Debate on Budget Policy Statement

I move, That the House take note of the report of the Finance and Expenditure Committee on the Budget Policy Statement 2006. This document is replete with fantastic ideas. It is premised on three key themes. The first theme is economic transformation, the second is families, and the third is identity. The document was dealt with by the very competent—and more than adequately chaired—Finance and Expenditure Committee, and was the subject of a very lucid presentation by the Treasurer. It is offered at a time when the economy is going through a cycle of less than fantastic economic growth. However, this cycle was foreseen, was looked at by Treasury, and comes as no great surprise.

What is the Government doing in this document? In contrast to the Opposition, we have something very rare on that side of the House: ideas. These ideas are focused on growing families and investing in infrastructure. Why is that important? It is important because we need a strong economy. A strong economy will deliver the living standards that our children and our grandchildren expect of us. How well has this economy performed under the fantastic stewardship of the Government and Dr Cullen? Obviously—and it will come as no surprise to the Opposition—it has grown 25 percent over the past 6 years, and nowhere is the growth happening at a greater pace than in those areas where technology looms large. I shall say more on that shortly.

In regard to a very innovative policy that we reflect in this document and in which we have great pride—and I hope all the university students are listening to this very good speech—from 1 April 2006 we will have our interest-free student loan scheme policy. Why is that good? That is good because it will no longer beggar and belabour families who want to see their children go on to tertiary education, and those children will be able to add to the march of people enriching the productivity of the economy.

In addition to that, what else are we doing? Unlike the Opposition, we have not forgotten about families. In fact, we are expanding the Working for Families package. It is a fantastic policy, and people are clapping up and down through the four winds in Aotearoa for it.

In addition to that, the policy reflects the fact that our export sector has not performed as well as exporters would have liked. Why is that? Amongst other reasons is, obviously, a high dollar. That brings us to the point reflected in this Budget Policy Statement: a high dollar cannot coexist with profligate fiscal policy similar to that which has been promoted by various speakers from the Opposition benches. For those reasons, I have no doubt that during the upcoming Budget rounds fiscal discipline and prudence will be a major point of interest. That is because too much loosening feeds inflation, inflation feeds interest rates, and interest rates worsen the prospects for our exporters.

However, let me continue with some of the brilliant policies that are reflected in our document. In the New Zealand superannuation scheme for married couples, there is an adjustment to 66 percent of the average weekly wage. What we have is a seamless approach: the retiree community has been well and truly listened to, the working community has been well and truly catered for through our policy of focusing on families, and the rangatahi—the young people—are well and truly catered for through a student loan scheme. Also through the policies that we will introduce, there will be a focus on childcare. Those policies reflect the seamless approach that this document is overwhelmed with.

I will continue in relation to capital expenditure. An additional $1.9 billion, we have heard, has been allocated for capital expenditure.

💬 Hon Member: Borrow for education.

A point has been raised as to why we do not have more borrowing. Well, fortunately, we will not get caught up in failed schemes, such as those we have seen in Australia, where essential infrastructure was handed over to private enterprise. Rather, we will continue to observe the necessary fiscal discipline and, where there is cash-flow operational capacity, it will be put into enriching the capital expenditure needs. Why? Because we lived through a deficit in the 1990s, when unwise decisions were made in the belief that the market would simply deliver. There is no better example of where the market did not deliver in the 1990s than in the debacle of our railway sector.

In addition to that, one of the most visionary policies, which is now acquiesced in by the Opposition is, obviously, our Superannuation Fund. That is forecast to increase in value from 4.3 percent of GDP in June 2005 to 12 percent in June 2010. Operating surpluses are predicted to be sufficient to meet the Government’s contribution to the fund over the forecast period. This indicates the very long-term strategic focus that this document reflects: taking care of business for the future, enabling more young people to educate themselves and not be saddled with unreasonably high levels of debt, and providing for a capital fund that contributes to the costs of an ageing population.

In respect of technology, we need to be able to grow our export sector, given that the entrance of labourers into the labour market is about to drop by 50 percent over the next 15 years. So how ought an economy to deal with that fact? Obviously, it is by productivity and by investing in technology. Therefore, technology—which people will no doubt hear about—will loom large as we continue onwards throughout this particular period of time. I think it is important to bear in mind that people throughout society, including doyens from the business community, have identified how comprehensive, constructive, and visionary this document is. So I tell those members who constantly prattle on and moan that we are being left behind by Australia, that it comes as no surprise that Ralph Waters, one of our better chief executive officers in the construction sector, tells people that things are really good in Aotearoa land.

Now let me continue in relation to those rather negative things that are constantly said about there being indications pointing to a business downturn. I need to quote from Jason Wong from First NZ Capital. What does he say? He says that business confidence is a coincident indicator. The surveys give rise to some consternation, which is exaggerated by members opposite. Those members worsen that consternation because they do not have a string of ideas.

The National Party had an opportunity last year to sell to the New Zealand public and to the electorate a series of ideas that blended social, cultural, and economic ideas. What did National members do with social ideas? They got members of the Exclusive Brethren to write their policy for them. What did they do with cultural ideas? They decided to demonise, stigmatise, and undermine the contribution of the Māori community to society. And what did they do in relation to economic ideas? They fled backwards and promised to shrink the State, which is why we are transformational whereas they are transistors. They would slash spending and try to recreate the failed policies of the 1990s. That did not work then. They have not contributed any ideas other than moaning and diversionary tactics, because deep down this document has captured the imagination and the support of the electorate. And nowhere was that better reflected than in the election result.

So what are we going to see in the upcoming Budget round? Well, that lies at a detailed level with Dr Cullen. However, to recap, there will be ongoing investment in our students. Those students know who their friends are.

The Budget Policy Statement finally dashes any hope New Zealanders might have had that this Labour Government cares about the gap between living standards in New Zealand and living standards in Australia. It dashes that hope. In 1999 after-tax incomes in Australia were 20 percent higher than after-tax incomes in New Zealand. Today after-tax incomes in Australia are 33 percent higher than those in New Zealand. All the indications are that over the next 2, 3, or 4 years that gap will continue to widen. The Australian Government will be cutting taxes; the New Zealand economy will be growing more slowly.

Equally worrying is the fact that over the last 5 years, growth in output per person, growth in productivity, has been a miserable 0.8 percent per annum in this country—substantially lower than in Australia. Everybody knows, even if Helen Clark and Michael Cullen do not, that we will never overtake Australian living standards unless we narrow that gap in productivity, and right now we are not beginning to do so. So on present trends we are going backwards vis-à-vis Australia, and is it any wonder that we have an increasing outflow of our brightest and best New Zealanders across the Tasman? Over 600 Kiwis are leaving for Australia every week.

It is no wonder, also, that reported just this week was the worst trade deficit in New Zealand’s history since 1976—in 30 years. It is the biggest-ever deficit in absolute terms, and the biggest deficit in terms of the relationship to exports, in 30 years. Over the last 5 years we have seen Government spending and Government hiring growing much faster than the rest of the economy, and, partly as a consequence, we have seen employment in the sectors that are not generating exports grow strongly by 25 percent over the last 5 years. We have seen growth in employment in agriculture, fishing, and manufacturing actually shrink by 1 percent over the last 5 years.

Why is that? In large part it is because Government spending has been growing too fast. While value added has been growing strongly in the domestic parts of the economy—the non-tradable parts of the economy—we have seen that value added in the primary sector has grown by just 1 percent over the 5 years to June 2005. There has been 1 percent real growth in the primary sector. It is simply not true that exports have not been growing because of the volatility of the New Zealand dollar. The New Zealand dollar is not more volatile than other major currencies, and that has been established by the Reserve Bank over many years. The main reason the export sector has been growing too slowly to keep our international trade in balance is that Government spending has been growing too quickly and the non-tradable parts of the economy have been growing too quickly. The Reserve Bank has had to increase interest rates. As a consequence, the exchange rate has been high, and that has put pressure on exports. It is not the volatility of the exchange rate affecting our export sector; it is the speed at which Government spending is growing.

What does the Budget Policy Statement say about the future? It says there will be slower growth, at 2.8 percent, over the 5 years to March 2010 than in the 12 years since 1993—that is what the Budget Policy statement says. There is no sign at all that the Government has any idea how to make that growth faster.

Mr Jones indicated in his speech the major initiatives likely to be in the Budget. What are they? We will have interest-free student loans. Well, that sure as Hanover will not increase growth at all—not at all. It will have no effect on growth. Why? Because the Budget Policy Statement itself says the number of people in tertiary institutions will actually decline slightly. It will be lower in 2010 than it is now. We will be dishing out $1.5 billion in new loans in 2010 with fewer students in 2010. There is nothing there for increasing growth at all.

The second thing the Budget Policy Statement has is a big amount of money being spent on the Working for Families package. There may be some benefit in that for many families—

💬 Jill Pettis: And they will spend it in towns.

Dr DON BRASH:—but it is bought at the cost of significantly higher effective marginal tax rates, which that member may not understand, which will be very high over a very wide range of low and middle incomes. There is nothing at all for growth in that package. It may make Labour voters feel good but it sure as Hanover will not do anything for economic growth.

The third thing Mr Jones talked about was the fact that the Budget will increase the entitlement for New Zealand superannuation from 65 to 66 percent of the average wage for a married couple. That may very well be something that is very constructive for older New Zealanders, but it is not at all relevant to growth.

It is a sad document. I am not even, at the moment, talking about the imminent slow-down of the economy, which is a real challenge to the economy in the short term. Many people will lose their jobs and many businesses will fail, and that is a serious issue. But much more serious is the fact that the trend growth rate of this economy will be slower in the next 5 years than it was in the last 12 years. This Government has absolutely no answer to that at all.

💬 Lindsay Tisch: Devoid of ideas.

It is devoid of ideas, as my friend Lindsay Tisch points out. This Government has been in office more than 6 years and the forecast growth rate is markedly slower—not just in cyclical terms—for the next 5 years than it has been in the last 12 years. That is the most severe indictment on this Government’s performance. After 6 years in office, growth is forecast to be slower in the next 5 years than it has been in the last 10 or 12 years.

