only New Zealander intelligent enough to understand the term he created—which, he told the public, would be the right way to measure the economy. We are running the largest surplus on an operating balance excluding revaluations and accounting changes in New Zealand’s history—$7.4 billion, and it is going up.

Dr Cullen knows exactly what that means. It means that he is overtaxing the people of New Zealand, and because he is now unable to get his message through—that somehow his spending is not enough and that there really is room for tax cuts—he is trying to recreate the wheel and invent a new title. Last week we saw a sort of thinly veiled attempt at that when he released some data on the available cash position, and that will be what he will argue for in the coming weeks—that somehow New Zealanders are not bright enough to understand that an operating balance excluding revaluations and accounting changes of $7.4 billion means there is room for tax cuts.

💬 Peter Brown: How much?

A $7.4 billion surplus is what the Government is running, and yesterday it announced an increase in petrol tax of another $200 million a year. The message from Dr Cullen is that the Government does not have enough money. There is a $7.4 billion surplus, but we are all thought to be so stupid that the only person who can understand it, apparently, is Michael Cullen.

When one funds one’s capital programme it is a very interesting strategy. I suppose that Michael Cullen will tell New Zealanders that they should be looking at their household budget on an available cash basis, as well—in which case very few of them will be buying houses, or doing any repairs on them of any sort whatsoever. It is to do with intergenerational fairness, which is an issue when a road is built that might last 50 years but it then has to be paid for by one generation in 1 year. I find it quite astounding.

Dr the Hon Lockwood Smith: It’s naive.

That is exactly right; it is naive.

I want to turn to Dr Cullen’s spending history, because it makes quite interesting reading for someone who tells us he is a fiscal conservative. He came to Parliament with a $6 billion spending cap in the 1999-2002 period, and he could not keep to that cap. He broke it and spent a touch more than that—about $6.1 billion. He said he would get rid of the cap, because it was a rather annoying thing to have some sort of control on his spending. And away he went; the horse was well and truly out of the barn at that point.

So over the last 3 years Dr Cullen will have spent an additional $12.7 billion—a hundred and something percent increase on the term earlier—and all projections show that spending will increase by dramatically more than that going forward into the next term. If Labour gets another term it will be spending something like $14 billion, $15 billion, or $16 billion in additional spending.

New Zealanders probably would not mind that additional spending if they could sit down and watch their TV sets at night and see evidence of how good a quality that spending was. But every night when they turn on the television they are faced with yet more horror stories of where their hard-earned taxpayer dollars have gone. They have seen spending in community education, in wānangas, and in some tertiary education areas where the quality has been so poor that the completion rates have been 30 percent. Yes, we have to invest massively in upskilling New Zealanders—and a future National Government will absolutely be doing that—but that is not a licence for some individuals in New Zealand just to go out, waste money, and not deliver performance for the taxpayer.

We are not seeing a Government that is building on the strong economic conditions of the last decade in order to future-proof New Zealand for future economic growth. We are not seeing investment made in infrastructure in any meaningful way, at all. We are not seeing solutions to the energy crisis that New Zealand is going to suffer. We are not seeing New Zealanders able to keep a fair day’s pay for a fair day’s work. We are not getting people to see the benefits of rising wages, because that benefit is stolen from them through inflation and fiscal drag, and through being dragged up into higher tax brackets. We all know the stories that one in four secondary school teachers in New Zealand now pay the top rate of taxation, and that the number of policemen paying the top rate has gone from 13 percent 3 years ago to 39 percent now.

I predict the next Budget in large part will be very much what we have seen in the past—tax and spend from a Labour Government, a Labour Government that will have spent the lot. There will be no tax cuts; it will be another very disappointing Budget. The only people cheering on Budget day will be Labour Party caucus members who will be told by their senior whip that if they do not cheer, their future careers will be limited.

Kia ora, talofa lava, and warm Pacific greetings. It is almost a pleasure to follow the honourable member John Key, and to dispel the myth of depression that he is trying to exude all over our country.

