Brash Don: Budget Debate 
Brash Don: Budget Debate 
[Volume:631;Page:3208] 
Dr DON BRASH (Leader of the Opposition) 
: 
 Helen Clark and Michael Cullen clearly believe there is a place for tax cuts—it is called Australia. This is the “Bondi Budget”. I move  
That all the words after “That” be omitted and the following inserted: “this House has no confidence in this Labour-led Government because for 7 years it has demonstrated a lack of vision and a lack of the policies to transform New Zealand into a high-income high-growth nation and has instead wasted the opportunities provided by buoyant international conditions by overtaxing New Zealanders and wasting billions of taxpayers’ dollars on low-quality spending programmes 
.” 
This Budget is not only incredibly boring as Michael Cullen promised but also profoundly disappointing. It will almost certainly be Michael Cullen’s last Budget and would certainly be if there were anybody else in the Labour caucus who could do it better. But Sue Moroney is not quite ready yet and Mark Peck has gone. Last year’s Budget was rightly dubbed the “chewing gum Budget” I think by the man who said he would never accept the baubles of office. He is not a man whose opinion I normally take seriously and the people of Tauranga clearly came to that conclusion last year also. But in calling last year’s Budget the “chewing gum Budget” he was right. It provided 67 miserable cents a week in 3 years’ time. 
This year we have the “brain drain Budget”—the “Bondi Budget”. Helen Clark and Michael Cullen want our grandchildren to be cheering for the Wallabies. There are two questions that should be asked about any Budget—what it does and what it says. Firstly what does it do? On the tax side of the ledger of course the Budget does absolutely nothing. It does nothing for hard-working Kiwis and nothing for New Zealand businesses. There is no recognition that Labour’s tax revenues have risen by 50 percent since the year 2000 twice as fast as the inflation rate over that period. There is no recognition that operating surpluses have totalled $28 billion over that period and are projected to be $14 billion over the next 3 years. There is no recognition that almost all Australians—certainly all those earning less than $180000 a year—now pay less tax in Australia than they would if they were paying tax in New Zealand. There is no recognition that added to the higher pre-tax incomes in Australia the ongoing tax reductions in Australia and the total failure of this Government to cut taxes in New Zealand the Budget will still further increase the incentive for New Zealanders to cross the Tasman. There is no recognition that the net outflow of Kiwis to Australia has more than doubled in the last 2 years—10000 in the year to January 2004 16000 in the year to January 2005 and 21000 in the year to January 2006. 
Over the last 7 years Michael Cullen has happily raised any number of taxes—personal taxes petrol taxes cigarette taxes road-user charges you name it. Only vigorous public opposition led by the National Party prevented the Labour Government from also raising a health tax a methane tax and a carbon tax. He is still thinking about a payroll tax. Which taxes has he lowered? Not one. Not a single one. Michael Cullen has made it clear by words and actions that he does not believe that New Zealand will ever be in a position to lower taxes and thus provide better incentives to hard-working Kiwis. The Budget surplus will never be huge enough for him to even consider letting hard-working Kiwis keep a little more of the money they earn. 
Six years back our company tax rate was the same as it is today—33 percent. Six years back that was lower than the company tax rate in the OECD on average. Now the average company tax rate in the OECD is 30 percent and continuing to fall. Now we are above the average. It is very clear that Michael Cullen has no intention whatsoever of reducing either the company tax rate or personal tax rates. 
 Australia embraces tax cuts—$45 billion of tax cuts were announced in its Budget last week. They are endorsed by the Australian Labor Party with Kim Beazley describing them as modest and overdue. Michael Cullen rules out any tax cuts. He simply does not understand that if New Zealand is to provide the high-quality health-care we all deserve the high-quality education we want for our kids and the high-quality infrastructure we need if the economy is to grow and prosper New Zealanders themselves must have the incentive to get ahead under their own steam which means removing the punitive tax rates and the heavy-handed rules and regulations that are the hallmarks of this Labour Government. 
Michael Cullen talks as if reducing taxes would be gifting money to taxpayers—as if tax revenue is first and foremost the property of the Government. The reality is the reverse. Hard-working Kiwis earn income and that belongs first to those who earn it. Government should take no more than is strictly necessary to fuel the ship of State. Reducing taxes is not a sign of Government generosity. Had National won the election last year it would have had an early Budget to ensure that tax rates and thresholds were reduced from 1 April this year. By the end of this parliamentary term 85 percent of all taxpayers would have faced a tax rate no higher than 19 percent. We would not have had police officers and experienced teachers facing the top tax rate. 
What does the Budget do on the spending side of the ledger? Well Government spending goes on and on much of it to minimal effect. We all know about the twilight golf and the radio singalong courses and the incredible waste in the tertiary education sector when Steve Maharey was in charge. We all know that Government spending on health has increased substantially in recent years. But we also know that that vast increase in spending has bought almost nothing. The number of operations has barely changed at all in the last 6 years. Many tens of thousands of people sick in pain and very often frightened are on waiting lists even after thousands have been culled from those lists on Pete Hodgson’s instruction and Treasury says that there is so little information on this sector that it is impossible to tell whether or not money is being sensibly spent. This is a monumental scandal. 
We all know that spending on new prisons has blown totally out of control. Yes we need more prisons and National does not accept Damien O’Connor’s proposal of simply letting 30 percent of the prison muster go home. But it is surely a national disgrace that the budget for building four new prisons should have been exceeded by $490 million with huge amounts being spent on consultants and consultations and an extraordinary $11 million on landscaping the new prisons. 