Once upon a time some New Zealanders believed Helen Clark and Michael Cullen when they talked about raising New Zealand living standards into the top half of the OECD. Once upon a time some New Zealanders believed Helen Clark and Michael Cullen when they said they were proposing to close the gap between New Zealand and Australia. Once upon a time some New Zealanders believed Helen Clark and Michael Cullen when they talked about economic transformation and raising productivity. Once upon a time some New Zealanders believed Helen Clark and Michael Cullen when they said they were aiming for growth of at least 4 percent per annum. Once upon a time some New Zealanders believed in the tooth fairy.

That was, for those who may not have known it, the leader of the once-great National Party. That was the leader who leads a National Party whose only tactic is not to stand by our country and our economy, not to put up policy or ideas, not to propose, as we do, how to do things better, and not to continue, as we have for the last 6 years, to continually transform and enhance our economy. No, the only tactic and the only idea that that member—the once-great Governor of the Reserve Bank—now has is to run the economy down. The only tactic that the National Party has—and it is interesting that the member is moving about—is to desperately pray for rain and to desperately pray that the economy will fly to pieces, that people will lose their jobs, and that the country will go to hell in a handbasket. I do not call that a tactic based on patriotism. There is another word for it, but we will not go there.

Dr Brash the doom merchant has been criticised by one Ralph Waters. It is very interesting what people out at the coalface, like Mr Waters, the chief executive of Fletcher Building, say. They are out there doing the business, not pontificating from the ivory tower that Dr Brash spent years in. Here is what Ralph Waters said about a speech that Dr Brash made on 31 January this year, in which he poured doom and gloom on the economy and basically said we were heading for the rocks.

💬 Dr Don Brash: No, no, that’s wrong.

I say to Dr Brash that squawking will get him nowhere—they are the last words from a man on his way out, I would think. Mr Waters said in the Dominion Post: “I fear the risk for this country is if enough people keep saying there is going to be a recession, it will be a self-fulfilling prophecy and there is no need for such gloom from how we see demand in the marketplace.” Now, that is what the chief executive—[Interruption] There “old chirpy” goes again, squawking away. He had 10 minutes in this House to get up and make a statesmanlike speech, and tell us his vision for the economy and for the country—what he would want to do if we were unlucky enough to have him leading this country.

💬 Hon Member: Not one idea.

He does not have one idea, my colleague says. He has not one policy, yet he squawks like a sort of strangled chook. Well, Dr Brash will learn, once he has been here a wee while, that his interjections show him up for what he is—and he is light.

I support the Budget Policy Statement because it is about transforming our economy, and looking after our families, young and old, and it is about something called “framing national identity”—something that Dr Brash once hypothesised about. He was asked—I think when he was on an aircraft—what it meant to be a New Zealander, and he could not answer. I think he said that it had something to do with being in first class. I could give him 4.2 million ideas as to what it means to be a New Zealander, but we will not transgress there. But it shows the lack of vision, the lack of ideas, and the lack of depth from the once-great Governor of the Reserve Bank. Others have also criticised Dr Brash.

I ask Dr Brash and the National Party where their policy for families is. We have one, the Working for Families package, and we are implementing it. We have an aim of looking after our families, young and old, and we are doing that. Where is National’s policy in respect of transforming our economy? Where is its KiwiSaver scheme, for instance? I recall Dr Brash, the once-great Governor of the Reserve Bank, saying the key challenge—

💬 Jill Pettis: He wasn’t.

Oh, he was. He raised everybody’s interest rates. The key challenge facing New Zealanders, he said, was how to increase household savings. He went on to say that he was frankly not sure how this culture of low household-sector savings could be changed. The only option, he hypothesised, was that the interest rates at the time he was Governor of the Reserve Bank were too low to encourage savings and discourage borrowing. I ask him today where his scheme is. Where is the National Party vision and policy to encourage Kiwis to save? The only thing the National Party has, apart from rolling out the doom and gloom, is to drop taxes and cut spending. That is the panacea of National Party members. That is the depth of their economic analysis. They tried it in the 1990s and they imploded our economy. Where have they come from as we enter the 21st century? Is there any new vision from Dr Brash and his team, even though they now have John Key, whose name, I am told, is “National Velvet”?

It is interesting that in the Budget Policy Statement debate the finance spokesman is put in the back shed—I wonder why—and that the leader gets up and hypothesises. I wonder why Mr Key was not given the lead speech.

Where was Dr Brash’s vision on savings? He has said for years that we must encourage savings. He is in the position of Leader of the Opposition, he says that he is a potential Prime Minister, yet he has no idea how to promote a savings scheme or how to change the culture of New Zealanders. We all know that New Zealanders ain’t that great at saving, but Dr Brash hypothesises, and says nothing. Yet he squawks like a headless chook from the back benches opposite.

Where is Dr Brash’s package on student loans? He had a go at our package to assist students. If members ask any grandparents in this country, they will find that their biggest fear before the election, apart from Dr Brash getting in and slashing their superannuation, was that they would not see their grandchildren again because those grandchildren had huge loans and the only way they could pay them back, or maybe not pay them back, was to go offshore. Yet Dr Brash on the stump, and today, said that he wants to encourage these young, bright Kiwis back. But where is his policy to do it? It is not there.

Our policy is to allow those young people to come back, and to knock off the interest as an incentive to do it. Our policy is to retain and look after our young people—to retain them and incentivise them to stay. I used to have a student loan, unlike Dr Brash. I am probably about the only member in this House who has done a degree under both schemes and who knows what it is like to have a student loan and to do it under the old scheme. The member opposite skated through. He would not know, he is not in touch, and he has evidenced that by his speech in this debate today. What is National doing for young people? Nothing. What is National doing for—[Interruption] I say to Mr Tremain that I would be careful if I were he, after what I heard at a select committee today.

The ASSISTANT SPEAKER (H V Ross Robertson): Order!

What is Don Brash’s policy on our older folks? His only policy, of course, was to wobble around on superannuation. We still do not know what his policy is today, just like we do not know what his nuclear policy is. Our policy is clear. Our policy is to look after our elderly folk. The National Party’s usual tactic is to never let the facts get in the way of a good story, and that is a tactic the Opposition uses in a number of theatres.

In conjunction with my remarks on the Budget Policy Statement I will just say that we heard a lot in the House today during question time. I put this comment to the House—it is about the atmosphere in this place—and I ask senior members to consider it very carefully: the protocols have been broken by the new Joe McCarthy of the House, Mr Hide. We all know where Joe ended up—a drunk, disavowed by his President, disavowed by his party, and disavowed by his mates. That is how Joe McCarthy died. People ought to reflect on the nature of their conduct in the House. We are approaching what I think is a new form of McCarthyism, and McCarthyism was predicated on the fact that silence said a person was guilty. McCarthyism was predicated on the principle of finishing people with slimy innuendo—a little salacious titbit here, and a little salacious titbit there. Mr Hide—“Joe McCarthy”—is a master. People’s lives were destroyed and people’s reputations were sullied.

I know, and it is interesting, that there are people on National’s side of the House who have been in the education profession and know what it was like to be an educator back in the 1960s and 1970s. Yet we do not hear a lot from them. We could draw some conclusions, but I caution the House. This is an honourable place. I am hugely honoured to be a member of this Parliament and hugely honoured to be a member of the executive. Children and adults come into this place and are in awe—possibly not of the personalities in here, but certainly of the institution that is Parliament. If we are not very, very careful there will be no rules and there will be no protocols for anyone—even for those who sit next to you, Mr Assistant Speaker—and a new form of McCarthyism will be alive and well, and shame on this Chamber for it.

I raise a point of order, Mr Speaker. I invite Mr Cosgrove to table any evidence he has at all suggesting that Ralph Waters criticised me in his speech in early February.

The ASSISTANT SPEAKER (H V Ross Robertson): It is up to the member whether he tables anything. It is only official documents—

💬 Hon Paul Swain: Read the Standing Orders, Don.

The ASSISTANT SPEAKER (H V Ross Robertson): Order!

💬 Hon Clayton Cosgrove: Point of order—

The ASSISTANT SPEAKER (H V Ross Robertson): The member will sit down, please. Points of order are heard in silence, and there is a reason for that.

I raise a point of order, Mr Speaker. I am quite happy to assist the House. Perhaps Dr Brash misunderstood the point I was going to make. I am quite happy to table Mr Waters’ quote from the Dominion Post of 16 February 2006, which states: “I fear the risk for this country is if enough people keep saying there is going to be a recession, it will be a self-fulfilling prophecy”, and I point out that that is exactly what Dr Brash has been doing for years.

The ASSISTANT SPEAKER (H V Ross Robertson): That is not an official document.

I raise a point of order, Mr Speaker. I thought you might have interrupted the member. He was making a speech. That was not a point of order. Dr Brash asked specifically for a document to be tabled that supported the position he took. It is either in order or out of order. For the member to then stand up and take a couple of minutes to make a speech and to quote from a document is completely out of order, and he should have been pulled up for it at the time.

I raise a point of order, Mr Speaker. The problem for the senior whip opposite was the so-called point of order from Dr Brash. Clearly, Dr Brash was aware that Mr Cosgrove had referred to the Dominion Post article. He was clearly aware that it was not an official document, and therefore his point of order was not one.

The ASSISTANT SPEAKER (H V Ross Robertson): I just say to members that it is one all, and I would like to move on.

In case anyone is confused, we are actually here to talk about the economy and the Budget Policy Statement. That was a classic speech by the honourable member for Waimakariri. It is no wonder that Mr Cosgrove did not say anything about the economy, because he does not know anything about the economy. He is just sent down here to act like the loveable bulldog that he is. Poor old Clayton—

The ASSISTANT SPEAKER (H V Ross Robertson): Order!