I stand with pride and with joy to participate in this very important debate on our 2005 Budget Policy Statement, because I am a very proud member of this Labour Government. As a woman, a Kiwi, and a New Zealand - born Pacific Islander, I stand with pride when I see the diverse faces of our Government, and when I see the many communities that can participate and live a life of dignity.

I thank our Minister the Hon Dr Michael Cullen for managing our economy well. It is all very well being conservative and fiscally responsible, but it is important that we have the big picture and that our economy is sustainable. I also thank all those people who participated in the submission process for the Budget Policy Statement of 2005. Some of those were the Public Health Association, the University Students Association, the National Council of Women, Federated Farmers, and the Business Roundtable.

The Budget Policy Statement of 2005 was published on 14 December 2004. In Dr Cullen’s remarks to the Finance and Expenditure Committee on 16 February 2005, he noted that things had moved on, and that whilst the Budget Policy Statement forecasts were then some months old the strength of the economy had remained greater for longer than most forecasters had predicted.

The Budget Policy Statement has three main policy goals: the first is to maintain fiscal and economic responsibility; the second is to build capacity to cope with future shocks and pressures; and the third is to ensure a fair society and to improve New Zealand’s economic performance. Our Government’s progress paints a very positive picture in relation to those three main policy goals and to our Budget Policy Statement. It shows us—and the facts speak for themselves—that our economy is in good heart and our businesses are doing well. The Hon Richard Prebble remarked on the fact that our trade figures are looking good and that our exporters are doing well.

There is also tremendous business growth locally. Firms are employing more people, and our unemployment statistics show that the unemployment rate is down to 3.8 percent. That is really, really great news. Our Government is overseeing one of the strongest economies for years. Economic growth is still very strong at 4.6 percent, and we have the lowest unemployment rate in the OECD.

This afternoon I want to reflect on the impact upon the people of our Wellington region, and also of my Mana electorate, of this Labour-led Government, its sound Budget policies, and its responsible economic management. Many of our households have every reason to celebrate. Local figures from Statistics New Zealand have revealed that the average gross weekly household income in the Wellington region has risen by 16.1 percent. It is up from $1,128 a week in 1999 to $1,310 a week now. The lowest paid workers—30,000 people across the country; many of whom also live in my electorate—have seen their hourly rate increase by 29 percent to $9 for adults, and by over 28 percent to $7.20 for youth.

Good management through the Budget also means that we have more for education. In Porirua and Mana we now have extra secondary school teachers from the latest Government staffing boost, and we are also answering a demand for more teachers in areas like maths and science. We have thousands of new bonded scholarships for student teachers, worth up to $20,000 each. We have put lots of money into early childhood participation, and throughout my electorate, where I visit a lot of our pre-school centres, I can see the increased participation that has huge spin-offs in the long run.

Our young people of our four colleges in Porirua participate in the Gateway programme. That means that many students can do placements with local businesses and trade places, so that they can actually carve out their careers and look forward to jobs at the end of their study. That Gateway programme has been absolutely wonderful for our area.

In the tertiary area debt is a big issue for students and families, but under this Government the cost of average tuition fees has fallen. The student loan debt between 2000 and 2004 has gone up by just over 15 percent, but the student loan write-off policy allows for no interest to accrue while students are studying.

Prudent fiscal management is releasing funds for improving the safety of our roads and reducing congestion. The residents of Kapiti and Mana—people from Darren Hughes’ electorate and my electorate—benefit enormously from the $225 million boost for transport. It means that a lot of that funding will go into existing passenger transport, and into rail in particular, and a further $160 million will go to projects to ease congestion and improve access. A lot of that funding will also go towards increasing our rail funding, which is needed to upgrade services on the line to Paraparaumu. Of course, $15 million has already been allocated for the construction of a median barrier on Centennial Highway. I want to thank the many people, but especially the communities, who have advocated strongly to their MPs and all key stakeholders—for example, Ministers and Transit New Zealand—to ensure that their priorities are being met. We know there is still more to do.

