Calder Cam: Debate on Prime Minister’s Statement 
Text is incorporated into the Bound Volume 
Calder Cam: Debate on Prime Minister’s Statement 
[Sitting date: 12 February 2013. Volume:687;Page:7722. Text is incorporated into the Bound Volume.] 
Dr CAM CALDER (National) 
: 
 As the World Economic Forum came to a close a few days ago in Davos IMF chief Christine Lagarde enjoined the Governments of the world to remain focused. She counselled countries to adopt the “do not relax” principle. The IMF forecast is for very fragile and timid growth for 2013 based on nations making the right decisions. One could argue that the international system is undergoing a generational transformation. Although some speakers’ minds at Davos seemed to be eased by the US’s stepping back from the fiscal cliff in my mind the step was more of a soft-shoe shuffle if not a sidestep. 
The US remains on the brink of a chasm. Despite an extension in a few short months the Department of the Treasury runs out of legal authority to borrow. Failure to raise the so-called debt ceiling would force the US Government to default on its obligations and force immediate cuts equivalent to almost 6 percent of GDP. This could easily drive the US back into recession. Is there cause for alarm? In the summer of 2011 the Republicans were solipsistic and cavalier in using the threat of default to extract concessions from President Obama and the Democrats. As a result one credit agency stripped the US of its AAA rating adding roils of further and largely unnecessary stress to the foundations of the already shaky global financial system. If petty politics pertain in the US we could be in for more of the same. 
Some economists at Davos expressed some optimism regarding China as its economic slow-down seems less serious than a year ago but challenges remain as there is a shift in focus from an export-driven economy to one that relies on domestic consumption. China’s vast reserve of cheap workers is dwindling rapidly and it will not be very long before China’s demographic dividend is spent. 
Although Mario Draghi of the European Central Bank is trumpeting 2012 as the year that the troubled single currency was relaunched deep systemic failures—fault-lines—run beneath the surface of the eurozone. Rising unemployment a growing social disconnect declining competitiveness and the fundamental tension between integration and sovereignty in times of austerity are becoming more and more evident. 
This principled pragmatic Government is making the prudent financial decisions necessary to weather the ongoing economic turbulence. No Government has a magic wand to wave and no Government can change things overnight. However our balanced approach of economic stimulus combined with deficit reduction is working and working well. It is worth reiterating that it attracted a ringing endorsement from one of US President Obama’s financial advisers Peter Orszag who was Obama’s director of the Office of Management and Budget until 2010. He singled out New Zealand as the model sans pareil for its balanced approach to the deepening international debt crisis. 
 New Zealand is the only country in the world that has “coupled additional stimulus with medium-term fiscal consolidation.” Just last week the international credit agency Moody’s in its latest credit analysis of New Zealand said the country’s AAA Government bond rating reflected “high economic strength very high institutionalised and government financial strength and low susceptibility to event risk.” That is sound recognition of this Government’s strategy. 
A society is judged by how it treats its most vulnerable. This National-led Government has borrowed to cushion vulnerable New Zealanders from the sharpest edges of the recession at the same time as maintaining strong financial discipline. As a result the New Zealand economy is performing better than that of the US Japan countries of the eurozone such as Germany and France and also the UK. We have focused on growth that is sustainable and is built on higher savings and earnings rather than ever increasing debt. 
How have we worked to protect the most vulnerable? Around $2 billion of borrowing over the last 4 years has been used to protect and grow public health services. This has contributed to the improved health services New Zealanders are seeing every day including free doctors’ visits for children under 6 years 35000 more New Zealanders getting elective surgery each year than 4 years ago and record numbers of patients being treated in emergency departments within 6 hours. But it is not only that—hugely increased numbers of our children are being vaccinated and we are aiming to do even better. We are increasing the target for infant immunisation rates to 95 percent of 8-month-olds being immunised with three scheduled vaccinations by 2017. 
We regard the incidence of rheumatic fever in some of our communities including the vibrant and diverse community of Manurewa where I have my office as unacceptable. We are investing $24 million and have set ourselves a target of reducing the incidence of rheumatic fever by two-thirds by 2017. Delivering better services to the public is one of our four key priorities. Our public services are steadily improving their effectiveness to get the most out of every health dollar. 
Attending a global health forum last year I met many delegates who were complaining that their Governments were cutting health spending. By contrast New Zealand’s public health service is doing extraordinarily well. In 2009-10 while other OECD countries were reducing health spending New Zealand had a 3.4 percent increase in real health spend—the third-highest of 27 nations. This is possible only through prudent financial management and building a strong and competitive economy. 
New Zealand is a trading nation. Building a more competitive and productive economy for New Zealand provides the resources necessary to protect the vulnerable in society maintain the rule of law provide high quality public services—some of which we have just mentioned—look after the environment and provide opportunities for our young people. Trade is our lifeblood. About 2 weeks ago the OECD and the World Trade Organization launched a new database of Trade in Value Added. This new data estimates trade in value-added terms which helps convey the interdependence of global value chains and reveal who ultimately benefits. 
New Zealand is especially well connected to global value chains in agriculture and the food sector. The OECD estimates that 81 percent of New Zealand exports’ value is created domestically. This is higher than the OECD average of 72 percent and reflective of both our geographic distances from market and the importance of agricultural products to our exports. As the Minister of Trade Tim Groser pointed out this database provides an important reminder that imports are vital to production of exports. About one-third of New Zealand imports of intermediate inputs are used to produce goods and services that are then exported. 
Now that we can quantify the contribution of imports to value-added exports it becomes clear that any barrier to imports in turn becomes a barrier to our exports and to our firms engaging internationally. Countries must ensure that business can access world-class inputs at competitive prices if they are to be productive and reap the benefit from global value chains and trade. The economic shamans and rune readers on the left constantly cry out for intervention to force the dollar down. One is reminded of King Canute—the cri de coeur from the economic sans-culottes is never accompanied by any explanation of how this may be achieved without ruinous inflation. It betrays a touching faith in the manifest abilities of our National-led Government that they believe us capable of doing so. 
It is worth knowing that Australia receives the bulk of our manufactured exports and the New Zealand - Australian cross rate has never been more favourable in the last 10 years. Obviously a strong kiwi dollar can provide a headwind to some New Zealand exporters but also depending on the proportion of imported inputs to the goods and services can be an aid to exporters. We constantly need to remind ourselves that companies like Apple Toyota and indeed Fonterra did not achieve their global success through selling goods cheaper than anyone else. 
The strong dollar has had other consequences. We ran a $486 million trade surplus in December—the largest trade surplus recorded for the December month as a percentage of exports in 21 years. The surplus is due in part to the costs of imports coming down because of the strong New Zealand dollar. Taking out the big one-off items and adjusting for exchange rate imports were actually up 7 percent in the December quarter. This of course suggests our economic recovery is continuing and we may be in for a pleasant surprise; an increase in the 0.4 percent Reserve Bank forecast when the December quarter economic growth figures are released. 
World dairy prices have improved in the December quarter and export prices are turning up which augurs well for 2013. A healthy growing sustainable economy allows us as I have mentioned to provide a safe secure environment in our communities high-quality public services and the opportunities for our young people to unlock the potential and creativity that lies within them all and to protect the most vulnerable—in other words a brighter future for all New Zealanders.