Poor old Clayton Cosgrove has spent his life being desperate to get into Cabinet. He did everything he could to get into Cabinet. He bought himself a nice new tie to take to Cabinet. Now that he is in Cabinet, he has worked out that the benchmark is David Benson-Pope. That is what it takes in order to get into the Labour Cabinet. Well, I have news for Labour members: they will all have a chance to get into that category. It is no wonder that Labour chose to put Mr Cosgrove down to debate the economy—he knows nothing about it. He should go back to worrying about noisy cars, and leave the economy to some people on the Opposition side of the House who know exactly what they are talking about in that regard.

It will be interesting, when the Budget does roll around—the Minister of Finance told the Finance and Expenditure Committee today that 18 May is the Budget date. What will surprise most New Zealanders will not be what is actually in the Budget, because we know that the Government was in free fall when it decided it was a great idea to write off the interest on student loans for all New Zealanders. The Government’s only problem was that it had a document from Treasury that told it that the policy would have a colossal effect on borrowing in New Zealand. It had a document from Treasury that told it that the policy would cost billions of dollars a year to run. The Government had not actually worked out that that policy would cost us $1.5 billion—that is the write-off from that policy alone on the balance sheet—and that that is what will flow through the Government accounts, through into the Budget Policy Statement, and ultimately through into the Budget, when the Minister gets up to read it on 18 May. So New Zealanders will not be surprised to see that cost in there.

New Zealanders also will not be surprised to see the Government’s “Welfare for Families” package in the Budget. But they may be surprised to learn that New Zealanders who earn $142,000 a year will be eligible for Working for Families. That is above the level where even the top personal tax rate cuts in, in Australia; that rate is set at around $125,000 a year for the moment. New Zealanders will not really be surprised to see KiwiSaver in the Budget either, even though the Minister of Finance knows it is very unlikely to be successful. So New Zealanders will not be surprised to see those things there, and they will not be surprised to see the little trinkets that came about from the various coalition and support arrangements that the Minister of Finance and the Prime Minister had to sign up to, as they cobbled together one of the poorer Governments we have seen in New Zealand’s history. All of those things will come as no surprise to New Zealanders when they see the Budget on 18 May.

What may surprise New Zealanders slightly, in fact, is not what is in the Budget but what is not in it. They will see one of the largest surpluses in New Zealand’s history, and they will be surprised that no tax cuts are in there, at all—not even a hint of a tax cut, to encourage New Zealanders. What is very interesting about Michael Cullen is that he gets up in the House and tells New Zealanders that they will respond to incentives when it comes to saving. KiwiSaver is such an incentive, and New Zealanders will be given $1,000 if they put money into KiwiSaver. So New Zealanders apparently respond really well to incentives, according to Michael Cullen, when it comes to savings, but when comes to—

Dr the Hon Lockwood Smith: What about tax?

When it comes to tax, he does not want a bar of incentives. We should know who to look to when we look for personal tax cuts, as my good friend Dr the Hon Lockwood Smith will know. Lo and behold, today when Dr Smith asked the Minister of Finance about the contradictory statements made by the Minister of Revenue, Mr Dunne, and Michael Cullen, and asked who should be believed, Dr Michael Cullen, in a very sincere way, looked across at the microphone and said Dr Smith should believe the buck stops with Dr Cullen. He said members should not worry about Peter Dunne, even though he signed the coalition arrangement. Michael Cullen said the buck stops with him, and if he says there are no tax cuts, then there will be no tax cuts.

Interestingly enough, I raised with Dr Cullen today what I thought what was a very simple question. In 2000, when Labour came into office, Government revenue was 38 percent of GDP, and today Government revenue is 45 percent of GDP—7 percent higher. That increased percentage equates to $10 billion. I said one would think that if a Government had $10 billion more, annually, than it had thought it would have, it could afford to give New Zealanders a tax cut.

When the Government has $10 billion more in any 1 year, can it afford a tax cut? Well, the Minister of Finance, 2 weeks ago, told the Finance and Expenditure Committee that any New Zealander who thinks there should be a tax cut on the back of the massive surpluses should be quietly taken out and drowned. I hate to tell the Minister of Finance that he is obviously condemning many, many New Zealanders—in fact, the majority, because the majority voted for parties that supported tax cuts at the election—to a watery grave at the hand of the State. I am sure that is probably not what he intended—but maybe it was, after all.

It is also very interesting that Treasury officials, who call things the way they are, today told the Finance and Expenditure Committee that growth would be much weaker than they had anticipated. Although they could not quantify what that weakness would mean, we asked them about growth in the September quarter, which we know was 0.2 percent. I asked the Secretary to the Treasury, Mr Whitehead, to tell us what he thought growth would be in the December quarter, the report on which comes out at the end of March. He said he did not know. I asked him whether he thought it was possible that the growth number would be negative. He said he could not quite put it in those words, but that if it was not negative, it could be zero.

For 6 months, the New Zealand economy has not grown.

Dr the Hon Lockwood Smith: Just stood still.

Well, it is wandering around in the wilderness, while every other economy is becoming more competitive and more productive, and is carving out a greater slice in the world. We are left with Michael Cullen and his ideology. I will give an indication of why we are wandering around in the wilderness, while other countries are getting on with it. On Monday Peter Costello, the Australian Treasurer, made what I thought was a pretty interesting move: he appointed two very pro-business people to a committee to look at taxation. The Australian Treasurer said to those two pro-business people that he wants them to report back to him, within 5 weeks, with some positive things Australia can do to stimulate its economy and some productive things it can do around its taxation system. The Australian Treasurer wants to implement those things by May of this year. We have heard from Michael Cullen that he will look at the business tax review—and I will get on to that in a moment—but that we will not see anything from that until 2008.

Well, it will take until beyond 2008 to convince people that Michael Cullen’s latest and greatest idea—a payroll tax—is a very good idea. Dr Cullen is a very smart guy, and I am sure he has thought it through that many of New Zealand’s export industries rely very heavily on staff, and that it would be quite difficult for those industries, were staff to go away. Labour, which, we are meant to believe, is the party of the workers, wants to put an impost on the employment of people. Its strategy is to roll out a payroll tax that will see a drop in the company tax rate. Some companies will pay less tax—I accept that—and a whole lot more of them will pay a payroll tax for every employee they have, at a time when unemployment is rising in New Zealand and is likely to rise more.

My leader, Dr Brash, talks quite a bit about this Government’s lack of ambition to get New Zealand into the top half of the OECD. I can assure the public of New Zealand that they will not need to read the Budget, or hear it read, to know that absolutely nothing in that document will raise New Zealand higher in the OECD rankings. In fact, we know that it would take 10 years of double the per capita growth we have had to get there, and that will not happen under this Budget. New Zealanders need to understand—in just the same way that Treasury tells our select committee what is going on—the facts. We are not in the first division of OECD countries nor in the second division of OECD countries. We are in the third division of OECD countries. When we look at countries that are not in the OECD and take a global perspective on the world, we see that we are 40th on a per capita income basis. The Falkland Islands are 36th, and the Faroe Islands are 42nd. Many, many small nations are doing very much better than us.

For 6 years we on the Opposition side of the House have sat back and waited for the Labour Government to do something. The previous National Government delivered to the Labour Government the strongest economy that any Government has inherited, and in 6 years Michael Cullen has done one thing, and one thing alone. He has ratcheted up spending, claimed that he is a prudent manager of the economy, and put more and more things into the economy that make us less competitive, less productive, and less likely to achieve the sorts of returns we need. Very soon Michael Cullen will read his seventh Budget, and it will be just like the other six: a very, very great disappointment to our country.

Yet again, National leaders are proclaiming that our economy is in a tailspin and that depression is just around the corner. In fact, the reality is that the economy has grown—that is indisputable—by around 25 percent in the last 6 years, compared with the OECD average of 16 percent. Admittedly, it was off a low growth base, but who was in Government during the previous 9 years? In reality, if it had not been for the astute handling of the Asian crisis by the then Treasurer, the Rt Hon Winston Peters, the growth rate would have been at an even lower base 6 years ago.

It is also indisputable that we have historically low unemployment rates—at 3.4 percent, the lowest rate in the OECD. It is debatable as to what degree those economic statistics can be attributed to the Government of the last 6 years. What, however, is not debatable is that gross sovereign-issued debt as a percentage of GDP has fallen and is predicted to drop further to, or lower than, 19.3 percent by June 2010. Dropping the level of debt has to be seen in terms of future-proofing the economy against future shocks. I refer to National’s policy, which would increase debt to fund tax cuts. That would hardly future-proof us.

New Zealand First supported Labour’s introduction of the Cullen fund. New Zealand First differs from the current administration, not over whether there should be compulsory savings—anyone who ignores the need for decisions to be made now condemns our elderly population to disaster in 30 to 40 years’ time—but we believe that such savings should be held in individual accounts to future-proof those savings against the rapaciousness of certain parties that may, God forbid, win the Treasury benches in the future and raid the Cullen fund.

However, for us to assess the economic performance of a Government purely and simply in terms of economic indicators such as growth and surpluses is simplistic. It gives no indication of how decisions relating to economics impact upon people’s lives. I was fascinated to hear Don Brash say that the Working for Families package may make Labour voters feel good but it does nothing for growth. I say to Dr Brash that I am happy I grew up in a period of time—and it was totally under National Governments, with the exception of the 3 years of the Nash Government—when Governments were committed to a redistribution of wealth to families, and particularly to families with children. I am really glad I grew up under that sort of regime.

When Jenny Shipley and her National - ACT - Mauri Pacific - Alamein Kopu Government reduced the floor of superannuation payments to married couples to 60 percent of the net average wage, it probably assisted the traditional economic indicators. However, not captured in the figures was the suffering of superannuitants. Therefore, the reference in the Budget Policy Statement that next April’s annual adjustment to the rate of New Zealand superannuation will lift the married couple rate to 66 percent is in fact joy to the ears of those of us in New Zealand First. A large number of superannuitants have told us how wonderful that $10 per week in their pocket will be to them. For many it will mean that they will be able to interact with their grandchildren—surely a fundamental expectation in our society—by simple things like buying them birthday and Christmas presents.