More important, though, is the fact that families are better off. Many families in Porirua and Mana are taking advantage of the Working for Families package. I am absolutely thrilled about that assistance for our local families. Many, many people in the area have made use of the free phone, in terms of ringing up and claiming eligibility for the financial assistance that supports them to participate more in the life of the community, and especially in the school life of their children.

During the last 5 years Dr Cullen has buried the myth that a Labour Minister of Finance and a Labour Government could not manage the economy responsibly. One year’s good management could be just good luck, but 5 years of prudent, responsible fiscal management is a record that any Minister of Finance can be proud of, and it reflects much more than just good luck. The famous golfer Gary Player once said: “The more I practise, the luckier I get.” Well, Dr Cullen has shown, through his Budget Policy Statement, that practice and responsible fiscal management have made the difference with New Zealand’s economy. I hope Dr Cullen’s golf scores are improving at the same rate!

Under Labour, New Zealand is moving ahead. Our Budget Policy Statement will continue to demonstrate our continuing commitment to an economy and a society that are fair and innovative, inclusive and creative, with a capable Government that is proud of Kiwis. Under the leadership of Helen Clark and Michael Cullen, we will continue to provide those policies and projects, and work towards long-term goals of fiscal stability and financial security for all New Zealanders.

When we hear a politician starting to believe his or her party’s own spin, we know that the party is in some trouble. That is what we have just heard. We have just heard the honourable member Winnie Laban talk about how families in New Zealand are better off.

💬 Lindsay Tisch: She’s got a lovely smile, though.

Dr the Hon LOCKWOOD SMITH: She has—she is a good person. But, as I said, it is so sad when Government members start to believe their own spin; it is the beginning of the end.

Winnie Laban said that families in New Zealand are better off. What are the facts? The facts are that under this Labour Government the average after-tax household income in New Zealand has not improved at all. The average household in New Zealand—after tax, in real dollar terms—is no better off today, despite the best economic environment in my 20-year political career. The average household’s after-tax real-dollar income is no better than when Labour came into office. That is an indictment on the Government. To make it worse, the difference between the average worker in New Zealand and the average worker in Australia has increased by $4,000 a year. New Zealanders are now $4,000 a year worse off. We were already behind Australia, but the gap has increased from $5,000 a year when Labour came into office to $9,000 a year now—and Labour says that has been good for New Zealand! Our average household, in real dollar terms, is no better off, despite a tremendous economic tailwind, and we are further behind Australia than ever before.

Looking at this Budget Policy Statement, what is so sad about it is that during these good economic times New Zealanders are no better off. And they are good economic times. I cannot remember primary product commodity prices being as high for 20 years. I know this because I am involved in farming myself. Beef prices have not been as high for 20 years. I used to be involved in marketing dairy products before coming to this place. Dairy prices have not been as high for 20 years.

💬 Hon Richard Prebble: And, of course, Helen Clark was responsible for that!

Dr the Hon LOCKWOOD SMITH: Of course, Labour claims credit for that. But the tragedy is that, despite this situation, this Government has squandered a once-in-a-generation opportunity to lock in a tremendous programme for the future to enable future generations in this country to benefit from these good economic times. Yet what does the Budget Policy Statement tell us? It tells us that through to 2009 the per capita growth that Treasury projects—and this Government obviously accepts it—will be 1.9 percent per year. That is less than what we achieved during the 1990s. For the last 12 years, from 1993 until now, we achieved 2.5 percent per capita GDP growth, and the projection in this Budget Policy Statement is that that growth will decline significantly through to 2009, down to 1.9 percent.

