Debate on Budget Policy Statement 
Debate on Budget Policy Statement 
[Volume:670;Page:17049] 
Debate on Budget Policy Statement 
CRAIG FOSS (Chairperson of the Finance and Expenditure Committee): 
 I move  
That the House take note of the report of the Finance and Expenditure Committee on the Budget Policy Statement 2011 
. First and foremost let me acknowledge the members of the Finance and Expenditure Committee. We considered this particular item of business and this report on the Wednesday post the Christchurch earthquake and I acknowledge the way in which we dealt with that. As can be seen from the report members have been able to express their policy and political views quite clearly—I was actually in the earthquake the day before—and members have been very good in assisting me the chair to get this report to the House.  
I ask members to note page 5 of the report. The Minister of Finance and officials were before the committee a few weeks prior to our consideration of the Budget Policy Statement. Members will note the comment on page 5: “During our examination of these documents we considered carefully the likely impact of the September 2010 Canterbury earthquake. The events of 22 February 2011 occurred just as we were completing this report. Our thoughts are with all those affected.” I am grateful to members who thought to put that comment into this particular document because events were unfolding as we prepared it. Again I acknowledge the goodwill of all to produce the document that is before us today. 
It is very important to note just how important it is that the Government is able to continue its prudent management its transparency of accounts and its rebuilding of the New Zealand economy. The investment statement which forms part of the Budget Policy Statement for the very first time is a very good and useful tool to use as the various Governments of today and the future start to prioritise their spending and make more informed decisions about how scarce capital much of which is borrowed capital can be allocated in the New Zealand economy. 
Whatever the political hue of members that is a very very important document and I strongly suspect that it will form the foundation of further budgetary process papers as we go through. It is very important because it puts a focus on each and every single dollar—borrowed dollars in many instances—that the Crown has. Events of recent weeks financial shocks around the world and acts of God or of nature such as the earthquakes down in Christchurch demonstrate again our need to keep our pencils sharp so that we can allocate the limited resources financial and otherwise of this country to the places of most need. We have to remember that every dollar that is not efficiently allocated to whichever resource the Government of the day decides is a dollar that is not available for social policies or to rebuild the country in the case of tragic events such as those we have witnessed recently. That is very important to note. 
The Minister told the Finance and Expenditure Committee that the Budget will ensure will continue and will demonstrate prudent financial management of the public accounts. The previous Government had ongoing cumulative and compounding new-spending increases of $2.8 billion per annum over the last 5 years of its term. One of the first moves of the new National Government was to bring that figure down to $1.1 billion. That is not a cut in spending; it is a cut in the ongoing increase in spending. 
The Prime Minister and the Minister of Finance in his evidence before the committee and in the Budget Policy Statement noted that the Government’s intention this year is through the savings and investment Budget to bring that figure down to between $800 million and $900 million of new extra spending every year. Members will remember that the total Budget is about $65 billion or $70-odd billion so that figure represents new money every year. Yes they are very large numbers but it is very important to note that the rate of growth is changing and slowing down. 
The rate of unsustainable growth under the previous administration—$2.8 billion which are new dollars slopping around in the economy every year—squeezed the rest of the economy out of the game. The statistics and the metrics all show the same thing. They show that the real sector which is the tradable sector the export sector was flat-lining for the last 5 years of the previous administration. There was no real growth. That is what the numbers say. 
Hon David Cunliffe 
: And that looks good compared to today. 
CRAIG FOSS 
: A member opposite asks why that is important. It is important because that is the sector that creates the jobs pays the wages pays for families and funnily enough pays that thing called tax which allows the Government whoever it might be to allocate resources to education health disaster relief or whatever it might be. That is the where the money comes from. 
When the Government looks at its books and sees that the money coming in does not match the spending the Government would like to continue what is the difference? It is in borrowing. Recent events around the world have cast huge light—torchlight daylight sunlight or borax if you like—on the need for prudent management of the accounts and that is why this Budget is a savings and investment Budget. This Budget will start to arrest turn round and change behaviour in New Zealand. 
There was an unsustainable growth in spending by the previous Government—that is the squeezing of households. How did households react to the increased tax demands? How did households react to the increased demands of the Crown? They borrowed. They had to borrow and they ate the equity in their own homes. When those homes were going up in value OK that might have helped but now the bills are being sent to those same homeowners who had to borrow and consume their own equity to help them get through the last years of the previous administration. 
On the surface it all looked hunky-dory but the moment we scratched the surface the moment the global financial crisis started to hit and the moment a recession arrived—and remember that New Zealand went into recession 1 year before the rest of the world under the previous administration—we were in trouble. That is why the coming Budget will start to address that. 
New Zealand owes $180-odd billion to the rest of the world. Some members opposite say that that is not a problem because it is mostly private debt. But actually when one is in the rest of the world looking to lend money to New Zealand it is the New Zealand dollar denominated debt that is the first port of call. New Zealand owes about $180 billion. When this Government came in the forecast was for another decade of deficits and that was before to be quite fair the tragedies that have happened in Canterbury and Christchurch recently. 
The need for much more focused and prudent management the need to help turn round the economy—away from consumption away from borrowing and hoping—is more paramount now than ever. The coming Budget has a savings and investment theme. As I noted earlier the investment statement which is a very important document will be contained in it. 
I need to raise a few matters that other members will probably raise in their various speeches. To be fair I note that in the Finance and Expenditure Committee’s report Labour and Green members made very clear their policy intentions. I say: “Good on them.” It is obvious whose points those were—the point being that every single one of those policies demands more borrowing more taxes and more spending. 
Every single policy intention involves the same failed policy that got New Zealand into more of a bad place than it otherwise would have been in. They are trying to continue that policy with their various announcements. I think they are up to about $5 billion or $6 billion so far. One of their arguments—which they will make later I am sure—stems from their confusion over the difference between debt and equity. They are totally ignoring risk. One member I believe is of the opinion that anything that exceeds the Government’s cost of capital should not be sold essentially. 
Well the other side of that argument therefore is that anything that is not achieving the Government’s cost of capital on a return should be sold. If that is the case then members opposite are saying: “Cash up New Zealand superannuation.” They are saying: “Sell every housing asset in New Zealand.” If they argue that one should not sell everything exceeding the cost of capital they are therefore arguing that one should sell everything that is not. 
I ask those members to look at the numbers. They are mentioned right here—in the investment statement—in black and white. They are hard numbers and they mean that there will be some difficult priority choices for New Zealand. 
I look forward to other members’ speeches to clarify perhaps their intention that they do not want to cash up all of those investments returning under the cost of New Zealand’s Government capital. Thank you. 
Hon PHIL GOFF (Leader of the Opposition) 
: 
 In this the third year of a National-led Government New Zealanders are getting rather tired of this National Government blaming the consequences of its own economic mismanagement on other events and on other people. 