New Zealand First is also proud of the role it has played in creating the statement that more resources are to be applied to the justice sector, including the boosting of police staff numbers. I commend the Minister of Police, who happens to be here, who ensured that what we thought was in the agreement was reflected in reality—that they are to be front-line police. What is the point, for example, of having the best economy in the world if people feel insecure in their homes and scared on their streets? National would have given tax cuts so that the rich could hire their own security guards, while at the same time it would have slashed police numbers and left the ordinary citizen with no protection from rape, burglary, assault, and all those other sorts of violations.

I also take note of the statement on page 81 of the Half Year Economic and Fiscal Update 2005: “The Government is in the process of developing options for a new immigration service delivery strategy that would allow better management of the risk surrounding immigration decision-making.” I might state that, for the last 3 years of the previous Parliament, the Labour-led administration denied that there was any risk. But, in the end, the strength of New Zealand First’s argument has prevailed. Out of this strategy will come a strong immigration policy, based on meeting the needs of the country rather than on aiming at creating a population of 10 million, which is the policy that the previous National administration had on a policy that satisfied a feel-good factor for those of Green persuasion.

I also note that on page 85 there is a reference to a new taxation regime for the racing industry. This is under way and will have a major impact on rescuing this very important sector of the economy from incipient collapse. We note with satisfaction reference to a review of arrangements for the payment of superannuation to New Zealanders residing overseas, and the treatment of overseas pensions paid to recipients of New Zealand pensions and welfare benefits.

The reason I mention these references is that they all derive from the confidence and supply agreement between New Zealand First and Labour following the last election. I ask one question: what impact has National had on this Budget Policy Statement? The report raises questions about the quality of Government expenditure. This must always be a concern of Parliament, and there will always be debate about that quality, regardless of which party is in power. New Zealand First, for example, would consider that interest-free loans for students is poor expenditure. The interest rate should, at least, be set at consumer price index in order that students repay the true value of what they borrowed, and possibly even higher to encourage payback.

Finally, the report notes the commitments to the development of infrastructure, including transport infrastructure. I want to make the point that the National Opposition is being extremely disingenuous over the funding of transport infrastructure. It has long been a New Zealand First policy that all roading taxes should be directed to transport infrastructure. During the 1990s National strongly opposed New Zealand First’s position. It voted down a New Zealand First member’s bill. Even when we were in coalition with National from 1996 to 1998, in preparation for the 1998 Budget, we wanted an extra 4.2c per litre to go into transport infrastructure from roading tax. Bill Birch, with the support of the then Minister of Transport—the Hon Maurice Williamson, I might add—totally opposed that initiative. In the end, a compromise was reached so that the Budget allowed for an additional 2.1c to go into the transport fund from the consolidated account, where it was being siphoned off to. Then, to get up to 4.2c, an increase of 2.1c per litre was required. In other words, National insisted on a tax increase. National is now saying that we should be putting all the funding back into roading. We believe that that is disingenuous, given its record over the 1990s. It should say, purely and simply, that it has flogged yet another policy from New Zealand First.

We cannot deny—and I do not think that the present administration is denying—that over the next few years the economy will not be as rosy as it has been over the last 6 years. As I said, we have to ask questions about whether the positive growth that has occurred has been totally allowed for by Government policy. As a result, we need to recognise that huge demands for additional expenditure will not be made over and above what has already been agreed to. If the public and members of various different lobby groups think that that is going to be true, then I think they should think again. Nevertheless, it is the responsibility of the present administration to ensure that it manages the economy as well as it possibly can over the next few years. Certainly, the commentators are saying that it is not going to be anywhere near as bad as the leaders of the National Party, Don Brash and John Key, are predicting. The pessimism that those people are putting out into the market place can be nothing more than for political purposes, being potentially destructive of any advantage that the New Zealand economy may have. We should ask that they consider whether the national interests are being best served by the pessimism they are promoting for political purposes.

This debate over the 2006 Budget Policy Statement gives us a useful opportunity to consider the recent economic history of New Zealand, and to look forward to the next financial year and beyond. We are told in this statement that the economy has grown by 25 percent over the last 4 years. But what is this growth all about? Has our economy become more sustainable? Can we call that 25 percent increase a success if it does not translate into greater human well-being or environmental sustainability? Rivers are still being polluted, basic health problems among so many of our children continue to increase, too many workers are still in insecure jobs with wages too low to sustain either themselves or their families, and so much more. We need measures of economic, social, and environmental success other than a mere growth in GDP. Unless this happens, we may well find that we have sacrificed our environment, our workforce, and our children in order to get up the OECD GDP league table. Moving up the table does not automatically deliver to the environment and to those who are most vulnerable in our society.

We are still heavily dependent on oil, which is driving our negative balance on trade in the current account deficit. Although George Bush himself has acknowledged that the US is addicted to oil, in Aotearoa New Zealand we seem to be oblivious to the short-term and long-term effect that oil dependency will have on our country. The year to January has seen the largest trade deficit ever. Nearly half the increase in imports lies in the cost of oil, yet we still have no standards for fuel efficiency in vehicles. We are building big new roads faster than ever before in history, with cries to build them even faster and with only very modest funds for public transport, cycleways, or traffic-demand management. We are doing all this despite the real question that we should be facing: how we will afford the fuel to drive in the future at the rate that we drive today.

The Budget Policy Statement sets policy targets for innovation and productivity, but only productivity of labour seems to be considered. What about the productivity of energy, which will be less available than labour in the future? We have failed to meet the targets in the National Energy Efficiency and Conservation Strategy, but there are no Budget measures to address this.

The biggest risk to our agricultural economy is climate change. It is also a big fiscal risk, as we are now liable for the cost of our carbon debts in 2012. Yet there are no policies to deal with this. The climate change policy is a shambles. The carbon tax has been abandoned and we will have to wait a year to see what will be put in its place, if anything.

Rod Oram’s reflections on the second Australia - New Zealand Climate Change and Business Conference in the Sunday Star-Times of 26 February was very instructive. Mr Oram’s article begins with the paragraph: “The debate over climate change and the response to it have advanced dramatically over the past year in the rest of the world. In New Zealand, they have taken a great leap backwards.” He goes on to say how Governments, scientists, businesses, and environmental lobbyists around the world are making great strides in dealing with climate change and carbon tax issues, while New Zealand delegates at the conference had a sorry story to tell.

We are still waiting for the Minister to tell us how the funding shortfall left by the carbon tax will be met. Will expenditure be cut? If so, on what? Will other taxes be raised? If so, which ones, and how? Today renewable energy is a smaller proportion of total energy than 6 years ago, so we are actually going backwards on sustainability.

Most of the room to move in the forthcoming Budget has already been taken up by the student loan zero-interest package. Of course we support this, even though the Government’s policy in this area lags a long way behind our commitment to get rid of the student loan scheme altogether and to allow borrowers to pay off existing loans every year that they work in New Zealand following graduation.

We also support the Government’s move to extend the Working for Families package tomiddle and high income families. However, we have consistently opposed, and will continue to condemn, the continuation of its policy that denies the same support to the most vulnerable of all families—those on unemployment, sickness, domestic purposes, and other benefits. It is an absolute travesty that those New Zealanders and their children are punished because they are unable to work. We again ask the Government to reconsider its policy in that area and end the systemic discrimination against beneficiaries.

I also call on Government members to seriously reconsider the Minister for Social Development and Employment’s apparent commitment to going ahead with the abolition of the special benefit, and its replacement with the temporary additional support benefit. I doubt that many Labour MPs have seriously come to terms with the fact that once the temporary additional support benefit is implemented and the special benefit no longer exists, many people coming on to benefits will be deprived of badly needed income. The temporary additional support benefit removes discretion and is time limited, unlike the special benefit, which means that in the future tens of thousands of beneficiaries will end up with even less money on which to survive than they have now. That is an outright and drastic benefit cut, and I believe that if Labour MPs really understood what those changes will mean they would be urging the Hon David Benson-Pope to take urgent action to reverse his decisions in that area.

There are, however, some areas of the Budget that we are looking forward to. Those are the matters addressed in the Labour - Green Party cooperation agreement that was signed as part of the new Government formation process last year. The two key areas the Green Party is expecting Budget support for are the enhanced energy efficiency programme and the Buy Kiwi Made programme. We are also hoping that over this term of Parliament the Government will support building increased capacity for public passenger transport; increasing the number of students eligible for student allowances by increasing parent or income thresholds; further reducing levels of child poverty; increasing overseas development assistance; raising the minimum wage to at least $12 an hour, if not more; improving the nutritional environment, especially among children; enhancing organics advisory services; improving environmental education; doing more about endangered species conservation; and taking measures to further support the development of the community and voluntary sector.

I am responsible within the Green Party for the Buy Kiwi Made programme. We are working closely with the Minister for Economic Development’s office and the Ministry of Economic Development itself on this project. I have already met with a number of interested and potential stakeholder groups for the project. There is a great support coming through from businesses, trade unions, economists, and individual firms.

The main opposition we have encountered so far has been in the pages of last week’s National Business Review that paraded three sirens for neo-liberalism to attack the programme. Can I assure the National Business Review and its doomsayers that the Buy Kiwi Made programme will not founder on its anti-interventionist rocks, but will become a major programme to celebrate the quality, tenacity, and courage of New Zealand companies and workers to support and promote what is made by, in, and for New Zealand.

Buy Kiwi Made has a number of goals. They are: creating awareness of the employment, economic, environmental, and social benefits of buying locally made products and services; building brand loyalty for New Zealand - made products; reducing imports, especially of consumption goods; helping to reduce New Zealand’s trade deficit; helping to increase New Zealand’s manufacturing capability; helping to create jobs; and helping to reduce fuel consumption.