The figures do not mean a lot to listeners. The tragedy is that this Labour Government had a once-in-a-generation opportunity to really put in place structures to enable this country to blossom, but instead of doing that the Government has tied everyone’s hands with more regulation. There is more regulation around labour markets and more regulation around anything anyone wants to do, and that does not work. Labour tried to put more regulation around tertiary institutions, and they broke out in boils all over the place—as see have seen with Christchurch Polytechnic and Te Wānanga o Aotearoa.

If we look at this Budget Policy Statement we see, quite clearly, that this Government is just a big tax-and-spend Government, and that is one reason why the projections, as we look ahead, are for poorer per capita GDP growth than we have had. We achieved the growth of the last 12 years despite the Asian financial crisis and 2 years of tremendous droughts in this country, yet the Budget Policy Statement, in looking ahead, says that our per capita growth is coming down. One of the reasons is that this Labour Government is simply trying to control too much of the economy. There is more and more tax. I want to remind New Zealanders that if they stay with this Labour Government—heaven forbid—the Budget Policy Statement shows that the average person will pay $4,000 more tax in the next 3 years under this big tax-and-spend Labour Government.

Labour members have been crowing this afternoon. They have been telling us how good things are. Perhaps the most succinct statement we have heard came from Mr Parker. He said that this country’s finances are in very, very good shape—not very good shape, but very, very good shape. Perhaps the last Labour member to take a call this afternoon will tell us why, then, the Government will impose a 5.6c petrol tax on the average New Zealander come 1 April.

💬 Hon Richard Prebble: They just like tax. They get drunk on it.

The Government just likes taxes. Perhaps Government members can tell us, so that we can understand, why it is necessary, when the country’s finances are in very, very good shape, to impose a further tax on the average New Zealander.

Yesterday the Minister of Finance, when answering questions on this petrol tax, was asked why he had supported the Winston Peters - sponsored bill that some time ago, in 1995, would have provided for all excise tax collected on petrol to go into a transport and roading fund. In 1995 Labour supported that. In answer to a question from the Hon Maurice Williamson, who asked whether Dr Cullen was the same person who had supported that bill, he said: “No. I am 10 years older and that much wiser.”

Do members know of the last person I am aware of who said something like that to his henchmen? Al Capone! When Al Capone was a young crook he told his people he was a darn good mobster. When he grew a bit older he said he was the perfect mobster. Officials could not touch him and the police could not touch him, but in the end they got him through income tax fraud. I just hope Michael Cullen takes note of that, because with the maturity of age he has lost the plot.

💬 Darren Hughes: Oh, what!

Well, let us go back a few years. Let us just suppose that in 1995 the Winston Peters - sponsored bill had been put through. By this time there would have been something close to $5 billion invested in roading or transport-related matters. That is the difference in monetary terms that the bill would have made. What would it have done for the country? We would not have the problems we have, many hundreds of people would not have died on our roads, and our economic well-being would be that much better.

If members do not believe that money invested in roading is just that, then they should read the Allen report. I have a copy here. They should read it. The Allen report, produced by the Automobile Association and various business people in this country, suggests that $2.4 billion invested now will, in a relatively short time, produce economic gains of $1.6 billion per year.

💬 Hon Dr Michael Cullen: Who commissioned that? The road transport federation.

The Minister might think that is funny, but there are huge gains to be made by investment in roading in this country—huge gains. I say to the member, and I say it sincerely, that had he stuck to his word and had he convinced a few people in the National Party to support that bill of Winston Peters in 1995, this country would be a lot better off. It is no good now crowing that the country’s finances are in very, very good shape, when we will go to the working people come 1 April and put some more tax on petrol. The price has gone up since that bill was passed. I believe that the Minister of Finance had the bill amended in order to give him a bit of flexibility to introduce the increase when prices were going down. But prices have actually gone up, and I would not mind betting that they will have gone up even more by 1 April, when the Minister is going to impose another 5.6c per litre of tax on petrol.