Let me begin where Mr Foss began: with the people of Christchurch. I had 2 hours down there this morning standing in the liquefaction with the stench of sewage. I talked to two or three dozen people who for 15 days have not had power water sewerage or even access to decent toilets. One gentleman I talked to said that his next-door neighbour is 84 years old. He is an ex - Royal Air Force pilot. He has a heart condition and he is on drugs. Each morning and sometimes in the middle of the night he has to walk 300 metres up the road before he can find a Portaloo. That really is not good enough for the people of the eastern suburbs. Our sympathies go to those people but they need more than our sympathy; they actually need active intervention and active government. Fifteen days after the earthquake people should not be living in those conditions. 
I say to Mr Foss that it is no good blaming the earthquake for New Zealand’s perilous economic position. I have in my hand last week’s  
BNZ Weekly Overview 
. What does it say? It says that before we even had the earthquake the data was showing a recessionary finish to 2010 and a recessionary start to 2011. It says basically that we were back in recession before the earthquake struck. That makes New Zealand one of just two countries in the developed world that is facing a double-dip recession. 
I say to Mr Foss that he needs to look to his own Government’s actions or inactions to explain that. How does one explain it when New Zealand is getting the best prices in 38 years—the very best prices—for its export products? Mr Foss knows that because he is a farmer. He is getting a bigger wool cheque a better lamb cheque—he is smiling and grinning now—and a better tax cut. He has personally had hundreds and hundreds of dollars a week in tax cuts. 
I will tell him about what it is doing to the rest of New Zealand. It is no good Mr Foss blaming the previous Labour Government. Bill English will take the next call. On 18 December 2008 in this House he stood up and he said as the new Minister of Finance that the books of this country were in reasonable shape. He said the Government was saving for a rainy day—it was not his Government; he had become just the Minister—and that rainy day had come. Mr English picked up a country that had zero net Government debt. There was no comparison to the countries of Europe that were heavily overburdened with debt. He picked up a country that had one of the lowest rates of unemployment in the world yet today in the third year of this National Government 700 additional New Zealanders every week are losing their jobs—every week they are losing their jobs. 
Do members know the shameful thing that shows that this Government is so out of touch with ordinary New Zealanders? Mr Key said that people going to food banks—and the number of them has trebled or quadrupled—are taking lifestyle choices. I tell Mr English about one of the people whom I spoke to this morning. His wife lost her job in the earthquake. She will get 6 weeks’ payment but what happens after that? Their mortgage repayments will not halve but their income has. That family like so many other families who never in their lives have gone to a food bank will possibly be looking for additional assistance. It is not because of a lifestyle choice but because their income is halved and their cost of living has gone up. I say this to you Mr English— 
Mr SPEAKER 
: I have allowed the member— 
Hon Bill English 
: Don’t you know the Standing Orders? 
Mr SPEAKER 
: I am on my feet. I have allowed the member to get away with it a couple of times but in debate members must not refer specifically to other members as “you” because it leads to disorder. I apologise to the member; he must not do that. 
Hon PHIL GOFF 
: I say this to Mr English: it does not help people who go to petrol stations each week and pay more than $100 to fill up their petrol tanks who go to the supermarket every week and pay more and more money for everything they buy and who have to pay more for the Government charges that Mr English is imposing on them. It does not help those people that this Government has contributed to their increased cost of living through a GST increase but has not delivered on what Mr Key promised which was that everyone would be overwhelmingly better off because of the tax switch. 
Mr Key is better off. He is better off by $1000 a week. He has given himself $1000 a week in tax cuts. Of course he feels that everyone is better off. But how about talking to the guy down the road who is a cleaner on the minimum wage? He got 25c an hour—25c an hour—from the tax cuts which does not come close to meeting the increased cost of living. His family is suffering. His family is being pushed into poverty because of tax cuts. The National Government has looked after its wealthy mates and itself but has not looked after middle-income people or lower-income people. Those people are being squeezed. 
The Government has failed because it has no plan. It has no plan about skills training. The head of Business New Zealand said to me that the Government has not put together a skills programme. He is not a friend of the Labour Party or an enemy of the Government; he is a friend of the Government—he is telling the truth. There is no plan. When we are thousands of skilled tradesmen short at the end of the year; when we cannot build the houses in Canterbury that people desperately need; when we cannot put the businesses back on their feet because there is a skills shortage; and when costs go through the roof because of that skills shortage maybe the National Government will reflect on the lack of a plan to train people in order to get the 7 percent of Cantabrians who will be out of work back to work and rebuilding their city. That is a huge gap. 
Maybe Mr English will think about research and development when he thinks about why the clever innovative companies are not coming through and providing the high-skill high-wage high-tech jobs. Mr English has cut research and development by 50 percent. National does not have a skills programme. 
Hon Bill English 
: That’s not true. 
Hon PHIL GOFF 
: Mr English says that is not true. Ask Sir Paul Callaghan. He will tell Mr English what is true and what is not true. National has cut research and development. It has cut the skills programme. 
National members say we have to save more yet after 2½ years of a National Government it has no plan for saving. Except for the fact that National closed down New Zealand Superannuation and is not contributing to it the only thing that is keeping the books afloat at the moment is the return on things like the Superannuation Fund and State-owned enterprises. Yet the Government has stopped funding superannuation and it wants to sell off State-owned enterprises. 
The Government does not care about what Kiwis think. Two to one Kiwis are telling this National Government that they do not want to sell the assets that generations of New Zealanders have built up. Selling the assets is bad for Kiwis and it is good for foreign investors. The foreign investors will laugh all the way to the bank. 
Hon Maurice Williamson 
: Who sold Telecom? 
Hon PHIL GOFF 
: Mr Williamson interjected. He worked for Air New Zealand. National said that selling Air New Zealand would be good for the country. It was run into bankruptcy. Labour learnt and never sold a single asset in the 9 years it was in Government. But this National Government will sell it off. National sold off New Zealand Rail to its mates Mr Fay and Mr Richwhite and they asset-stripped it and ran it into the ground. They bought it cheap and sold it for too much. We needed New Zealand Rail back for an infrastructure programme. 
National has learnt nothing. It listens to nobody. It does not listen to New Zealanders when they say they do not want those assets sold. It does not listen to the hundreds of New Zealanders who are writing to me every week about the Marine and Coastal Area (Takutai Moana) Bill and saying they do not want it. Those New Zealanders tell me that it is not what National promised. People who have been card-carrying members of the National Party have been absolutely betrayed by a Government that has broken its word and is acting just to retain its power with the help of the Maori Party. New Zealanders are fed up with that sort of arrogance. This Government has failed and on 26 November this Government will go. 
Hon BILL ENGLISH (Minister of Finance) 
: 
 Mr Goff’s speech was enthusiastic but almost all of it was wrong—just simply wrong in fact let alone wrong in analysis. His speech showed what the public know which is that Labour still does not understand the mess it made of the New Zealand economy when it was in Government particularly from 2004 onwards. Although the earthquake is a very significant and humanly tragic event it will not knock the Government off course in rebuilding and rebalancing the economy towards some kind of sustainable strong growth that raises incomes raises people’s opportunities and now assists with the rebuilding and reconstruction of Christchurch. 