Although in the scheme of things the Buy Kiwi Made project will be a modest exercise, the latest balance of payment figures show that it must be all hands to the pump to ensure that this country does not spend more than it earns. Reducing imports is just as important as increasing exports, and, in the end, much more sustainable. Yet, for too long, import substitution has been a dirty phrase in this country.

Economists sometimes tell us that to understand a national economy we have to think of it as a household. Well, let us do that. What would we think of a household where the parents concrete over half the vege garden, grass over the other half and put a cow on it, throw away the sewing machine, the workshop tools, and all the repair kits, and then give the kids credit cards with unlimited spending. Yet that is exactly how our economy is being run. No matter how hard the parents work, and how much they earn, the children continue to run up debt. The household continues to run up deficit after deficit. Then when the parents try to take the credit cards away from the kids, they are sued by the World Children Organisation for breaking its rules. Can the Government explain how that makes sense? Can National’s Mr Groser, who has helped write some of the World Trade Organisation rules, explain the sanity of the situation?

I look forward to the success of the Buy Kiwi Made project, but, even more important, to it being joined by other Government-Green initiatives that can tackle the rising trade deficit and help us develop the truly sustainable Aotearoa that we will need if we are to survive the environmental and economic crises of the next decade.

Before I came to Parliament, cost cutting, penny-pinching, keeping the freezer full, and making do were just part of the challenge of raising a whānau up north. After having spent some mind-numbing months on the Finance and Expenditure Committee I realised that the same principles are supposed to apply to Parliament and the national statement of accounts. Folks, I have to say that the accounts down here in Wellington just do not add up. One example is this. The Government is planning to spend an extra $13 billion over the next 4 years, but for some reason it cannot find the money to help the 250,000 poorest kids in Aotearoa. That is a damning indictment on this Government, reflected in the view of the Public Health Association, which challenged us that the health of children must not suffer because of Government policies. Quite frankly, we should not be patting ourselves on the back about how good the accounts look when our kids are going hungry.

In terms of income and growth we note that the country has a 3.8 percent growth rate, but that 60 percent of Māoridom still has an annual income of less than $20,000. In fact, at the time of the election the average income for Tai Tokerau Māori was less than $13,000. Again, the national accounts may look OK, but they sure do not stack up for Māori. Then at the other end of our population we note that the Government is expecting to have nearly $10 billion in a superannuation fund by 30 June, but for some reason there is still a massive difference in life expectancy between Māori and Pākehā. So although every Māori taxpayer, like everybody else, will be expected to contribute to that super fund, very few Māori actually get to receive the benefits of it. Again, the glitter of the accounts does not measure up to the reality of those most in need. We need to take a harder look at the way in which we present our national accounts, and consider a more realistic and more honest measure of the state of our nation, because our well-being, our health, and our future as a nation depends on the prosperity of our total environment, not just on what is in the wallet.

The Minister of Finance spoke to us last week and painted a pleasant picture with words like “modest or mild slow-down” and “retail numbers coming off a bit”, and gave us the reassurance that the present track is within the Government’s comfort range. I also need to inject some reality into that comfort range. That reality includes the race relations report released this week that noted that indicators of well-being remain relatively poor for Māori and Pacific peoples in a number of areas, particularly health, economic standard of living, and education. It also includes the big difference between Pākehā and Polynesian in health problems like diabetes, heart disease, cancer, obesity, and smoking-related illnesses.

That brings me to just one of those areas—smoking. During the select committee process the anti-smoking lobby argued for a massive increase in the tax on tobacco. The reality in my electorate suggests that tax increases do not work well. When people are addicted to smoking, when the price is put up, what happens is that smokers get pissed off, they stop buying cigarettes, and they buy roll-your-owns instead. The health problems get worse more quickly and the country starts to pay out more for smoking-related health-care. I am a reformed smoker and, some would say, a bit of a pious and pompous prick about it as well, but I am also a politician and a proud member of the Māori Party, which is mounting a strong attack against the tobacco companies.

Nelson Mandela said that if one was a politician one had to be prepared to suffer for one’s principles, and the Māori Party is prepared for that. He also said that a political movement must keep in touch with reality and the prevailing conditions. While some might think that our position is a little wacky, the truth is that it is not hard to understand. The reality is that tobacco kills 600 Māori people every year and jeopardises the lives of all those around us who are smokers as well—family, friends, and workmates. Kids are particularly vulnerable, and the prevailing conditions of poverty and low wages are also part of that reality. So when I see people light up I think about things like the fact that 25 percent of those who die from smoking die 22 years earlier than non-smokers; that, like me, my co-leader Dr Pita Sharples stopped smoking, because it is all about whānau, and, like me, he also wants to live to enjoy his mokopuna; and that, for all of their best efforts, the “Just Say No” campaigns are barely working.

Yesterday the Australians said that, based on an inquiry into the effects of passive smoking on passengers, particularly children, they were considering legislation banning people from smoking in their own cars. I can hear all those smokers shouting out already: “How can they? This is my car; I can smoke in it if I want to!”. Well, remember when the bikies kicked up a fuss about wearing helmets? Now they all wear them and nobody blinks an eye. Remember what a fuss there was about us having to wear seatbelts? Now the first thing we do when we get into a car is put one on. And remember how we thought that kids’ car seats were dumb? Now every parents’ car has one. Sometimes we have to put personal choice aside for the greater good. Banning the production and sale of tobacco is one of those times.

When we look at the health of the economy, we must also look at the health of the people and the health of the nation. We must find a way of achieving genuine progress for Aotearoa. The Māori Party has adopted what is known as the genuine progress index, which measures progress based on positive contribution and negative activity. Smoking, for example, is a negative, because it takes $1.2 billion out of our pockets and add millions more dollars to the bill through health care—and for what? There are no positives about smoking.

I remind the House that smoking kills, and the tobacco companies keep smiling about it. Last year the number of cigarettes smoked increased to 2,436 million—that is 590 for every baby, every child, every daughter, every son, every mother, every father, every grandparent—every single person in Aotearoa. That is criminal. It is a good opportunity to remind ourselves that the GDP that the Government uses is nothing more than a measure of economic scale. The genuine progress index is the true measure of the health of our nation.

I know that only too well from our experience with Ngāwhā prison. The Department of Corrections did not tell us when it was building the prison that it would cost too much to build and that it would be just another 360-bed regional comprehensive prison, using the same obsolete practices that do not rehabilitate people, or that it would have to be repaired all the time because it has already started sinking into the geothermal landscape. The enormous financial and social costs of our record prison populations are a negative on the genuine progress index, and ones that we need to balance out with rational and forward-thinking debate on criminal and penal policies that encourage whānau to take responsibility for their own, that introduce alternatives to prison, and that can help victims, communities, and offenders.

The Māori Party well knows the risk of raising issues of principle like tobacco—gee, here I go again—and controlling crime, and the shots that people will take at us for daring to raise them. But if we want to achieve, then we must also be prepared to take the risks. In 25 years the population of the country will be more Polynesian, more Asian, better educated, and more multilingual. We need to consider Māori knowledge as an asset to the nation, and we must look at how we can harness the talents, values, and philosophies of our Pacific and Asian brothers and sisters. Treasury has no structured mechanism for recognising and dealing with the browning of our society. But a brown Aotearoa is like Pantene—it may not happen overnight, but it will happen—and we must factor that into our plans.

We must look at why it costs $2,000 per Polynesian child in hospital costs, and plan to insulate all homes to reduce the likelihood of asthma, which comes about because 30 percent of our homes simply are not insulated. We must look at new approaches in order to manage our natural resources better to cope with the peak oil challenge. Finally, a Brazilian, Paulo Freire, reminds us that we make the road by walking. If we want policy statements that bring about positive social change, we need to start doing it, to think outside the square, and to open the debate to others—to indeed make the road by walking. Happy are those who dream dreams and are prepared to pay the price to make those dreams come true.

The debate on the Budget Policy Statement takes place at a critical time for New Zealand. Growth in the New Zealand economy has slowed appreciably. Business confidence is low, and continues to decline. The merchandise trade deficit hit $7.1 billion for the year ended January 2006, which was the highest amount on record. That deficit represented 23 percent of the total value of all our exports, which is the largest figure in 30 years. The people of New Zealand are more indebted than ever before, with at least $158 billion now owed to overseas creditors.

The only thing in all of that that is stronger than ever is the Government’s balance sheet. I must say that the Government has exercised a degree of prudence during the last 6 years of strong economic growth, although I would argue that it has been somewhat tight, rather than prudent. But it is certainly true that the Government’s coffers are now overflowing with riches, and that its balance sheet is in tremendous shape.

It is against that background that Treasury, in its briefing to the incoming Government last year, stated that although it believed that New Zealand is currently well placed in a fiscal sense, the rate of spending increases in recent years will need to slow significantly to ensure long-term fiscal sustainability. But the Government’s Budget Policy Statement indicates that it intends to do just the opposite. Not only does it intend to ignore the recent advice of Treasury on that point but, in fact, it intends to go in the opposite direction. I will give some figures to back up the statement I have just made.

For the year ended June 2001—the first full year after this Government took office—core Government expenditure was 31.3 percent of GDP. That figure reduced slightly to 30.6 percent of GDP for the year ended 30 June 2005, which is the date of the latest Government balance sheet that we have. However, in spite of Treasury’s advice, the Budget Policy Statement forecasts core expenditure to rise to 32.6 percent by 2008. That is 2 percent of GDP more than for last year. The total core Government expenditure in 2008 will be a whopping $55.4 billion. That is $9.2 billion, or 20 percent, higher than it was for last year. So in the next 3 years expenditure will increase, as a percentage of GDP, by 2 percent, or, in dollar terms, by $9.2 billion.