On top of that, the Minister is going to index to inflation the excise tax collected on fuel. Let me ask the honourable Minister, if he thinks that is fair, why he does not index to inflation the money he pays out to rest home care. Rest homes are way behind the eight ball. Late last year, I think, the Government agreed to a 3 percent increase, which I understand has not been implemented. The Government passed holidays legislation and gave nothing—nothing at all—to rest homes in order to pay their staff, who care for New Zealanders.

Thank you for the call, Mr Speaker, and I say that soon you will be able to call me the father of the House. [Interruption] It is based on continuity, I am afraid. I want to come to the interesting aspect of this debate. We have listened to—[Interruption] Well, Mr Prebble can call me “Dad” if he likes—one continuous song from the Opposition throughout this debate. Opposition members have said that the economy is doing too well under this Labour-led Government, that the Government finances are too good under this Labour-led Government, that there are too many people in employment under this Labour-led Government—and that we are going to hell in a handcart, as a consequence of all that. That has been the line taken by Opposition speaker after Opposition speaker.

I want to point out, firstly, that the Budget Policy Statement re-emphasises the long-term agenda this Government has. Unlike previous Governments in recent times, we are not governing just for the next 3 months or the next 3 years; we are governing for the long-term benefit of the vast majority of New Zealanders. We do not believe in having a big booze-up one night and a big hangover the next morning, in terms of governing this country. Yet almost every Opposition party believes in some variety of a booze-up, but does not want to face the reality of some variety of hangover as a consequence the next day—or, in the case of some members who start the booze-up rather late, the hangover probably comes in the evening. We are providing therefore, within the context of the Budget Policy Statement, fiscal stability and certainty. The markets, international observers, and businesses in New Zealand know how this Government is governing in fiscal terms. They know that there is a strong fiscal path forward, and that there will not be major lurches in policy from one extreme to another.

Secondly, we are providing for the future superannuation needs of New Zealanders. The New Zealand Superannuation Fund is building up assets rapidly—so well, indeed, that the National Party has done the flip-flop of all time, and has decided it will support the New Zealand Superannuation Fund. To be fair, ACT has remained staunch. ACT has stood by its belief that many people should be poor in their old age, and therefore it opposes the New Zealand Superannuation Fund. We have to give the ACT party marks for consistency. It has low marks for intelligence and low marks for humanity, but has high marks for consistency.

Thirdly, we are investing further and further in health and education. In this year’s Budget, health spending will see the largest increase that it has ever seen, in terms of the increased dollars going into Vote Health. That vote will deliver to us a massive improvement in primary health care throughout New Zealand. Indeed, one of the fiscal problems I face is that the primary health organisation policy has been more successful than the Government had forecast. More people have come into the primary health organisations than was forecast, and we are having, therefore, to front up with money earlier than we had originally anticipated, in terms of the primary health organisations. The result of that is that many more people are getting cheap visits to the doctor, and many more people are getting low-cost prescription charges. Therefore, low to middle income New Zealanders are able to afford to access proper primary health care, which is crucial to their long-term health status.

Then, we are providing money for infrastructure and business development. What every party in the Opposition wants to do is to provide the infrastructure, but those parties do not want to pay for that infrastructure. To be fair, the Green Party would not have the infrastructure at all in the first place, and therefore sees no reason to pay for it. But at least it is clear what the other parties want to do. They want to build roads out of nothing, they want to build bridges out of nothing and, presumably, they would have roads and bridges that went nowhere, as a consequence.

In this year’s Budget we will have some new priorities. We will have policies around savings and how we can assist people to lift the level of savings in New Zealand, particularly work-based savings. We will have policies around how we assist middle-income families into first home ownership, because that is a great difficulty and we are seeing declining homeownership levels amongst too many people. We could have argued 5 or 10 years ago that that was due to social choice, but the rate of decline in homeownership is clearly not socially or economically desirable, and is not being driven purely by choice.