I will talk about just a few things on which Mr Goff was wrong. I am interested in Labour’s rapidly developing theory about skills shortages in Canterbury. Apparently Labour’s skills strategy anticipated the earthquake. Apparently if one has the right kind of plan it includes things like earthquakes. There will be issues about getting sufficient skills in Canterbury but I think the story of skills development in the next 12 months will reflect what has happened in the past. Back in 2006 and 2007 there were skills shortages because we were in a housing bubble. There were massive increases in debt and massive increases in credit. New Zealanders were paying an awful lot of money for houses and building lots of new ones all off the back of foreign-lent money. With the global financial crisis that situation turned out not to be sustainable. The building and construction industry then went into a fairly deep recession. It has been propped up by the investment of this Government and long-term infrastructure projects. Some of our major companies have found that 90 percent of their work has been publicly funded work. We have committed billions of dollars to long-term infrastructure investment that has supported the maintenance of those skills. 
As it happens if it were not for the most recent Christchurch earthquake the reconstruction effort after the first one would have been taking off about now. It was pretty obvious that there was spare capacity in the construction industry to pick up that effort. Now that we have had the second earthquake which according to Phil Goff we should have anticipated it is likely that in 12 months’ time all that spare capacity in the construction industry will have been taken up including all the thousands of people who have been made redundant from it over the last 2 or 3 years. It is likely that we may be back into skills shortages. I might say again as an illustration of the difference between Governments that in respect of industry training this Government has had a clean-up. We have taken about $40 million out of that because thousands of people were getting no skills from it and we have put the money into other tertiary places. We have maintained the number of people who are in skills training. That is how that picture is going to unfold. It is part of a longer-term approach that the Government has taken to rebalance the economy and is reflected in the Budget Policy Statement. 
I hope the next speaker for the Opposition will at least demonstrate an understanding of where this economy went off the rails even if they continue to demonstrate Labour’s inability to put together the kinds of policies that will lead to sustainable and strong economic growth in a risky world. We have set out to rebalance the economy because growth under Labour was based on fast increases in Government spending and on excessive debt. That is what grew this economy particularly from 2004 onwards. That is where the 200000 new jobs came from—essentially from the Government sector and the construction industry. As it happens neither was sustainable. That is why all this Government’s policies for the last two Budgets have been and for the next one will be focused on shifting people capital and resources into savings investment and exporting. We will hold back on growth in consumption growth in the housing market and excessive growth in the Government sector. That is how we will get sustainable jobs. That process is being assisted by relatively high commodity prices—in fact very high prices. Unfortunately there have been some headwinds in the process: the Christchurch earthquake would be an obvious one and another would be the ongoing relatively high New Zealand exchange rate particularly against the US dollar the euro and the pound. 
We intend to continue with that plan and we have taken a pretty broad and considered approach. In fact we have picked up a number of the better policies that the previous Government had in place. We have continued for instance to increase the investment in research and development. That is just one example. On the other hand we have discarded other policies. We do not believe in an ineffective Public Service with very large back-office costs. We have shifted the focus to very effective front-line services and we are reducing back-office costs. All of this has to be seen in the context of a New Zealand that is one of the most indebted countries in the world where private sector debt household debt and Government debt have given us a proportion of total liabilities to foreigners that puts us up with Spain Portugal Greece and Ireland. So the focus of economic policy over the next 12 months has to be to absorb the effect of the earthquakes—both of them—plus the fact that households in New Zealand are grappling with reducing their debt and increasing their savings. That has meant flatter economic growth than was expected. We need to deal with both of those adverse circumstances without increasing our liabilities to foreigners. That would increase New Zealand’s vulnerability to all the kinds of problems we see playing out particularly in Europe but to a greater or lesser extent all across the developed world. 
We cannot put our long-term health as an economy and our long-term stability as a community at risk by taking short-term decisions that will push us in the wrong direction. The Government has said a number of times that it intends to absorb the effect of the earthquake in the initial stages through increased debt. That is unfortunate. Our overseas debt levels are already high. The Government in its own balance sheet can absorb that debt but we do not want it adding to New Zealand’s total vulnerability. Then we will work to reduce that debt over time. We will do that in a fair and balanced manner. I think that most New Zealanders understand those circumstances because the things the country is dealing with are exactly the same as New Zealanders are dealing with in their homes in their community organisations and in their businesses. We all have to cut our cloth to suit the new circumstances. We have to reduce debt. That is what the Government is doing and what families are doing. We need to be careful with our spending. That is what all organisations are doing what businesses are doing and what families are doing. That is what the Government is doing. We have to take a long-term view to see our way through these adverse circumstances that have arisen I would have to say a good deal more frequently than any of us might have expected. 
The Government is staying on course. The same issues that mattered before this earthquake matter now. The long-term structural weaknesses of this economy which were exacerbated in the last 5 or 6 years still have to be straightened out. The people of Canterbury want us to do both things at once—that is support them in the short term but also make sure that this is an economy where they and their children can rebuild their opportunities in the long term. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 This is the first opportunity I have had to address the House since the terrible events of 22 February and may I please at the outset take this opportunity to extend on behalf again of our caucus our sincere condolences and our heartfelt support to the people families and businesses of Christchurch. We are making every attempt to keep the tone of our interventions in keeping with this sad time but there are real issues in this debate which are made more pressing not less pressing by the events of the Canterbury earthquake. So it is appropriate to deal with them in this context. 
I wish it were true—in the words of the Minister of Finance who has just returned to his seat somewhere else—that everybody in the country was going through the same thing. It is not the case because some people in this country have been suffering more than others and that is part of the problem. Of course the people of Canterbury have suffered the most of all and our hearts are with them and our resources will be behind them. But that is not the only terrible unfairness that is going on at the moment. Some people in this country have had massive tax cuts and some people in this country have benefited from record export prices. Other people get stressed and depressed every time they go to fill up the petrol tank in the car or get a trolley load of groceries at the supermarket. Their incomes have not risen for several years; they have gone backwards in real terms. Those people are struggling to feed their families in the face of ever-rising prices and a higher and higher cost of living. We are getting to be two New Zealands not one. 
Under National New Zealand is going backwards. National does not have a plan to get our whole economy going and to lift all boats. National is terribly out of touch with ordinary New Zealanders. Those Ministers received their big tax cuts—each better than $240 a week. Someone on the minimum wage received 25c an hour. They received 25c an hour in the latest adjustment to the minimum wage. There is nothing fair about that. Someone earning a $1 million a year received $1000 a week back in tax and the country had to borrow an extra billion over 4 years to fund it. In the process the Government has been mortgaging our children’s future. Not only has it cut funding for research and innovation but it has refused to contribute to the New Zealand Superannuation Fund. Ironically that is about the only fund that is driving the Government’s books back towards balance at a very difficult time. The fund is up $3.47 billion. That is the very fund that the Government refused to pay into. The Government is stealing from tomorrow to make short-term tax cuts for people who do not need them today. That is not right; it is just not right. It was not right before the earthquake and it is certainly not right now. 