We all know that scattered throughout the Government is a huge amount of spending which is not only of limited value but is also of negative value. I tell Phil Goff that it is positively counter-productive. Take for example the $13 million allocated for a school programme designed by the Parliamentary Commissioner for the Environment to promote learning and education on sustainability. This programme actually advocates reducing GDP per capita reducing living standards and forsaking economic growth as a goal because otherwise we face planetary collapse. National certainly cares about the environment about clean air and clean water and about protecting our native fauna and flora but we do not see reducing living standards as having any part in our policy programme. 
More generally we would make sure that the money taken from taxpayers to ensure that Government services are provided where and when they are needed is spent with the same care with which taxpayers spend their own money. 
What else does the Budget do? Let me talk very briefly about the unbundling of the local loop prematurely announced as the result of the most serious leak in New Zealand Budget history. Every person who understands the extraordinary power of the Internet wants New Zealanders to have faster and cheaper access to the Internet. The National Party absolutely shares that desire. For that reason we will support the unbundling legislation as least as far as sending it to a select committee so that the proposal can be considered on its merits and on the basis of hard evidence. We will be particularly interested to hear the views of the Government’s own Telecommunications Commissioner who so far at least has opposed unbundling; perhaps he has changed his mind. We will certainly weigh all the evidence carefully. 
Most of the rest of the Budget’s so-called initiatives are simply a reclassification of existing programmes. 
So much for what the “Bondi Budget” does. What does it say? First it states that growth in the current year will be only 1 percent. By contrast the Australian Budget expects Australia to be steaming ahead at over 3 percent. Over the next 3 years Michael Cullen forecasts the New Zealand economy to grow by less than 7 percent in total; Peter Costello expects Australia to grow by 10 percent. 
A few weeks back the Government Statistician revealed that productivity in the two-thirds of the economy for which output can be measured accurately had picked up markedly since the late 1980s but it had slowed again quite sharply since the year 2000—and we should not be surprised at that. This Government prides itself on doing a whole lot of things that bit by bit erode the potential to improve productivity. What does this all mean? It means that the gap between average after-tax incomes in Australia and average after-tax incomes in New Zealand—20 percent in 1999 33 percent last year—will keep on growing. It is not at all unrealistic to expect that gap to be 40 percent or more by the time this parliamentary term is over. 
The survey by the Swiss organisation IMD published last week tells a similar story—in 1 year New Zealand dropped from 16th to 22nd place in its survey of competitiveness and Australia improved from 9th to 6th place. We all remember Helen Clark coming into office in 1999 with a great fanfare and promising to lift New Zealand into the top half of the OECD within a decade. Well now she no longer talks about achieving that objective within a decade; indeed she does not put a deadline on the objective at all. It is just something she aims to achieve over time which at least is more honest because on current policies and current trends Helen Clark has much more chance of becoming Secretary-General of the United Nations than she has of getting New Zealand into the top half of the OECD in one decade or indeed even in three decades. 
Hon Bill English 
: That’s her real ambition. 
Dr DON BRASH 
: That could well be her real ambition as my colleague Mr English points out. 
New Zealand has not moved up one place in the OECD rankings since Labour came into office. The only hope of getting New Zealand into the top half of the OECD within a decade would be if the OECD widened its membership to include a whole bunch of low-income countries. The OECD already groups New Zealand as a low to middle income country along with Hungary South Korea Portugal Greece Spain and the Czech Republic. It does not have to be this way. With the right policies and the political will New Zealand could move up the international league tables again and once again be a country where our children choose to live and build their homes. 
This Budget confirms that Labour has given up the fight. Tragically for New Zealand this Labour Government has coasted along on the back of strong export prices low interest rates and a strong inflow of people after September 11. It has been redistributing income certainly but it has been doing absolutely nothing constructive to increase incomes. Indeed this Government does not even understand how to increase incomes and it continues to send all the wrong signals to hard-working New Zealanders. The Government says to people: “Want to get ahead under your steam? If you’re a family breadwinner on the average wage we’ll take more than half of every extra dollar you earn off you. Think you can save up to send your kids to university? You’re nuts! We’ll give them interest-free money to encourage them to start life with a big slug of debt.” 
The tragic reality for New Zealand is that Helen Clark and Michael Cullen are interested only in their own political survival. They are not interested in New Zealand’s future. Last year Treasury provided them with a great set of recommendations to speed up our growth rate. Michael Cullen dismissed Treasury’s advice as an “ideological burp”. Treasury advised Michael Cullen that KiwiSaver would not materially change the amount of saving New Zealanders do and that it would do nothing to reduce the balance of payments deficit. The Institute of Economic Research told him that KiwiSaver would redistribute wealth but do nothing to create it. Again Michael Cullen simply ignored their advice. I have not seen what Treasury’s advice was on Labour’s student loan bribe—and I do not need to. No rational policy maker would have argued for such a blatantly political bribe. I do know that Treasury estimated that the cost of that bribe was much greater than Helen Clark claimed before the election. 
This Budget lacks urgency and it lacks vision. Instead of boosting the economy’s capacity to grow it focuses on redistributing what we currently have. New Zealand’s economy needs to be more competitive and productive and under a National-led Government that is where the focus of the Budget would have been. That means lower taxes which give people the incentive to get ahead under their own steam. That means investing in the infrastructure this economy needs to grow. That means ferreting out waste and low-value programmes in the public sector to ensure that every one of the dollars taken from taxpayers provides good value for money. That means fixing the Resource Management Act so that the investment needed to lift living standards can proceed quickly and efficiently without damage to our environment. It is now blindingly obvious that it will take the election of a National Government to give Kiwis the future they truly deserve.