Groser Tim: Budget Debate 
Groser Tim: Budget Debate 
[Volume:655;Page:4289] 
Hon TIM GROSER (Minister of Trade) 
 The Budget strategy was a judicious blend of economic and social responsibility. Just before I try to analyse that strategy let us just confront for the first time the uncomfortable political fact that the Labour Opposition has sought to disengage the public’s attention from. Before anyone started to talk about the international economic meltdown this country was already technically in recession. In other words before any of the severe international economic problems started to attract the attention of policy makers 9 years of a Labour Government had reduced New Zealand to a state of recession. This country was already in a weakened state before it had to confront the realities of the worst economic downturn since the Great Depression. 
When one looks back at the history of the previous Government one sees that this is quite some political achievement. When Labour came into power it was the golden weather. New Zealand had uninterrupted productivity growth from the last 3 years of the 1990s and it had the best terms of trade for 25 years. One thing Labour could do fabulously well was spend. Labour members are world champions at spending. Core Government spending in Labour’s 9 years went up from $32 billion to $60 billion—almost a doubling of the spend. But if that Government was good at spending it was very poor at saving New Zealand from being one of the very few countries in the world that was technically in recession before the international downturn hit. 
We can track the severity of that downturn just by looking at the operating balance before gains and losses statistics as they came through over a period of about 12 months. In May 2008 we were $1 billion in surplus. If members track those statistics forward to the pre-election fiscal update in October they will see that we were already $1.7 billion in deficit. Three months further on the deficit had mushroomed to an estimated $4.1 billion. That really illustrates the growing severity of the situation this Government inherited and had to deal with with a sense of economic and social responsibility. It got worse. By May the deficit had exploded to an estimated $7.7 billion. The deterioration of the accounts unprecedented in recent times indicates the magnitude of the challenge facing this Government as Mr English the Minister of Finance framed his first of what I think will be many Budgets. 
That was if you like the broad macro-fiscal setting facing this Government as it set about the task of putting down a Budget strategy for New Zealand that would ride out the rough edges of this recession for disadvantaged people. That is precisely what we mean by showing social responsibility. The Government also showed a great sense of economic responsibility by putting up a strategy that would on the one hand protect New Zealand’s credit and on the other hand start to address some of the long-term economic challenges that are still there under the surface. When we have dealt with this recession—and we truly hope we will be out of it within the next 12 months as we are starting to see not just in New Zealand but internationally the curve going upwards—we will still come back to having to face those challenges. 
On the social side let us just rehearse some of the simple statistics. We had $3 billion in extra health spending and amongst the many highlights of that I instance 800 new health professionals. I recall—and I stand to be corrected about this because the number is simply extraordinary—that 56 reports were compiled on shortages in the health sector labour force; I believe 56 was the number. We have done something about that. We have allocated 800 new health professionals. The Budget covers that. We have put in the money to open 20 new surgery theatres. So against this background of very difficult economic conditions and of New Zealand already being in a recession and hit with this double whammy of experiencing the deepest recession in the global economy since the 1930s the Government has still managed to find the resources to upgrade our health sector. That is what I mean by showing a sense of social responsibility. 
Let us look at education. There is $1.6 billion for new spending in education including $523 million—almost half a billion dollars—either for new schools or for modernising existing schools. There is half a billion dollars to attack that deficit. We have put in $70 million to extend early childhood education in a number of different areas. That is precisely why we talk of this Budget as being socially responsible as well as being economically prudent. 
Then we start to address the deficits of the previous Government in respect of justice and crime. Spending has been allocated for the provision of 600 new police officers with a large number of— 
Hon David Cunliffe 
: What happened to Vote Conservation? 
Hon TIM GROSER 
: Does the member want to talk about Vote Conservation? There will be $54 million of savings over 4 years. It will be $100 million more than the budget for conservation has been as recently as 2007. Unlike that member’s Government we are demanding productivity from our public services and we will get it. The Department of Conservation vote will be managed with prudence and a greater attention to productivity without letting down any of the essential conservation objectives. 
Let me return to the central thesis. In respect of the deficits in the area of justice and crime there will be not only 600 more police officers with a large majority of them in some of the most troubled areas of New Zealand but there will also be 246 more probation officers. That is the sort of signal if you like of a Government that fully understands the social dimension of the challenge facing New Zealand. Consequently the Government has put up a series of initiatives that addresses these issues in a very concrete and practical manner. 
I will now turn to the other side of the coin in terms of the economically responsible approach that has been taken to the Budget. All that the Opposition could talk about was the size of the stimulus as if somehow in some crude way it was a case of the bigger the number the better the result. Actually that approach to public spending would have left New Zealand in a very very difficult situation in terms of having fragile financial markets. Instead what this Government has done is first of all provide a very moderate economic package. Overall net spending was actually increased by $2.9 billion or if we look at spending over the 4-year stream by $5.8 billion—so much for the “slash and burn Budget” which is what we heard from people who wrote their speeches before reading it! This was decidedly not a slash and burn Budget and it would have been totally inappropriate to put forward such a Budget given the downturn and given the need for the State to use its balanced book to cushion the impact of the recession on New Zealanders. That is why we took this responsible economic approach. 
The issue of international financial markets was absolutely central to framing the Budget strategy of this country. The fact remains that this country is still vitally dependent on its credit standing and still requires unfortunately very large inflows of private capital. People do not lend people money with the intention of seeing it go down a tube. If the risk profile of New Zealand had gone up we would have ended up paying even more in terms of interest rates. On every householder’s mortgage we would have seen the practical impact of this. Every small business struggling to find a way through this recession would have had to bear the cost of even higher interest rates but for the fact that this Government took a highly responsible and balanced approach to its economic planning for the Budget strategy. As a result of that as we all know I think it is correct to say that New Zealand is the only country that in recent months received an upgrade in its credit rating. 
Investing in the long term is another feature of this Budget. It would not have been sufficient for this Budget to just manage the short-term macroeconomic impact of the recession. We also had to increase spending to address the crucial infrastructural deficits of the last 9 years and that is exactly what we have done.