Before going into the symptoms and the causes of those problems can I just again note the double talk that we are getting from the Minister of Finance about the legacy that the Government inherited. He said in December 2008 that the Crown’s books were “left in reasonable shape” that the Labour Government had saved for a rainy day. What did reasonable shape mean? It meant that we were in credit to the tune of 4.7 percent of GDP by the time the assets of the New Zealand Superannuation Fund were taken into account—net credit. We have a net Crown debt now above 20 percent of GDP and rising. But that is on the current Government’s watch not the previous Government’s so let us be very clear about the historical legacy. If the Minister was being fair in December 2008 why can he not continue to be fair about it now? 
Of course we regret the events that have happened to the country beyond anybody’s control and we must pull together to address them. But the way to do that is to have a plan that provides a way forward for all New Zealanders and not just some. National is not working for every New Zealander’s family and every New Zealander’s future. Labour will give New Zealanders a fair go and make sure that everybody pays their fair share. We will protect the assets that have been built up by generations for our future and for our children. 
The raw truth is that the New Zealand economy was going backwards well before the earthquake hit. The Budget Policy Statement shows that even before the earthquake the economy was heading in the wrong direction. In the third quarter of 2010 growth was minus 2 percent. We checked with Treasury this morning and its latest estimate of growth in the fourth quarter was zero percent if not negative. Everybody is now saying that the first two quarters at least or probably most of 2011 will be negative. We are in another recession. This is not the global financial crisis recession; this is National’s recession. It has been in power for 2½ years and it is solely responsible for the policy framework that has driven us backwards. 
What is the essential error in National’s plan? Well firstly it does not have a plan. Secondly such actions as it has taken have taken from some who could not afford to give and given to others who did not need to get and borrowed in the process. That brings us to the great debt deception that has been exposed by the earthquake. The Government said in its Budget Policy Statement that this debate reviews that the country’s international debt was so high that it would have to cut new spending from $1.2 billion to $0.8 billion in order to balance the books—that Government debt was the problem. That flies in the face of the truth which is that 90 percent of New Zealand’s high international debt was not Government debt; it was private debt. It was private debt that was built up by people borrowing to bid up each other’s house prices and make their bankers rich—bankers like the Prime Minister. 
Borrowing for housing speculation made this country at risk. When that was happening what was Bill English saying? He is an expert on housing. He was saying: “Tax cuts.” That would have inflated the bubble more and it would have prevented us from building up a Government surplus for a rainy day which he at least had the grace to acknowledge in December 2008. If we had followed his advice then we would be in a worse position now with less in the kitty to fund the earthquake recovery and less to cushion us from growing international debt. 
The second part of the deception is this: if it was a priority on 21 February to cut Government services and maintain tax cuts in order to pay down debt why is it that after the earthquake the whole cost can be put on to international debt and that once again those who could afford to spread the cost are immune? Why is it that the wealthier New Zealanders those on very high incomes who got the bulk of the windfall in the 2009 and 2010 Budget tax cuts are immune from any revision of the tax rates that would help spread the cost? 
Why is it that it is now OK to put what we cannot save straight on to international debt which was the very thing a month ago that the Minister was railing against even though it would mean fewer doctors fewer nurses fewer policemen fewer firemen and fewer people who would be there in the process? 
What did the Minister say to the Finance and Expenditure Committee? He said to public servants: “Don’t dish up waffle. Go and find a new job.” Those were his words and they were precisely the same public servants who have come up trumps—come up trumps—in the response to this tragedy. I ask where we would be without a professional Public Service with the very people whom this Government was running into the ground to fund its tax cuts. It is a great great shame that it has taken something as tragic as the Christchurch earthquake to prove the untruth that it was all the Government’s fault. It was never the Government’s fault. It was 90 percent private debt because everybody in New Zealand—you and me included—borrowed to bid up house prices and build up private debt. That was the folly. Yes New Zealand is paying for it— 
Hon Trevor Mallard 
: Not me; I live in Wainui. 
Hon DAVID CUNLIFFE 
: —oh well there we go—but the solution to that is not to run the economy down by cutting the Government’s Budget to the point where it cannot be a force for good. 
Dr KENNEDY GRAHAM (Green) 
: 
 As noted by the chair of the Finance and Expenditure Committee in opening this debate this year the Budget has been eclipsed by the Christchurch earthquake. Previously the Green Party has criticised this Government for not putting the environment at the heart of its economic management and that criticism remains. The Green Party has also proposed solutions to the growing levels of inequality in our society. This disaster will only exacerbate those trends. But today we also question the Government’s fiscal responsibility in its response to the earthquake. We do so on four grounds: first the failure to consider raising revenue; second the risk of taking on more and more debt; third the threat of reductions in social expenditure; and fourth the failure to reprioritise infrastructure spending on roads. Let me address each one. 
The first is the failure to consider raising revenue. This Government has decided to take a one-sided approach to responding to the Christchurch earthquake. It has decided to take on more debt and enact spending cuts that will hurt the most vulnerable in New Zealand. Instead of living within our means the Government has decided that future generations will pay for this disaster. This chosen course will expose us to more risk and weaken our ability to respond to further possible shocks in the near to medium term. 
We believe the responsible and smart response to the Christchurch earthquake would take three forms: first to raise some revenue from those most able to pay; second to borrow a little in order to share some of the costs of the rebuild with future generations; and third to reprioritise infrastructure spending but not to cut other forms of Government expenditure. 
Failing to consider new sources of Government revenue to pay for the rebuilding of Christchurch is simply not a smart way to run this economy. The commentators agree on that. Let me cite just one of them. Fran O’Sullivan has come out in support of a levy arguing that by setting the levy at a high threshold the additional tax is unlikely to affect economic growth as high-income earners are currently using their wealth to retire debt not to consume. A temporary levy set at a low rate on high-income earners is unlikely to affect economic growth and could raise up to $1 billion per annum making a meaningful contribution to the reconstruction effort—an effort now estimated by Treasury to be in the vicinity of $5 billion of uninsured cost to the Government. A temporary levy as set out by the Green Party coupled with leaving the corporate tax rate unchanged at 30 percent would raise just over $1 billion per annum. We should share the cost across those who can most afford to pay. A levy is the fairest way to pay for the earthquake and we believe serious investigation of this option should be undertaken. 