What we have in the Opposition, some 6 or 7 months out from an election, is a party that aims to become the Government—the National Party—and one can see its members here. Mr Tisch has shrunk down behind his seat, and the only other member who is supporting him in the House is Mrs te Heuheu. National is a party in a state of ongoing crisis—a party whose own caucus members now refer to themselves as being like the cast from the television series, Six Feet Under. I will not go through the cast of Six Feet Under and say which particular member of the National Party front bench resembles which particular member of the cast, because I would very quickly get myself into serious trouble in terms of withdrawals and apologies, I tend to suspect.

💬 Jill Pettis: Yes, yes—resist, resist!

So I will resist—for once, I will resist that temptation.

Certainly, the National members are also becoming more widely known these days not as the National Party but the “Pyjama Party”. All I can say is that it is a bit like having a parachute on. I think the best thing that Dr Brash can do is to pull the cord and see whether he gets to a position of safety as a consequence of doing that. National’s view of life for average Kiwis is that we should have a diet of heated-up peas and frozen corned beef, and that is the future for the average Kiwi. Dr Brash is a lonely, out-of-touch, autocratic leader, who gives strange speeches without consulting with his caucus and his spokespeople, and then it all unravels as a consequence thereafter. He is a leader who barely participates in Parliament, and who has sat here for day after day, not asking a single question as Leader of the Opposition.

💬 Darren Hughes: What did he say today?

I think that he said “Uh” today. I think that was his major contribution, in terms of understanding. During the year so far Dr Brash has managed to ask two main questions and seven supplementary questions—the Leader of the Opposition! When Helen Clark was Leader of the Opposition, she asked questions day after day after day. When Bill English was Leader of the Opposition, he asked questions every day in the House, but Dr Brash apparently does not need to ask any questions. Perhaps he thinks he has all the answers already. That may be the reason why he does not ask any questions.

And Dr Brash’s self-proclaimed chief strategist, Mr Murray McCully, has disappeared.

💬 Jill Pettis: Missing in action.

He is missing completely in action. Nobody knows where he has gone to. If Mr McCully were Tarzan, Jane would be going through the forest and trying to find him, but he is not Tarzan at the present time, so we do not know what has happened to him. Maybe he is working on a grand strategy that will be pulled out some time a month before the election, to a reaction of shock, awe, and horror from the rest of the political scene within New Zealand.

We have heard only one song from the Opposition: that the Government has a huge surplus, which means we can have tax cuts—bigger and bigger and bigger, depending on which party one is in—that will have no effect at all on the economy or on our ability to spend money in health, education, etc. Firstly, I say that is macroeconomic nonsense. In an economy where the manufacturing sector is running at 93 percent capacity, where the exchange rate of the New Zealand dollar is already high, and where unemployment is low and employment very high, to feed extra billions of dollars into consumption would be pure macroeconomic madness at the present time. Any Government that would think about doing that in this position should be taken out and quietly shot. Secondly, I say that is fiscal nonsense. It confuses an operating surplus with a cash surplus.

Let us take what ACT said. ACT said that we could afford $5.8 billion of tax cuts without affecting current spending, because the operating surplus is about $6 billion. The cuts would pay for themselves, those members said, because we would have increased growth. Well, even if we accept the somewhat weird argument from certain Treasury officials that we could get 0.5 percent a year of extra growth in GDP—0.5 percent a year was what they were thinking was more possible—that is $800 million of extra GDP and $230 million of extra revenue, which does not go far towards meeting $5.8 billion dollars of reduced revenue. Tax cuts do not pay for themselves, and that has been proved over and over again. Who does pay for tax cuts? Those who want to see a decent health system, those who need a decent pension system, those who actually want decent roads, those people who need assistance for educating their kids, and those people who cannot afford to pay the full cost of going to a doctor or the full cost of getting their prescriptions. That sounds remarkably like the kind of person who is a stalwart in the ACT party. It sounds remarkably unlike the vast majority of New Zealanders. Tax cuts do not heal, and they never will.