Parker David: Taxation (Annual Rates and Budget Measures) Bill — First Reading Second Reading In Committee 
Parker David: Taxation (Annual Rates and Budget Measures) Bill — First Reading Second Reading In Committee 
[Volume:672;Page:18889] 
Hon DAVID PARKER (Labour) 
: 
 This Budget was written against the context of the Prime Minister and the Minister of Finance having repeatedly said that New Zealand has a problem with total New Zealand indebtedness rather then Government indebtedness and against the background of them having said that we needed to restructure the economy in order to have a fundamental shift in the economy. It fails. The Budget document on page 70 describes the net international investment position—that is New Zealand’s net debt as a percentage of GDP. The forecast for the year ended 2011 is 78.6 percent of GDP having gone down a little over the last year and for every year hereafter in the projections New Zealand’s net international position gets worse—that is New Zealand becomes more indebted as a nation year after year after year not just in nominal terms but also as a percentage of GDP. It goes up from 78.6 percent forecast for the 2011 year to 85.3 percent forecast in the year ended 2015. That is an indictment on the Government’s policies. 
The other really bad figure in this is the current account deficit. The current deficit pops into surplus of 0.5 percent this year in part because of the moneys coming to New Zealand from reinsurance overseas. Every year after this we have a growing current account deficit as New Zealand gets poorer year by year which is reflected in that debt position I just referred to. The current account deficit forecast for 2012 is 4.1 percent rising every year to 6.9 percent in the year 2015. The Government can only pretend it has maintained any one of its pre-election promises. Remember it was going to close the wage gap with Australia—fail. It was going to lead us to a brighter future—fail. It was going to cause a step change in the economy—fail. This Budget lays bare the failure of the Government’s economic policy. 
We have heard from other contributions that National will go to the electorate for a mandate for its changes including the sale of State-owned enterprises and cuts to the likes of KiwiSaver tax credits yet it counts every one of them in the Budget. Every one of those measures is counted in the Budget yet this year we have a $16.7 billion cash deficit and we have deficits going into the future. Indeed those debt figures I quoted for the country are after the sale of the energy State-owned enterprise interests and Air New Zealand interests so those figures I have as to total net debt are after the family silver has been sold. 
David Cunliffe covered some of the effective tax increases that are in this Budget for middle-income New Zealanders as a consequence of changes to KiwiSaver. It is worth noting that the effect of this Budget and of the Taxation (Annual Rates and Budget Measures) Bill that we are now debating is to increase the tax burden of middle-income New Zealanders as a consequence of those changes. This same bill reinforces the cuts that were made to income tax rates by stating them again for the forthcoming year for the highest income groups. So the 10 percent of the population that got 42 percent of the income tax cuts in last year’s Budget keeps them. Middle-income people who are on lower incomes than them get their KiwiSaver tax credits cut. Is that fair? No. Does it cause the economy to grow? No. We have had a much-vaunted figure of 4-point-something percent as being the growth outlook for the first year in the Government’s forecast. That includes approximately 1.5 percent of money coming into the economy mainly from overseas as a consequence of the Christchurch earthquake and the insurance money being paid out of New Zealand coffers that is being spent in Christchurch after the earthquake. If that is cut out the underlying growth rate for New Zealand is a little over 2 percent. 
What New Zealand needs now is a credible plan to grow the economy. The Government has had 3 years to do it. Its outlook is very poor as shown by the fact that New Zealand’s net debt position in the world gets worse. Even to get to that position the Government has included asset sales. National sold the family silver once; it cannot sell it again. It has broken its promises to New Zealand in many different ways. The figures I would have reinforced to listeners are not those debt figures that the Minister of Finance has been repeatedly emphasising as being important. The net international debt position of New Zealand as a percentage of GDP is a proxy for whether we are getting richer or poorer as a country and that number gets worse. Every year from here on in we go backwards. We heard the Prime Minister say in his speech that interest rates are going to be better than they would otherwise be. His own Budget on page 70 shows the 90-day bill rate going up from 3 percent to 5 percent over the forecast period—a 3 percent to 5 percent increase in interest rates over the forecast period. So that is not quite what the Prime Minister would have people believe either. 
The other point that I find worrisome in this Budget relates to the predictions as to tax revenue. The Inland Revenue Department and Treasury cannot agree as to how much tax revenue will be collected. I will read out what it states: “Both sets of tax forecasts were based on the Treasury’s economic forecasts.” So it is not related to economic forecasts but it states: “Using slightly different assumptions and forecasting models Inland Revenue has produced a set of tax forecasts that are much lower than the Treasury’s.”—not just lower but much lower than Treasury’s—“In this  
Update 
 the total difference between the tax forecasts across the five … years … is nearly $4 billion a larger difference than is usually the case … The bulk [of this is in] corporate tax.” That is what it states. What does the Government do? Does it take the prudent course and use the lower of those figures because it has got it on the wrong side in every one of its Budgets so far? No. Does it average the two and take a mid-range figure? No. 
The Government is taking the irresponsible course in the face of what is already a $16.7 billion deficit in order to protect those income tax cuts of last year 42 percent of which went to the top 10 percent. It takes the irresponsible course of taking the highest figure because that suits its cause. It has taken the Treasury forecast it has ignored the Inland Revenue Department’s forecast and it has not even taken the mid-point. As a consequence even by this Budget document it is possible that these numbers over that 5-year period are $4 billion out. It is not a trifling amount of money. 
I will say something about what is heading towards the education sector as a consequence of a change in this Budget. At the moment for teachers in KiwiSaver the employer contribution matches the teacher contribution and it is paid out of Government revenue. It comes out of Government revenue via the Vote State Services. This Budget changes that and states effectively that schools have to pay for that themselves. Effectively there is a hole in the budget of every school because they have teachers who are entitled to be in KiwiSaver whose matching contribution from their employers will go up from 2 percent to 3 percent next year—with the Government having reversed the change in employer contribution from 4 percent to 2 percent last year—but the school now has to pay that 3 percent contribution to the teachers’ superannuation. Where is that coming from? How does the magic work in the schools’ budget? I cannot work that one out and I do not think that schools will be able to either. 
I also ask with regard to this pretence that KiwiSaver contributions are getting better by going from 2 percent to 3 percent whether people realise that the 3 percent that is coming from employers will have tax deducted from it before it hits their accounts. Tax is deducted at the employee’s tax rate before it hits their KiwiSaver account presumably at the cost of a future wage increase for the employee—and I am not necessarily criticising all of that as some of it is unavoidable; I am not saying that the employer can magic it—so the tax payment that will now be deducted from that 3 percent employer contribution effectively comes out of the employee’s superannuation account. Not only are teachers being asked to sacrifice some of their wages but also they are paying the tax on that 3 percent contribution. 
This Budget fails against the test that the Government set for itself of leaving the economy substantially changed. That was its promise yet we see that the growth forecast is unchanged. New Zealand still wanders along at a pretty modest rate and New Zealanders still have to wait yet again for the promised golden day just round the corner that never seems to arrive under this Government.