Let me address the risk of taking on more debt. Before the earthquake the Government was adverse to increasing debt. This Government rejected a meaningful economic stimulus as a response to the recession due to a fear of a downgrade of our credit rating. Before the earthquake this Government used reducing debt as the rationale for selling State assets. Greater Government debt means higher borrowing costs for all. It also means we face the very real possibility of a near-term credit downgrade the results of which will mean we all pay more for the money we borrow thereby suppressing growth and sending precious resources offshore simply to service the higher cost of risk of lending to “New Zealand Inc.” Fitch Ratings and Standard and Poor’s have put us on a negative credit watch. A credit downgrade means most households will pay for the rebuilding of Christchurch. However none of the additional money that households will pay will go to Christchurch; it will go offshore to international financiers. A levy by comparison will limit the risk of a credit downgrade and ensure all money levied will go directly to pay for the earthquake. Therefore taking on additional debt should be a last resort used only to make up any difference between raising additional revenue and reprioritising infrastructure spending. 
Let me address the reductions in social spending. The Government has indicated that it will cut social spending and use the earthquake as a justification for imposing National’s policy on welfare reform. Rather than asking those most able to afford it to contribute to the cost of the rebuild the Government has proposed cuts to those on Working for Families benefits and cuts to entitlements to students who require student loans to enable them to get an education. The Government is sending a perverse message that students and those with families will have to pay for the rebuilding of Christchurch while those on higher incomes and those without children to support will not. This is not smart economics; neither is it fair. Welfare cuts of the size needed to pay for the likely damage will need to be significant and will affect some of the most vulnerable. The Green Party supports a fair and equitable approach to pay for the rebuilding of Christchurch. 
Fourthly I turn to the failure to reprioritise infrastructure spending on roads. As part of a responsible smart and balanced response to the Christchurch earthquake this Government can reprioritise its current infrastructure spend. It can suspend its massive expansion of motorways—a capital investment programme of $9.6 billion. To date the Government has failed to reconsider its commitment to spend $9 billion on roads outside Christchurch when roads inside Christchurch are twisted broken and impassable. I was on them today. 
By postponing indefinitely the Wellington Northern Corridor project up to $2.4 billion in funds could be redirected into critical infrastructure spending in Christchurch. Transmission Gully is a new motorway project to be built on an active earthquake fault and it has a cost-benefit ratio of 0.36 to 0.5. That means that for every dollar that the Government pours into that motorway 36c to 50c of benefit will result. Such low-quality spending of public funds must now be placed in doubt when our second-largest city has been destroyed. The same can be said for another road of national folly: the $1.7 billion Puhoi to Wellsford motorway extension. As if the current high oil prices are not reminder enough these projects represent an extremely poor quality of public expenditure. The significant amounts of money involved—close to $9 billion in all—need to be redirected to meet critical infrastructure needs in Christchurch. The amount that John Key’s Government wants to spend on motorways alone could rebuild most of my city’s destroyed and uninsured infrastructure twice over. 
Let me turn those four criticisms into four constructive principles. We can call them the principles of earthquake recovery. First the Budget should include a levy. Second the rebuild should be sustainable and the Budget should allocate funding for an environmental clean-up as a result of the earthquake. Third those most able to pay should help the most. Fourth infrastructure spending should be reprioritised. 
The Leader of the Opposition spoke this morning about spending time in Christchurch. He spent 2 hours there this morning and I know he has spent time there on previous days. I have spent almost every day in the field in the suburbs in eastern Christchurch and downtown in the inner city. I know what it is like there. 
The Green Party supported the extension of the state of emergency for Christchurch. The earthquake is a tragedy and we all need to do whatever we can to help the people of Christchurch. There is a lot of work to be done. People need food power toilets and a place to sleep. There is a looming crisis in the east of Christchurch and we must address this as a priority. It does not help that winter is approaching. As we move forward together we must find ways to ensure that the voices of the people are listened to. I have been through most of the city. I have been in the central business district and I visited my office two doors away from the Methodist Mission Church which lies in rubble. I have been up the hills to the south where new homes lie awkwardly broken in two. I have taken Green Party volunteers into the eastern suburbs shovelling the liquefaction doorknocking and delivering food and counselling. 
We know what we must do. Yet that is for the future. For now for the present for this moment we shall remain one in this House. Thank you. 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 On 28 May 2009 I said in this House that this is a Budget of deficit—a deficit of spending a deficit of current accounts a deficit of courage and more important a deficit of imagination. I now realise I got it wrong; I was far too generous to the Government. This country is up the proverbial creek not only without a paddle but in a boat that is quickly sinking. We are running a cash deficit of $300 million a week which will rise dramatically over the next few months and the Government’s response has been to simply sit on its hands. Government members have refused to do the right thing. They are happy to fund reports to hold press conferences and to give speeches thereby doing everything humanly possible to avoid making any decisions that might in any way make them unpopular. I for one am sick of that. 
To be fair New Zealand faces problems that are of a longstanding nature and not necessarily of this Government’s making. But the point I make is that the Government is the Government and it is the Government’s responsibility to fix those problems. If we look around the world we can see a number of inspiring examples of Governments that have had the guts to do what is right to make the tough decisions and they are now enjoying tremendous success. Their economic prosperity has meant that the vulnerable and the old in their societies are looked after. The physically able have access to productive jobs. The sick have access to health care and their children are well-educated. These are the hallmarks of a well-functioning society. 
For many politicians in this House it seems that a vision of a prosperous society is just too difficult for them to fathom. Steve Chadwick made this clear when she said recently that her children had already resigned themselves to earning less in New Zealand than they would overseas. Is that the sort of vision and inspiration we will see coming out of Labour in the future? What a great future and vision she has instilled in her children for New Zealand! 
Instead of looking for reforms that could see us pass Australia many politicians in this House have simply given up. In this speech I do not want to focus on a comparison with Australia. The National Government by rejecting the 2025 Taskforce showed that it in turn does not want to catch Australia. It seems to be too ambitious for the Government. Rather I will look at a country that we should be outperforming in almost every respect: Singapore. Singapore has everything against it. It has roughly the same-sized population as New Zealand it has absolutely no mineral wealth and it could easily fit inside Lake Taupo. In almost every respect we should outperform it. However the reality is that we do not even come close. Let us draw comparisons between the two countries. First New Zealand’s GDP growth in 2010 was under 1 percent; Singapore’s GDP grew by a whopping 14 percent. In 1960 our GDP value was almost three times that of Singapore; in the last 20 years Singapore has raced ahead and will have a GDP value that is three times that of New Zealand by 2015. So in 1960 our GDP was three times that of Singapore; in 2015 Singapore’s GDP will be three times ours. If we look at labour productivity per capita in New Zealand dollars we see that Singapore productivity in 2010 was $182000; New Zealand’s productivity by comparison was $90000. We can see how the gap has grown quickly from 2000 on. 
Why has Singapore been able to achieve such prosperity with no minerals no land and a relatively small population? It certainly did not do it I suggest by giving loans of $43 million out of Government coffers to private television channels. It is because Singapore was willing to make the tough decisions. Government expenditure in Singapore is only 17 percent of GDP—17 percent; that compares with New Zealand’s 43 percent. Its tax rates are also low. The top tax rate in Singapore—and I have a chart here—is 20c in the dollar and that rate does not cut in until someone earns $320000. New Zealand’s top rate of 33c in the dollar kicks in at $70000. The first $20000 of income in Singapore is tax-free which is good for low-income earners and on the next $15000 people pay at a rate of only 2c in the dollar. 
