Douglas Roger: Taxation (Annual Rates and Budget Measures) Bill — In Committee Third Reading 
Douglas Roger: Taxation (Annual Rates and Budget Measures) Bill — In Committee Third Reading 
[Volume:672;Page:18950] 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 I think it is worth asking the Minister of Revenue to advise the Committee whether he is confident that Treasury has its predictions right. More particularly if Treasury’s predictions are wrong what does that do to the Budget and what does it do in terms of New Zealand’s credit rating etc.? 
I have had my staff look at recent predictions made by Treasury and those predictions do not give me a lot of confidence. If we look at Treasury’s predictions of GDP we see they are all in the band between slightly higher than 1 percent and 4 percent. I have here a graph showing the actual GDP line. We are being told in this Budget that growth will be up near 4 percent initially and then will tail off. That is one side of the ledger and one has to feel that Treasury predictions of growth and wage growth in particular are pretty high. But if we look at Treasury predictions of core Crown expenditure from 2005 through to 2010 we see that the one consistent factor is that every year the predicted expenditure is lower than the actual. It is lower by an average of 6.8 percent which is about $4 billion. So if the predictions are wrong again this year we will have a deficit of $20 billion. Treasury is actually saying that over the next 2 or 3 years Government expenditure will not go up by the $4 billion to $5 billion that it has been going up by each year; it will go up by only 1.4 percent. 
This graph shows us the difficulty we have. It shows the amount of growth consumed by Government spending. The green line shows the increase in nominal expenditure and another line shows the increase in Government expenditure over 3-year periods. We get to a stage where the Government— 
Hon Pete Hodgson 
: It is not a zero-based graph. 
Hon Sir ROGER DOUGLAS 
: It is the actual nominal. We are talking nominal. 
Hon Pete Hodgson 
: I am saying that the graph does not start at zero. 
Hon Sir ROGER DOUGLAS 
: It starts at 1999-2000 and it is in 3-year periods. But members should look at the next 3 years. We are led to believe that nominal GDP growth will be 23 percent but guess where we have been told Government expenditure will be? At 1 to 2 percent. If someone believes that I think that person will believe almost anything. 
If I look at the numbers in the back of the book I see that for example Vote Corrections expenditure went up over the last 4 years by $350 million. We are told that in the next 4 years it will actually go down by $3 million. Maybe that is right; maybe that is wrong. But some of these estimates seem to be fairly tough. It we look at primary education in the last 4 years we see that expenditure has gone up by $630 million and student numbers have gone down by 4000. In the next 4 years student numbers will go up by 25000 but expenditure will go up by only $100 million. 
So all I am asking is how confident the Minister is that he has it right both in terms of revenue and in terms of expenditure. I am not particularly confident given that if we look at every year from 2005 through to 2010 we see that Government expenditure every year has averaged 6.8 percent more than the estimate and that GDP growth has been lower than the estimate by a considerable amount. How confident are we? If we get it wrong both on lower revenue and on higher expenditure then we have some very real difficulty.