That is against the background whereby growth in the New Zealand economy has slowed from 4.7 percent per annum in 2003 to a forecast figure of less than 1.7 percent in 2007. So we have the contradictory situation that although the New Zealand economy is slowing—and slowing significantly—the Government is intent on going on a spending spree. Growth is down by 3 percent per annum, but Government expenditure, as a percentage of GDP, is up by 2 percent per annum. So there we have it, very simply: growth is slowing, the New Zealand economy is struggling, and the Government is intending to boost expenditure to that extent.

I believe that that is fundamentally wrong. The Government must not imagine that it can spend the country to prosperity. That is an impossibility. It is like a man trying to swim to the surface with a great weight tied around both his hands and his legs. He will not make it, and we will not make it either as a country if we go down the pretence pathway that somehow we can spend our way to prosperity.

It is also something that is fundamentally unfair and inequitable in terms of its impact on the New Zealand people. Whilst businesses have lost confidence, and are retrenching and struggling to maintain profitability, which has an effect in terms of their ability to pay increased wages and salaries or to take on extra people—we know we are now beginning to see lay-offs in many companies—those who happen to be paid from the public purse will be insulated from all that. They will be put into a privileged position where they are fine and dandy, whilst those in the rest of the country, which is actually the productive sector, are struggling, and struggling greatly. We want the productive sector of the New Zealand economy to grow—not the Government bureaucracy—and that message needs to be formally taken on board by the Government. It is better by far that businesses are allowed to swim than that the Government weigh them down.

That is why the business tax review, as part of the Government’s confidence and supply agreement with United Future—it is happening only because we asked and negotiated for it—coupled with a decrease in Government expenditure, is so important. I put this proposition also to Dr Michael Cullen, whose fingerprints, of course, are all over the Budget Policy Statement. I make the point that if he is prepared to spend $9.2 billion in extra money, then he can alternatively use part of that for tax reductions for businesses. There is scope to do it, and it would be a far better and more effective thing to do. The submissions to the Finance and Expenditure Committee from Federated Farmers, Business New Zealand, the Business Roundtable, and many others, all made this central point: it is time for the Government to rein in its bureaucracy and expenditure, and to allow more of the hard-earned prosperity of this country stay in the pockets of businesses, so that they can grow, provide employment, and increase the productivity rate, and so that we can lift the living standards of all New Zealanders.

I again say to the Government that it should be listening to that advice. There is actually no point in the Government having Treasury do the significant analysis that goes into the Budget Policy Statement if, on such a central plank as that, the Government continues to ignore Treasury. Dr Cullen told the Finance and Expenditure Committee today that, in a sense, he sees the boost in Government expenditure as stabilising the negative growth, but I do not think it is the Government’s job to do that—that should be left to the businesses of this country.

In addition, as the Business Roundtable set out on its submissions on the Budget Policy Statement, the Government should use its strong balance sheet to speed up investment in infrastructure. When I look at the statements of the Crown for the year ended 30 June 2005, and look down to net core Crown debt as a percentage of GDP, do members know what I find? I find 0 percent. In net terms the Crown, on its own balance sheet, has no debt. I say to the House that if I were working as the chief executive of a large corporation, and I had business opportunities for growth ahead of me but no debt on the balance sheet, I would be sacked. That would be the reality, because it is important that we go ahead and make investment in order to decongest transport in Auckland, Wellington, Tauranga, and other places. It is extremely important that we upgrade the electricity grid, so that we can get electricity to people at a reasonable cost. The Government should be using the strength of its balance sheet to get those sorts of things moving, and moving fast.

United Future favours borrowing for those projects, with repayments spread over 30 years or so, so that we can get ahead and do those kinds of things. Those are the sorts of investments that have the potential to grow the economy, to grow our prosperity, and to ensure that all New Zealanders are better off. That is not revenue spending; revenue spending is of dubious quality. It is actually good investment in the future of our country. It is the way in which we can boost productivity and support business, and it is the path towards prosperity for our nation.

It is always a great pleasure, in relation to the Finance and Expenditure Committee, to follow Mr Gordon Copeland and, indeed, Mr Hone Harawira. I enjoyed both contributions to this debate. I listened most attentively to both speeches, and I agree with everything that Gordon Copeland said. We certainly have a problem in this country with the economy going down, and with the Government over the next 3 years expanding its expenditure and effectively squeezing out the private sector. Of course, that is what is driving up interest rates, through the inflationary impact.

I was staggered to be reminded by Mr Copeland that the increase in Government expenditure over the next 3 years is a whopping $9.2 billion. We often sit on the Finance and Expenditure Committee and talk about a billion dollars. It just rolls off one’s tongue, but it is a very hard figure to get one’s head around. It is a thousand million dollars.

Mr Copeland talked about an increase in expenditure of $9.2 billion, and he said that core Government expenditure would rise to $55.4 billion. To give members a feel for what that is, I want to paint a picture of what it would look like. Most people in this House or listening to the radio can at least imagine a $100 bill. I want members to imagine a $100 bill, and to then imagine a bundle of $100 bills worth $10,000 and standing just so high. We can imagine those bundles being stacked up on a table. We would put one bundle, another bundle, and a third bundle—and there is $30,000, which is a lot of money, but just so high. That is what Jonathan Hunt spent on his taxi chits in 1 year.

Then we go a bit higher to $40,000, $50,000, $60,000, $70,000, and $80,000—and ask how high $1 billion would stretch. Well, it would not be just to the ceiling here; it would be way beyond that. It would stretch for a kilometre. So bundles of $100 bills stacked up to equal $1 billion would be a kilometre high. Of course, $1 million is just a metre high.

So that gives us a comparison of $1 million with $1 billion, and when we look at what Dr Cullen is spending in the year 2008, we see that it is $55.4 billion. That is money taken from hard-working New Zealanders, which would stretch 55.4 kilometres high. The increase alone in expenditure would be 9.2 kilometres high and, quite frankly, I would not let Dr Cullen spend $100 of my own money and think that he could do a better job than I could.

💬 Hon Chris Carter: No one would want to give you any money. It’s like Fiji; tell us about Fiji.

Well, I know that Chris Carter would not know what money was, but I believe it is shocking to think that Government expenditure over the next 3 years will expand by that amount. So I agree with everything that Mr Copeland said.

I want to pick up on a point that my colleague Hone Harawira made. Of course, he is quite right: smoking is a terrible, terrible thing. It is a terrible thing for the health of New Zealanders, and what makes it particularly tragic is that those who are most addicted to smoking are oftentimes those who can least afford it. It is such a tragedy amongst young Māori, still, to see them taking up the habit of smoking, despite the best efforts of people and the knowledge we now have about what it will mean. I just find it so sad when we see those beautiful young people with nice skin and healthy bodies, but they are having a smoke and, unfortunately, we know how they will end up looking in 50 years, how it will affect their health, and how with even their best endeavours they may not be able to quit easily.

But I want to quibble a wee bit with Mr Harawira’s suggestion that we ban tobacco, as the solution—

💬 Tariana Turia: Ban the sale.

RODNEY HIDE:—that we ban the sale of tobacco. I want to explore that, if I may, and ask Mr Harawira to consider what it would mean. The difficulty would be that people would not stop smoking. People would still smoke, and the first thing we would have to do would be to increase the resources of the police enormously, so they could go around and catch people who were illegally growing tobacco, manufacturing tobacco products, and possibly smoking tobacco.

I know that Tariana Turia said that we will pull them up just for selling it, but it is the same business. If we catch those smoking tobacco we have to find out whether they have bought it from somewhere. So there would be a huge increase in the State’s resourcing of the police, to police the smoking of tobacco in this country of ours.

Prohibition would also make criminals of those who bought and sold tobacco, and presumably we would need some penalty against them. Do they go to jail, do they get fined—what do we do to people who buy and sell tobacco? Also, of course, nothing would help the criminal gangs in New Zealand more than the prohibition of tobacco, because that would make the growing and the sale of tobacco a huge underground industry. I do not think we would necessarily see less tobacco being smoked in the end than we do now.

So I caution about the use of prohibition. Yes, I would love to live in a country where no one smoked and people did not buy cigarettes, and where young people in particular did not take up the habit. But I urge caution about the idea that somehow through prohibition we can wave a magic wand and remove a drug such as tobacco. And my comments apply with equal force to other drugs and whether we are going about controlling them in the best way.

The Government talks about economic transformation, and there has been a transformation under this Government. The transformation has been the transfer of money from the pockets of working people and business people to the Government. That is the transformation that has occurred: everyone is feeling a bit poorer because everyone is paying a bit more tax. While the Government crows over the fact that it has a positive balance sheet, the economy turns turtle.

I know that Michael Cullen likes to heap scorn on Adam Smith, but Adam Smith’s point was, in part, to explain that a country got rich not by having a king who had a lot of gold but through the sum total of the wealth that was created by its citizens through trade, and that measuring a country’s wealth by its Government’s treasury was a complete mistake. Michael Cullen, who thinks he is so clever about economics, does not understand even the most basic point made by arguably the very first economist—that is, that the wealth of a country is not measured by how much money the Government has.

Day after day we are subjected to Dr Michael Cullen suggesting that, because the Government has taken a lot of money from working people and businesses and put that money into its own Treasury, the country is in good shape, when actually it can mean the reverse. We heard that from Dr Michael Cullen in the Finance and Expenditure Committee today. The committee also heard what Michael Cullen had to say about the economic cycle. I found that very interesting—and Mr Copeland can confirm that I asked him what he thought had caused it. It is very interesting. According to Michael Cullen, when the economic cycle is on the up it is his good work, but when it is on the down it is everyone else’s fault and has nothing whatsoever to do with Michael Cullen.

We can go right back to Adam Smith and every economist since; we know the conditions for growing an economy. They are free trade, the maintenance of law and order, the maintenance of the basic utilities needed to run an economy—

💬 Gordon Copeland: A stable currency.

—a stable currency, and a Government that keeps taxes low and spends wisely. Of course, with this Government we have the exact opposite: a Government that taxes hard and spends unwisely, and it, therefore, destroys wealth. Indeed, this Government does not allow people in business to go about their business, but hinders them every which way.