Most important Singapore’s politicians had a vision for the future of their country. They put aside short-term political gains and focused on the future. In short they had the guts to do what was right. They outlined a blueprint of where they wanted to go and they moved swiftly to achieve it. In doing so they left New Zealand in the dust. But that is enough of that. 
What vision should we lay down for New Zealand’s future? The first point is that we should not accept apathy or poverty as many do today. We need new leaders that are inspired and want to do the best for New Zealand not necessarily for their own political parties. We need politicians who are prepared to implement quality reform. At the heart of any successful reform programme in New Zealand we need to achieve a switch from Government delivery to private sector delivery as Singapore did in a whole range of industries. In health for example the Singapore Government spends only 1 percent to 3 percent of GDP; in New Zealand we spend 9 percent of GDP on health. But in every area of the health sector Singapore has better outcomes. Its death rate at birth is only a quarter of New Zealand’s and so it goes on up the scale. People in Singapore save for some of their own health costs and they take out catastrophic cover. They also encourage the best doctors from around the world to come to their country. 
In education the outcomes for the poorest third of its population are extremely high with two-thirds of people in the lowest income bracket in Singapore scoring within the top two-thirds of their primary school leaving examination. 
Only when we in New Zealand are willing to look forward and to devolve control of much of what the Government currently spends on individuals will we deliver solutions for the problems that people on low incomes in particular face. New Zealand has become a nation rife with bureaucracy recklessly determined to reuse the ideas that have failed to solve poverty and other social ills over the last 80 years leading to poor education outcomes and poor health outcomes. But if we always do what we have always done then we will always get what we have always got. Eighty years of political control has achieved a larger welfare budget more people on welfare and barriers for those at the bottom that actually prevent them from getting ahead. It is time that we looked at countries like Singapore and had the guts to implement the types of policies they have implemented. 
RAHUI KATENE (Maori Party—Te Tai Tonga) 
: 
 When the Finance and Expenditure Committee met on 9 February this year the impact of last year’s Canterbury earthquake weighed heavily on all our minds. Discussion with the Minister of Finance included some of the immediate impacts of the quake—for example the need for support for small businesses the inevitable increases in unemployment the cost to the Crown of some $1.5 billion to cover the net costs of the Earthquake Commission and the consequences of $5 billion worth of damage and the associated reduction in economic activity. 
As dire as these impacts are nothing prepared us for the profound cost to the nation that would accrue from the events of 22 February. I stand here today painfully aware that when the committee had its second meeting on the Budget Policy Statement my colleagues from Canterbury and I were immersed in the most catastrophic tragedy of our time a tragedy that will cost us dearly. Best-guess assumptions from Treasury indicate that the total cost of both Canterbury earthquakes will be $15 billion. 
There is no question that we have to factor in the combined effects of these natural disasters on the Government’s finances and the wider New Zealand economy for many years ahead. The Government’s balance sheet plays an important role in the economy including the drive to maintain low overall costs of capital-raising by improving New Zealand’s credit rating and by providing financial flexibility to support the economy in times of distress such as post-earthquake times. We all know and accept that the Government will have to pay for the rebuilding of Christchurch by short-term loans and also giving priority to Otautahi over some other Government spending. 
Some very interesting statements made in the 2010 Investment Statement have particular bearing at this time. Basically the Investment Statement suggests that the Government’s balance sheet can be better managed. It issues some direct challenges to the Government to rebuild its balance sheet as a buffer against future adverse events. It suggests that we must systematically work to reduce the Government’s risk by strengthening the economy and it calls for an approach to sharpen incentives on Government agencies to use existing money well. 
I was heartened by the Minister of Finance’s statement last weekend about committing to an approach that he described as protecting the most vulnerable. He added: “Any spending changes we make will ensure that continues.” That is music to the ears of the Maori Party. The Maori Party entered into a coalition agreement with National with the following commitment: “The Maori Party seeks significant outcomes in whanau ora through eliminating poverty advocating for social justice and advancing Maori social cultural economic and community development in the best interests of the nation.” Those words are as vital now as they have ever been. 
These post-earthquake times have given me an insight into the communities that we might describe as being the most vulnerable and that I will never forget. Over the last fortnight I have walked the streets of Wainoni New Brighton Aranui Bexley and Dallington. Those communities were already vulnerable from low incomes high unemployment and a range of other social and health needs but it has been devastating to see how unprepared so many of our people were for an emergency of such proportions. 
Over the weekend Maori wardens reported to me that as they went door to door they came across a woman who was dehydrated and in 2 weeks had not been visited once. People in the eastern suburbs have had the additional pressure of shops being closed access routes being blocked a lack of petrol and the basic absence of sanitation and water facilities. Some people are getting food grants but have been denied petrol vouchers. Consequently they lack the means to travel across town to get basic supplies for their families. 
We really need to teach our people to look beyond today and to prepare for tomorrow. One of the key issues arising from this crisis has been the need for greater efforts to occur to ensure that our families are self-determining and self-managing. This is where it comes back to the notion outlined in the Investment Statement of getting better value for money through the services provided by the State. This is also where the Maori Party’s leadership with Whanau Ora has been so critical. We believe that one of the fundamental revolutions of our time has been the mobilisation of whanau through investing in whanau to build their capability rather than resorting to dependence on service. 
One of the greatest success stories of our term has been the roll-out of some 25 provider collectives with 158 providers across 10 regions building whanau resilience and independence. I want our mokopuna in our future to benefit from having whanau who are self-managing living healthy lifestyles and participating fully in society. Anyone can rant and rave about what is not being done but the greatest outcomes come from those who actually get up and do. That is why we are so proud of the momentum achieved through Whanau Ora. I have been so pleased over the last 2 weeks to see Whanau Ora in action in Christchurch with Ngai Tahu matawaka and the Maori providers working with Government agencies to support the most vulnerable in our communities. 
Having said that I will return to the Minister of Finance’s words about protecting the most vulnerable. Earlier today the Child Poverty Action Group issued a release drawing attention to research from the University of Auckland demonstrating that many low-income families are unable to afford even a basic nutritious diet for their children. The group called on the Government to help all families better afford nutritious food by extending the in-work tax credit to all low-income families. It is a call the Maori Party supports. 
I did all I could to encourage the Government to consider the elimination of poverty as one goal that could be progressed through my member’s bill to address rising food prices by removing goods and services tax from healthy food as defined by the Ministry of Health. But that is not all we are doing in our determination to make our nation great again by investing in ourselves. The Maori Party is about investing in opportunity and in the optimism all families need to experience in order to be the best they can be. 
