O'Connor Damien: Appropriation (2009/10 Supplementary Estimates) Bill Imprest Supply (First for 2010/11) Bill — Second Readings 
O'Connor Damien: Appropriation (2009/10 Supplementary Estimates) Bill Imprest Supply (First for 2010/11) Bill — Second Readings 
[Volume:664;Page:11906] 
Hon DAMIEN O’CONNOR (Labour) 
: 
 I acknowledge the speech from the previous speaker who is an enthusiastic new member. It is a shame he did not stick to the facts; it would have made a bit of difference. 
I refer to a sobering IMF report that has just been done on the New Zealand economy. It states that New Zealand “stands out as having one of the lowest saving rates and one of the largest net foreign liabilities positions of any advanced country.” But the National Government’s last Budget cut all efforts in terms of savings. KiwiSaver and contributions to the superannuation fund were cut. What then did the Government do this year? We have heard some pearls of wisdom in the House today. Mr English said that we need to create jobs in the export sector and that we need a growing tradable sector. I agree with those statements. However Roger Douglas from ACT said that we need to reduce taxation dramatically in this country. Then we heard Mr Dunne say that we need liberating policies. Well if these three parties work together as a Government we would think that there would be some cohesion and logical outcome from all of those statements. 
So I ask what the Budget did to promote those statements if indeed those members believe them. At the select committee one of the senior Ministers Gerry Brownlee was asked what growth targets the Government has. He could not admit in the select committee to any growth targets because the Government does not have any. I go back to those statements made in the House just today. What did the Budget do for taxation? If we are to believe that lower taxes drive a better economy—perhaps through Mr Dunne’s liberating policies—maybe he believes that the flat tax like a flat earth is the nirvana that we should all seek or that no tax delivers a perfect world. Well it does not; we know that. 
Let us go back to the naive belief that lower taxes deliver a better economy. In fact tax went up for every single New Zealander in the last Budget. GST will go up to 15 percent. So every single item we buy will cost more because of increased taxation. There were cuts made to taxation—cuts that delivered one-third of the total benefits to 5 percent of the taxpayers in this country. Those cuts were unfair. If we go through and look at the cuts we see that those on the lower end earning zero to $14000 received a 2 percent cut in taxation; moving up those earning $48000 to $70000 get a 3 percent cut; and those on the highest levels over $70000 get a 5 percent cut. It was simply unfair unethical and in my view immoral. So there were tax cuts for a small number of people but those people at the bottom end who got less will have any benefits of that gobbled up through increased GST electricity costs going up and inflation which the Budget admitted would be at 5.9 percent by July of next year. That will cripple many many people. 
Mr Dunne was wrong. There were no liberating policies in the last Budget. In fact tax did not go down as Sir Roger Douglas would demand; it went up for the vast majority of New Zealanders. If we were to believe that lower taxes delivered better outcomes why are Finland and Denmark European countries that have strong sustainable growth high incomes good investment in research and development better off than the low-tax countries which include New Zealand? The IMF said that we are not as great as that looking forward. We have some serious issues around savings and net debt. We are a so-called low-tax country. The Budget did not deliver a more sustainable future for New Zealand; it taxed the lower-income New Zealanders more and it cut taxes for people at the higher end. 
Let us look at the tradable sector. If we are to believe Bill English—and I do agree with him—that we need to drive growth in the tradable sector we need to ask what the Budget did for the export sector. Well I think it is widely acknowledged that we need more investment in research and development. What happened? We had a commitment of $700 million for research and development in the tradable sector but the Government swiped the money and came back with a Primary Growth Partnership proposal which did nothing for 18 months. There was absolutely nothing for 18 months— 
Craig Foss 
: Not one dollar? 
Hon DAMIEN O’CONNOR 
: That is right there was not one dollar out of the Primary Growth Partnership for 18 months. Three grants have just been made. What happened was that we had research and development tax credits in place. Every single business in this country could claim tax credits for research and development. The National Government wiped them out. It took them away. It has implemented a research and development grants programme. That is as bureaucratic as one can possibly get. The party that claimed to be stomping on bureaucracy replaced tax credits tax cuts for research and development with a bureaucracy that delivers if one is lucky some grants for research and development. That is not the way to drive forward this economy for the export sector. 
Quite recently Mr Bollard increased the official cash rate. He put it up by 0.25 percent. That will do more to harm the tradable sector in the medium term than any benefit any policy that the National Government passed through the Budget. We will see and already are seeing the value of the dollar climb—because we have increased interest rates they flow across the board and we are seeing the dollar climb. The export sector will get punished once again. I acknowledge the work that is going into the monetary policy reform that we will put on the table through Mr Cunliffe and Mr Parker. There is a lot of good work going on. We know that the export sector cannot continue to be battered around by a fluctuating dollar and by interest rates rising—and they will rise as they did in the 1990s under the National Government—because the export sector that Bill English said we need to grow will be hammered as we move forward. 
Another area where the Government could have assisted the export sector was with depreciation allowances. The Government eliminated depreciation incentives for new planting equipment. It took them away. If ever there was a way of increasing productivity it is to encourage businesses to invest in new technology and new plant but the Government took away that incentive. In fact one could say that it created a perverse incentive because it lowered the company tax rate. We are likely to see businesses that have the option of either taking out money through dividends or reinvesting back into higher levels of productivity take that money out because they pay less tax on it now. That is a bizarre policy for a Government that says it is encouraging the tradable sector. 
The next area that we need to invest in is infrastructure. What did the Government do in this area? It shrunk the money going into health to a point where the rural areas are now suffering cuts in home care and cuts to age-care facilities—threats to the services that support the people who drive this export economy. 
I will talk about education. I quote from a principal of a school: “In short I feel that the 2010 Budget will do absolutely nothing to assist”—and I take out the name of the high school—“and this is particularly irksome when the Prime Minister has stated that ‘One of the Government’s top priorities is ensuring that a greater proportion of education funding goes to frontline services in our schools and less into bureaucracy.’ … I can say categorically that it won’t.” That is from a principal of a high school in a rural area. He knows the truth. The Government has refused to properly fund education through this Budget which might support people who live in rural areas and who produce the export income. 
In communication we committed $48 million. What has the Government done? It has said it will take a levy off all other broadband users and put the money back into the $300 million fund for rural broadband. That is compared with the $1.5 billion the Government is spending in the cities. That will not help the tradable sector. Neither will roading where the Government has chopped money from provincial roads that are in the control of councils to put into projects around the cities.