I do believe that we face some very serious issues in our economy. We face some very serious issues on the social welfare front, in health, and in education, and we face some very serious problems—to which there are no easy answers—in law and order and the maintenance of public safety. I do not see this Government, or, indeed, this Parliament, addressing those issues. That is the tragedy of the Budget Policy Statement. Where is the vision from Helen Clark or Michael Cullen as to where this country could be in the next 10 years? That is what we are lacking. That is why we need a better Government.

For those who did not know, that was Rodney Hide, the leader of the ACT party. The first part of his speech sounded to me very like the kind of gobbledygook recipe he dished up to the people in Fiji. Many of the people who went and listened to him in Fiji came away losing millions of dollars.

💬 Hon Chris Carter: Poorer.

They were the poorer for it. That is the kind of gobbledygook nonsense that that member constantly dishes up in this House, and he then has the cheek to lecture Michael Cullen and the Labour-led Government, which has turned round economic growth from very low figures to an average of around 4 percent for the last 6 years, which is well ahead of the OECD average. Rodney Hide used to believe in “values, not politics”. Do members remember that? Roger Douglas did some good things and some not so good things, but I do think he was a principled person. When he was starting the ACT party he talked about “values, not politics”. What he was trying to say was that people were interested in hearing about the big issues; they were not interested in the sleaze and the character assassination with which Rodney Hide has made his mark.

💬 Hon Chris Carter: It’s his trademark.

That is right—it is his trademark. He thinks that that is the way to build the party. That is why the party’s support is down, that is why it now has only two members, and that is why its coffers have dried up—because it has nothing to do with values; it is all to do with sleaze. Rodney Hide thinks that that is the way to build a party, and, of course, he is wrong. That is basically why he is inconsequential to the proceedings of this House.

The Budget Policy Statement sets out—

💬 Rodney Hide: Tell us about David Benson-Pope! Why won’t Benson-Pope take an interview?

The point about that comment, of course, is that the member realises that during the entire 10 minutes he had to speak he made not one policy statement on behalf of ACT—not one new idea, not one new thought, and not one constructive suggestion. That is why the ACT party and Rodney Hide are irrelevant to this debate.

The Budget Policy Statement sets out the broad strategic priorities that the Government is guided by in preparing the Budget. The three broad themes the Government is pursuing are economic transformation, families—young and old—and the importance of national identity. There is not sufficient time to go into all the huge measures the Government either has begun or wants to proceed with over the next 3 years, but I will mention a few.

The growth in employment figures is an outstanding, spectacular success, with growth rates that have been the envy of the OECD. Unemployment is the lowest it has been for decades, but the job is not finished. We recognise that growth will soften—there is no question about that—as we go into this phase of the economic cycle, but we are pursuing a number of measures. One is the Superannuation Fund, which is now such a huge success. National members opposed that at one stage, until they realised they had to jump horse very quickly or they would be in trouble.

Another success is in the area of skills training. The Government has resurrected the apprenticeship system that was killed off by Bill Birch in the 1990s. The tax changes for small business, which have just gone through the Finance and Expenditure Committee, are very, very positive for small-business development. We have also worked on productivity, which the Budget Policy Statement says will improve.

The second theme is the whole issue of families, with the Working for Families package and the announcements made prior to the election. The Government is now well on track to expand those measures, giving more opportunities to families.

The third theme is the issue of national identity, which this Government has taken really seriously—led, of course, by the Minister for Arts, Culture and Heritage, who happens to be the Prime Minister, who has put a real focus on arts, fashion, design, film, and all of those things New Zealanders do well. And, of course, we are having some huge successes in sport, including the magnificent performance of the Hurricanes. I have a feeling that this will be their season.

I want to compare that with the National Party. It is hard to get a single policy out of National at the moment. We have had a huge number of flip-flops. I do not want to flog the nuclear policy any more, because everybody knows that the National Party does not know what it stands for or what its policy is on that issue. So I will not even bother with that; that would be like flogging a dead horse. Then we had the flip-flop on superannuation.

Those members have also fallen into the trap of focusing on personal attacks and character assassination, and it is really sad. I have been in this place about 16 years and I have never known Parliament to stoop to the low levels it has been stooping to lately. I am sad about that because the situation will become worse. The real point is that we have always been able to keep away from that sort of thing, but it will become worse, and members opposite will have to start thinking about the things they have done in their past that may well come forward in this House. So I think a few of them will be sweating. The problem is that people who live by the sword, by and large, die by it.

I think that the problem with National Party members talking about, or even trying to reflect on, what their policy might be is that they are sounding like a stuck old seventy-eight. It is the same old policy: they want tax cuts—huge tax cuts—at a time when the economy is starting to slow, and they want to spend more. All National members of Parliament want to spend more. I have one such member close to my electorate. John Hayes, the member for Wairarapa, wants to build a tunnel through the Rimutakas. Of course, he has no idea how to fund it or what other projects might go by the wayside. National members just want to do whatever they like, say whatever they like, and borrow more. We heard this morning that the National Party is quite happy to give up on the debt target this Government has set. Those members would have tax cuts of huge amounts, borrow heaps, and spend more—and that is why no one takes them seriously.

Don Brash in his speech lamented the fact of the income gap between Australia and New Zealand. He forgot to point out, of course, that the labour market in Australia is much more regulated than New Zealand’s, and that workers there have been able to take a bigger dividend from the growth that has come about. What the leader of the National Party wants to be able to do, of course, is say that we should deregulate the labour market more. National thinks that somehow that will solve the problem. Of course, it will not. The National Party still believes that 4 weeks’ leave is an outrage, even though Australia has had it for about 30 years. That is one of the reasons why this Labour-led Government has introduced it.

But I think the problem with National Party members is that they are still obsessed with the leadership race, and I am obliged to tell those punters where things are at since last week.

💬 Hon Chris Carter: Give us some tips.

Well, I think that Don Brash has slipped back a bit. He has gone from $1.30 to $1.40, because he has become involved in sleaze and because of his inability to recall the deal with the Exclusive Brethren. With John Key, there is no change; he is on $1.50. Bill English has gone from $1.80 to $2, because he has become involved in sleaze. He knows that that is not the way to do it, so he has slipped backwards. Money is coming off him at the moment, so people are watching him closely to see whether he will keep on with that. If he keeps away from doing that, I reckon his odds will shorten again, and he will be back to more like $1.70. Gerry Brownlee has gone out to $8.

💬 Hon Chris Carter: $8?

Yes—$8. I think he has gone way out to that. But, of course, he has been handicapped by his past, and we do not want to talk about that. But he is carrying quite a lot of weight in that department, and I would say he is out to $8. Simon Power is on $3.50, I would say. That is where he is. I think that some of the money that is on him will probably go to one of the other contenders—probably to John Key towards the end. But there is still that big tussle going on at the moment at the TAB between Key, English, and Brash, with Brash, to be fair, with his nose out in front. Then, of course, there is Tim Groser. If one had a hundred bucks, one would put it on Tim Groser. He is paying $100. That would be a great return; that would be a real roughie. It would be a great return at $100-odd. If I had a hundred bucks, I would slip it on there, because we never know what will happen before they get to the finish line.

So the National Party is concerned about leadership. What the Labour Government is concerned about is economic transformation, families young and old, and national identity, and that is what the people of New Zealand want to hear about.

The Hon Paul Swain betrays, I think, Labour’s lack of judgment over the issues that are swirling around David Benson-Pope. If Paul Swain and the Prime Minister think that that issue will go away because they have started throwing some muck at some other MPs, then they have completely misjudged where public opinion is and where the opinion of this House is. Mr Swain should understand that the long list of problems now attached to David Benson-Pope and the seriousness of the actions and behaviour he has been involved in mean that he is the issue, not the National Party or Rodney Hide—and that is certainly how the public sees it. One teacher was quoted in the New Zealand Herald today as saying that this issue is “blowing teachers’ minds out there”. The very idea that a Government could tolerate, as a senior member of its own ranks, someone who has behaved in the way that he did is unacceptable.

💬 Rodney Hide: They excuse him.

Well, the Government has actually gone further than that at times by saying it never happened. So Mr Swain would do well to take the issue a good deal more seriously than to treat it as playground tit for tat, because it does not matter what he says about Gerry Brownlee. What has been said about David Benson-Pope by over a dozen young people who have been willing to come forward and say it publicly is what is in the public mind, and that is the issue that Helen Clark must deal with and, so far, she has chosen not to. In a way I would like to say that that is to the benefit of her political opponents, such as myself, but I think that a more serious problem arises from her inability to deal with the issue—that is, the erosion of the sense of respect for the authority of teachers and for the Government stewardship of public education.

But that is not the only issue where Labour is suffering from a credibility gap. The other one would have to be economic transformation. One imagines that when someone uses a word like “transformation”, something significant, something energetic, and maybe something new would be happening to the economy. Well, that has not been the case, at all. Economic transformation appeared as Helen Clark’s slogan early in the tenure of this Government, in around 2000 or 2001. It was Labour’s label for the idea that it had something to say and something to do with the burst of economic growth that this country has had. As has been debated in this Chamber many times, that growth has had very little to do with the actions and activities of the Labour Government.

However, this Government has spawned a major industry of bureaucracies, plans, strategies, and people monitoring each other, measuring, counting, and speculating—at a cost of hundreds of millions of dollars to the taxpayer. It has made no difference to the economy, and Dr Cullen has not set out to try to show that his last 6 years of economic management have made any difference to the economy.

I just want to pick up two or three areas where the Government needs to get down out of the clouds and get to grips with the realities of microeconomic reform, because, fundamentally, that is what will drive our economy forward. The Labour Government in New Zealand has been untypical. In most other similar countries—Australia, Canada to a lesser extent, and the UK—Governments have persisted with a constant process of reform to make their economies more competitive. If they are left-wing Governments, they have embarked on other programmes like expanding public expenditure, growing the numbers of civil servants, and having more middle-class welfare. But no Government has given up on the programme of microeconomic reform in the way that this Government has. This Government has fooled itself into thinking that more money will fix every problem.