On other fronts we have actively campaigned against so-called loan sharks to protect our most vulnerable from paying excessive interest rates. My colleague Te Ururoa Flavell currently has a bill on the Order Paper that focuses on gambling harm reduction the purpose being to provide local communities with more power to determine where pokie machines may be sited and how the proceeds can be distributed. We will continue to apply concentrated efforts to our campaign to lift the minimum wage to at least $15 an hour in our absolute belief that raising low incomes will improve the country’s economic performance while at the same time supporting families. We will as always maintain the vigilance that is needed for any MP worth their salt to be in the House to monitor the policies that are debated to place pressure where pressure is due and above all to come up with ideas worth investing in. 
Protecting the most vulnerable—whether they are families post-earthquake or low-income families struggling to make do—must be the mantra for all of us to apply to every issue debated in Parliament. This is the time for collective responsibility for shouldering the responsibilities of working together to absorb the worst effects of the recession over the past 2 years and for rebuilding and restoring. We must make the best of the lessons we have learnt over this last difficult year and commit to an approach that places priority on environmentally friendly sustainable development on working together to create our communities and on strengthening all our families in order to build our future together. 
DAVID BENNETT (National—Hamilton East) 
: 
 Today we are talking about the Budget Policy Statement. I will first of all start by acknowledging the pain and suffering that our whole country and especially the people of Christchurch have suffered in recent weeks. The Budget Policy Statement debate today has tended to focus on the Christchurch earthquake and on the economic approaches that could be taken to deal with such an issue. It will be a focal point of the Budget no doubt but I think we also need to be mindful that fundamental economic policy does not change. What is right for an economy and what is right for the New Zealand economy will always be the same solution. It is the solution that National along with its coalition colleagues will be promoting through the Budget. It is not the solution that Labour and the Green Party have been trying to promote through this House today. That fundamental debate about economic policy has been crucial to this debate about the Budget Policy Statement today. On the one hand we have heard good solid strong economic policy from National and on the other hand we have heard a distributive slightly communist approach from Labour an approach that went into full-blown communism from the Green members in terms of how to deal with such an issue. 
If we go back to what is good solid economic policy we must look at what we need in order for a strong country to go forward and we need savings and investment. We need a country that saves money that invests in its future that provides for its people so they have the signals and incentives to take advantage of their opportunities and that also provides results so that the country through its tax system can take the fruits of labour and use that money for social distribution. We cannot have social spending without income coming into the Government and that income needs to be promoted. The more we promote that income the more money the Government has to spend and the more social spending the Government can provide. 
It is very simple economics. On the left the equation for economics is that the Government can take more in the first instance before actually letting the economy grow. Those on the left believe that by taking more they can redistribute more. That is a very circular and very cyclical argument in the sense that it keeps on going inward. We have a much more open approach which looks at having a greater economy and therefore being able to provide greater Government spending rather than having greater Government spending at the initial point of contact which cannot grow any bigger because effectively the economy is being strangled. 
That is what Labour did to the economy in our best years. It strangled the New Zealand economy. It put us in recession before the rest of the world. Then on top of that we had a world recession that meant New Zealand had to go through some very difficult economic times. National in coalition with the Maori Party ACT and United Future set about a plan to build this country to be stronger and we were making the first steps to achieving this. Now we have had a natural disaster which nobody could have predicted and which is on a scale beyond any comprehension but it does not mean that we have to change the plan. The plan and the answer will always be the same— 
Grant Robertson 
: You haven’t got one. 
DAVID BENNETT 
: —because that is the response we need to have; it is fundamental economics. Labour says we do not have a plan. That is patently not true. We have a plan that is based on savings and investment and therefore on building a stronger economy. We want growth which will mean that the Government through its tax system will have more money to spend. That is the nature of it rather than Labour’s approach which is just to tax and tax and then hopefully work its way through. New Zealand has a plan. We have a good economic plan. It is a plan that does not need to change as a result of what is happening in Christchurch but we need to be mindful of what has happened in Christchurch. Of course the Budget will consider that in our priorities for spending and there will be some balance between that and the need to increase debt as everybody would expect because such a natural disaster had not been anticipated and could not be anticipated by a country going forward. 
The important approach of how we build an economy is to concentrate on the tradable sector. We do not want to see what happened under the previous Labour Government when the tradable sector shrank in the 5 years from 2005 to 2009 when the non-tradable sector grew by 15 percent over that time and when the previous Labour administration increased its investment in Government administration but not in the way whereby we paid our way in the world. There was a large increase in borrowing by New Zealand. Our debt to the rest of the world increased by about $60 billion to over $160 billion and that blowout in debt put a handbrake on our economy especially in the productive parts of our economy and its growth. We need to change that. We need to get back to a place where we have savings and investment and that is the crucial aspect of what National has been doing over the last year or so. 
We also have to be mindful of the fact that we have large assets within Government portfolios. If we look at what happened with the Budget Policy Statement we see that there was also the 2010 Investment Statement of the Government of New Zealand. This document is new in the sense that we have not had them in the past. It shows the assets the Crown possesses and their potential returns in the formats that have been put together in a booklet. That is a starting point for New Zealanders to look at where their investments are and at what rates of return they get on their investments. That can be a crucial point as we go forward and look at the Government’s role in investing and delivering a stronger economy. 
If we look at that statement we see that the Government holds about $223 billion of assets. We are looking at ways in which that holding can be further enhanced in the sense that there are opportunities for New Zealanders to potentially invest in making our economy stronger and those assets stronger. It is one of the things that we look to do in the future as we work towards providing that savings and investment culture. Just like the tax issue one raised many times by Labour today it is crucial in providing that investment and savings culture. New Zealanders now have the incentives out there to get a good education to work hard and to take advantage of the jobs that are in this country and this region. That income will then come through to the Government through the tax system and we can spend it on social and other spending. 
This is contrary to the Labour point of view which is to keep New Zealanders at low incomes then control their destiny and therefore control Government spending. At the end of the day that will never lead to a stronger country and it will actually lead to a country that cannot manage and deal with natural disasters such as the one we have had in Christchurch. Crucially when we look at the Labour approach we see that it would never enable us to deal with the natural disaster we have had; it would be an approach that would stifle the economy further in these times. 
We need to look at a long-term approach that will grow the economy and provide the way to deal with this issue and also build a stronger future for New Zealanders. That is the crucial part of this Budget and the Budget Policy Statement which will be amended to reflect the natural circumstances that we now have as a country. Effectively the heart of it is the same in the sense that economic policy that is solid strong and effective will be employed in the Budget as we go forward. That economic policy is universal. It is not designed to take into account just one situation; it is a policy that will enable us to provide opportunities for New Zealanders. It will enable this country to grow and through long-term growth we can pay for the effects of natural disasters such as Christchurch’s earthquake. Not only can we pay for those effects but we can grow our economy further so that New Zealanders can have those opportunities and so we can have the prosperity we need in this country to deliver the social services and other assets that people want. 
The Budget coming up this year will be an important one for New Zealand. It will be part of that portrayal of how we deal with economic issues and that is the fundamental debate we have had in this House today. But let us remember that there is an answer that there is a plan and that that plan is the one that can work. The Opposition will try to put out something else that is not a plan that is not an answer and that has failed in the past as we have seen from the previous Labour Government. The choice is quite stark and it is the fundamental choice of economics that this House represents. 
Hon DAVID PARKER (Labour) 
: 
 When the National Government was elected 2½ years ago its members said that they were going to go for broke—go for broke. They were going to close the wage gap with Australia they were going to cause a step change in the New Zealand economy they were going to keep debt low they were going to reduce taxes and they were going to reduce unemployment. Well “go for broke” has proved to be true: New Zealand is more broke now than it was then. National has failed to achieve any one of the promises upon which it was elected. 
Let us take the first one: the wage gap with Australia. New Zealand is going backwards in terms of the wage gap. It is but one example of where New Zealand under National is going backwards. National members promised that they would close the wage gap with Australia. Yet in that respect New Zealand is going backwards. It is growing ever larger—so much so that rather than the number of New Zealanders going to Australia going down it has increased and increased. The Prime Minister of Australia Julia Gillard was here recently and I was embarrassed when she said that Australia really like having New Zealand as a neighbour because we train people really well who then go and work in Australia for decent wages. 
The National-led Government was elected on the promise that it would fix that gap. For the past 2 years Labour members have tried to pin the Government down as to the date by which it will have fixed it. National members will not give us a date by which they will have fixed it so we moderated our request and asked them to at least give us a milestone by which we can judge their performance—to at least tell us a date by which they think they will have stemmed the flow so that the gap between wages in New Zealand and Australia will cease growing wider or at least will get back to the point that it was when they came into office but they will not. The reality is that under National New Zealand is going backwards. 
Until recently National’s literature on its website was promising a step change in the New Zealand economy. Do members remember that phrase—a “step change” in the New Zealand economy? That is another of the things that National members promised New Zealand before the election. They were going to cause a step change in the New Zealand economy. Actually there has been a step change in the New Zealand economy: we have not had just one recession; it sounds like we are in the middle of a second. We have a second recession. We are one of two countries in the Western World to have a double-dip recession. 
This second recession is undoubtedly National’s recession. It is the National Government’s recession it is responsible for it and it was National that promised New Zealand a brighter future. A “brighter future” was another of the phrases that does not really measure up with the duller future that we are now experiencing as New Zealand goes backwards under National. The step change has gone closing the wage gap with Australia has gone and the “brighter future” is very dull. 
In this Budget Policy Statement we have acknowledgment by Treasury that more than two-thirds of the reduction in New Zealand’s forecast relates to events pre-earthquake. Although the Government might say: “Woe is me.” for having to deal with the consequences of the earthquake—and there is something in that—let its members not say that it is the majority of the problem. Two-thirds of the problem pre-dates the earthquake and the tragedy and economic costs that flow from it. 
The reality is that National has done very little to change the way in which the economy operates. National members talked big about their tax switch. They called it a tax switch; that was clever language for changes that increased the proportion of taxes paid by low and middle income people and decreased the proportion paid by higher-income people. The tax switch from income tax to GST for lower-income people makes no difference to them so long as the total amount is identical because they still have to spend all their income. It is effectively still a tax upon their labour whether they pay it through income tax or whether they pay it out of their wages through GST for the things they buy at the supermarket. The only people for whom it made a substantial difference were the top 10 percent of earners who managed to garner 42 percent of the income tax cuts. 
The Government does not have a plan to get the economy going. It has only a very small part of what would be a prudent economic plan and that relates to tax policy. Its tax policy is in the view of the Labour Party wrong because it so disproportionately benefits the very narrow section of New Zealand for whom National plainly governs. But even if we accept that tax policy as being right which we on this side of the House do not it is but a small part of a good economic policy. 
What are the other parts of the economic policy of the Government? We should mention a couple such as the cut to the research and development tax credit which is needed to stimulate the sectors in the economy that will grow exports in non-traditional export areas. We all know that agriculture forestry and fishing are very important sectors of the economy and will continue to be so but growth in those sectors alone will not lift New Zealand’s fortunes sufficiently for us to bridge that gap with Australia. We know that from amongst other things the report by the New Zealand Institute  
A goal is not a strategy 
. The title itself was a flick at the Government for its economic mismanagement. 
We know that in order to grow our exports we have to have exports in new sectors. What did the Government do? It cut the research and development tax credit when virtually every other OECD country has one and most important Australia has one. Given that Australia is our competition for some of this innovative endeavour it is obvious that as a consequence more of that work will be done in Australia than in New Zealand. 
The other major blue on the part of the Government underlines the fallaciousness of the contribution we heard from the previous speaker for National David Bennett that we need more savings. If we look at National’s record on savings through the decades we see that it cut the Kirk savings scheme introduced under Labour. That scheme was designed by Sir Roger Douglas who is now in ACT. National cut that scheme. If we had it New Zealand would be in a similar position to Australia with savings and investment markets similar to those of Australia. The stand-out difference between New Zealand and Australia is the quality of savings and the depth of the investment market. 
What did it do subsequently? The last Labour Government ran surpluses. We ran public surpluses on the Crown balance sheet and we reduced Government debt. Every one of those Budgets was opposed by the National Party. Its clarion call Budget after Budget was: “Tax cuts tax cuts tax cuts! Do not run surpluses!”. If the prior Labour Government had done that New Zealand would be in the position of some of those countries like Portugal Italy and Greece which are having to drastically cut social expenditure at the moment because public debt is so out of control. Instead Labour reduced net Government debt to zero and brought gross Government debt down from 38 percent to 17 percent of GDP. Every one of those Budgets was opposed by National. 
National said that there was an increase in private debt at the time and that is a problem. That is very true. No one in Labour has denied that. What did we do in response? We pushed against it in two main ways. First we ran Government surpluses which were opposed by National and reduced Government debt. 
David Bennett 
: What did you do? 
Hon DAVID PARKER 
: Secondly I tell Mr Bennett we introduced KiwiSaver. He shakes his head because he has obviously forgotten that. We introduced KiwiSaver because we knew there was a problem with increasing private debt. Interest rates were increased through the Reserve Bank independently of the Government—it does that independently—to try to take the top off some of the asset bubbles. We did more than National has done since then to stimulate savings both to take pressure off that burgeoning private debt and to increase the depth of our investment markets. What did the National Government do in return? It cut KiwiSaver. 
It says that the focus of this Budget will be savings. I say to Mr Bennett and other National members that it is 2 years too late. They have undermined savings until now and not many people will be fooled by their rhetoric and belated steps at this point. They are out of touch with Kiwis. Costs are going through the roof. Living costs are up. Ordinary Kiwis cannot afford their power bills. Those members are putting them at risk by flogging off State-owned enterprises which will put further upward pressure on power prices. New Zealand is going backwards. 
The Government does not have an adequate plan for the economy. Therefore the contest at the end of the year is open. The contest at the end of the year is open because people are increasingly recognising that although it might be true that the earthquake has exaggerated New Zealand’s economic problems National is the cause of them. 
Debate interrupted.