Members can take as an example the roading infrastructure. We have seen a complete debacle from rising star—what is his name?

Dr the Hon Lockwood Smith: David Parker.

We have seen a complete debacle from “Rising Star Parker” in the last couple of weeks. A politicised Transit board puts out a plan, and the Government realises it is an embarrassment and disowns it but has no alternative proposals about how it will fund a plan it says it is totally committed to. We know, because of the environment the Government has created in local government and around Transit, that that money will not be spent efficiently. In a sense it does not matter how much it commits to; a significant proportion is bound to be wasted because of the processes that have become so complicated, the delays that have become so long, and the increasing amount of Government compliance that those who will be building this infrastructure have to deal with.

Another example is the Department of Corrections. We have seen in the last 2 or 3 months a great deal of public attention to what is going on in our prisons. It is quite clear now that the Labour Government has been totally held hostage to Mr Phil Goff’s rhetoric. Labour has embarked on a programme of sentencing and “lock ‘em up” kind of politics in order to shore up its own constituency, but it has had no proper programme for how to deal with the consequences. Then, when it has started building the prisons, the costs have doubled in a matter of 2 or 3 years. My electorate will be one of the beneficiaries of that. The prison in Milburn will be set up at 300 beds, it is bound to end up at 600 beds, and at the current rate the Government will spend over half a billion dollars building that prison at Milburn. That will be terrific for the local economy but very bad news for the taxpayer.

I want to refer also to the issue of education. This is yet another area where the Government is creating a swamp of complexity, incompetence, and failure while it swans around the country talking about economic transformation. Well, we have had transformation in education. The Government has taken an orderly and well-run tertiary sector and turned it into a train wreck of incompetence and public waste. It has taken an adventure in secondary school qualifications and turned it into a dripping sore of lack of public credibility. Dr Cullen has taken on the job of tertiary education Minister. I wish him well. In a sense I feel sorry for him, because his significant career as a Minister of Finance is going to fizzle out as he wades into the mess that Steve Maharey left for him, and it will take him all the rest of his term in office to fix it.

Dr the Hon Lockwood Smith: As Steve Maharey makes more mess.

Yes, as Steve Maharey makes more mess in TVNZ. He is going to mess up early childhood education. He left a mess in his other portfolio of science and research, and certainly in tertiary education. Why is it that everything this man touches crumbles? It is like a reverse Midas touch.

Dr Cullen has written a Budget Policy Statement with speculative ideas, such as KiwiSaver, which is minor. The minor ideas take up a bit of media space, but the real problem is that the Government has lost its desire, its will, and its capability to do the fundamental jobs of Government properly, and those are to provide public education in a way that is effective for students and cost-effective for the taxpayer; to make sure there is long-run and efficient investment in infrastructure; and to deal properly with the consequences of policies that it has followed for political benefit, like the problem that has arisen with prisons. All of these problems will fall in the lap of the Minister of Finance, and over the next 2 or 3 years he is going to feel like the roost to which all the chickens have come home. All the built-up problems of overspending, micro-management, and politicised processes are adding up to the need for him to cut expenditure. They are adding up to public dissatisfaction with services. They are adding up to a credibility problem for the Government in areas that have traditionally been regarded as Labour’s core competence—in particular, education. The man who will have to fix it all is Dr Cullen, who is tired, cranky, and worn out with shovelling all the extra bits that Helen Clark and her Ministers leave for him. This Government’s credibility will stand or fall on whether he can do a job that no Minister in Cabinet is capable of doing.

On 15 February the Finance and Expenditure Committee heard evidence from the public on the Budget Policy Statement. Among members of the public were groups from the business world, including the Business Roundtable, Business New Zealand, and Federated Farmers. The Business Roundtable, admittedly, does not have a huge number of members, but it has very significant members. Many of our major corporates are members of the Business Roundtable. Business New Zealand has among its members a huge cross-section of New Zealand business. Federated Farmers represents a large chunk of the primary sector. I guess that with those three organisations we had a large chunk of New Zealand’s productive sector making submissions to the select committee.

Their submissions were almost identical. They all pointed out to the select committee that the Government sector has been growing too rapidly at the expense of the private sector. They pointed out that if that continues, there is no way the objectives in the Government’s Budget Policy Statement can be achieved. There is no way that productivity in this economy will be lifted to match that of other countries in the developed world, such as Australia, that we have to compete with. There is no way we will see an economic transformation in this country if the growth in Government spending carries on in the way it has been going.

One of those submitters pointed out that if we look at employment in agriculture, fisheries, and manufacturing—again, a significant chunk of our productive sector—we see that employment in that part of our economy over the last 5 years has actually fallen by 5 percent, while employment over the same time period in the Government sector, the State sector, has grown by 17.5 percent. How does one expect the economy to be transformed into a highly productive, dynamic economy when employment in the productive sector is going down and employment in the State sector is mushrooming?

But, of course, Dr Cullen knows better. A large chunk of the productive sector of this economy is saying to him: “This is all wrong, and you won’t get the productivity growth you’re seeking while this goes on.”, but Dr Cullen and this Labour Government know better. They know better than most of the businesses in New Zealand. That shows the arrogance of this Labour Government now, after 6 years in office. It is the arrogance that sees Dr Cullen telling the business world: “You guys don’t know what the hell you’re talking about. I know far better than you do.” Dr Cullen is saying that the Government should carry on and increase the size of the Government sector—which is what the Budget Policy Statement shows will happen—and shrink the private sector.

That is the same kind of arrogance we are seeing from the Prime Minister. Today she said it was acceptable for one of her Ministers, David Benson-Pope, to have used his power—and I use that word advisedly—as a teacher. There is a huge imbalance of power between a teacher in his position and a student in a classroom, a dormitory, or a shower. For a teacher to abuse that position of power in the way David Benson-Pope did over some years in that school he taught at, and for Helen Clark to think it was acceptable for a teacher to abuse that difference in power between a teacher and a student in the way David Benson-Pope did—to think that his judgment in abusing that power was all OK—shows the arrogance of this Government and how that arrogance has seeped right through it.

Helen Clark thinks that is OK. Dr Michael Cullen thinks he knows better than the entire business sector in this country. That is why this Government is starting to get the odour of decay around it. Its judgment is being shown to be falling to bits.

Let us look at what is happening now that this Government has increased its expenditure so much in the last 5 years. Government revenue as a percentage of this economy has climbed in that period from just under 38 percent to 45 percent of GDP—that is, almost half our economy is now represented by Government revenue. Part of the reason, although not all of it, is that this Government is allowing New Zealanders to pay more and more tax. As New Zealanders’ incomes go up—which happens over time with inflation, plus increases in pay—they go into higher tax brackets and pay more and more tax. That is one of the reasons why the average after-tax income of New Zealanders has not gone up or even stayed the same relative to the average after-tax income of Australians. Their average after-tax income has climbed much more than that, and the gap between the two has gone from 20 percent 5 years ago to 33 percent now—partly because this Labour Government is allowing New Zealanders to pay more and more tax.

We know that New Zealand First and United Future want to change that. We know that Peter Dunne wants to have tax thresholds indexed so that that does not happen, and so that over time New Zealanders can keep more of their pay and not pay more and more tax as they go into higher and higher tax brackets. We heard Gordon Copeland talk about that today. But I have to tell this House that at the select committee today I asked Michael Cullen point-blank who the public should believe in terms of adjusting the tax brackets—him, or Peter Dunne. Dr Cullen said that they should listen to him. He said: “The buck stops with me; I make the decisions.” All I can say to Peter Dunne is that I am sorry about that. It will not be him making the decisions over those tax thresholds. Peter Dunne told Parliament on 22 February that he was working on the legislation for that, but I have news for him. Michael Cullen is deciding whether that legislation is going ahead; that is what he told the select committee today.

It is important, because the migration statistics of New Zealanders over the last 3 years show a massive net outflow of New Zealanders leaving New Zealand on a permanent basis. Just 3 years ago, 11,200 New Zealanders net left New Zealand on a long-term basis. The year after that, 2 years ago, that figure had jumped 7,000 in a year to 18,100. Last year, the figure jumped another 7,000 to 25,000 New Zealanders. The number of New Zealanders leaving New Zealand on a permanent basis and going overseas has more than doubled in 3 years.

One of the reasons—not the only reason—is that of course in New Zealand they have no hope. They cannot get ahead; as their pay goes up and as they get more and more senior positions in their work, they go to higher tax brackets and pay more tax to this rapacious Labour Government that believes it knows best. It is fascinating to look at a recent report out of Ohio University in America on the impact of taxes on the migration of people between states in the United States of America. It is fascinating to see that in recent years—between 2000 and 2004—1.3 million Americans left states with high income tax levels to go to states with low income tax levels. In fact, a commentator on the Ohio University research stated: “It’s a stealth migration, and it’s one of the biggest, most significant yet least recognized movements of the population in American history … People are voting with their feet to say that taxes do matter.”

How high are our taxes here in New Zealand? People would be shocked to learn what most families face. Ninety percent of New Zealand families are now involved with the Working for Families package. Once that package, which this Budget Policy Statement will put in place, is rolled out, 90 percent of New Zealand families with dependent children will be involved. Tax research shows that marginal tax rates affect people most, because those rates affect the tax they pay on their next dollar. For hard-working families in New Zealand who try to get off benefits and move up into self reliance, the marginal tax rates they face are appalling. The Government’s own Inland Revenue Department data shows that once a family with three children earns $10,000 a year trying to get off the domestic purposes benefit, on the next dollar that family earns it will pay 92 percent tax. It does not get better. As that family with three children gets up to $50,000 in income it will pay over half its next dollar in tax, and so it goes on. That family does not get below paying 59 percent tax on its next dollar until it is earning $100,000 of income. Then it gets down to paying 39 percent tax. No wonder people are leaving New Zealand in droves under this Labour Government.