Key John: Debate on Budget Policy Statement 
Key John: Debate on Budget Policy Statement 
[Volume:623;Page:18898] 
JOHN KEY (National—Helensville) 
: 
 That was the Labour member for Otago Mr Parker—who is otherwise known as quite an intelligent member I think—reading out the speech prepared for him by the Labour research unit. Mr Parker did not believe that speech. He was shaking his head when he was reading much of it out and he will be shaking his head later on when he reads his  
Hansard 
 record. 
But I want to correct one small thing for Mr Parker which he raises sometimes at the Finance and Expenditure Committee—that is the issue around New Zealand’s going further back in the OECD and Australia’s moving ahead. He talks quite a lot about that period as being in the early part of the 1990s when Don Brash was Governor of the Reserve Bank. In one sense he is factually correct: Don Brash was Governor of the Reserve Bank and it is true that New Zealand slipped further down the OECD ladder. Of course what Mr Parker conveniently forgets is that all economies have lags and leads. There is quite a long lag effect when an economy the size of New Zealand’s is being restructured. We were one of the most closed economies in the world prior to 1984. Then the Roger Douglas - David Lange Labour Government of 1984 and the subsequent Jim Bolger Government of 1990 did an awful lot of reform work but that took some time to flow through. Mr Parker who as I say is a very intelligent member knows full well that it would take some time for that to flow through to the economy. 
I turn now to the Budget Policy Statement and I will make a few statements on that. The first is that the Government has been having a fine old time in the latter period of this debate talking about how it should be taking credit for the strong economy we are going through at the moment. Of course the economy has not been any stronger in the last 5 years than it was in the 5 years prior to that. It has been growing at around 3.7 percent for the last decade. That is nothing new actually. [ 
Interruption 
] Basically it has been exactly the same. 
What has been changing though—and I think this is a point that Labour would be well advised to have a bit of a look at—is what is causing the growth in our economy which is that the growth is consumption-led. New Zealanders owe a lot of money. They are up to their necks in debt now. That is what is happening. They have remortgaged their houses. They do not have any money because Dr Cullen spends it for them so they have had to get out there remortgage their houses and draw down on their credit cards. 
We will be producing some quite interesting information for the House in the next few weeks that I predict will show the level of indebtedness this country has. [ 
Interruption 
] Absolutely. That has led off the higher house prices that people have been able to draw down their mortgages on but it has very little to do with anything the Government has actually done. 
The message we should be getting from the Budget Policy Statement is quite clear: Michael Cullen is going to do a “Rob Muldoon”. He will come before this House on Budget day and say that he has spent the lot. There will be no room for tax cuts because he will have spent the lot. That will be the message from Dr Cullen. He will spend every dollar available to him and any New Zealander who thinks that he or she may be getting a tax cut when Budget day comes around is sadly misguided I am afraid. Despite all the attempts that Helen Clark tried to make through spin doctors when she gave her Prime Minister’s statement earlier in the year despite putting up former Cabinet Minister John Tamihere to tell the public that yes there really would be a corporate tax cut and despite Michael Cullen telling the media on several occasions that he would not be ruling anything in or ruling anything out Michael Cullen came with his tail between his legs to the select committee and told us that it was one thing or the other: either he would spend the money or he would give the corporates of New Zealand a tax cut and spend the money. 
There will be no tax cuts on Budget day. The message from Dr Cullen will be that he has spent the lot. He will say that he has spent it better than we could spend it because he knows what is right and this Budget will be the corporate equivalent of what the last Budget was when Labour said: “We’ll tell you how to spend money. We’ll tell you what’s right for you.” But in terms of New Zealanders making choices for themselves that will not be happening under this Budget. 
 Another thing that will happen on Budget day is that the Minister of Finance will come to Parliament and say to the people of New Zealand that he is the only New Zealander who understands the operating balance excluding revaluations and accounting changes—the only New Zealander intelligent enough to understand the term he created—which he told the public would be the right way to measure the economy. We are running the largest surplus on an operating balance excluding revaluations and accounting changes in New Zealand’s history—$7.4 billion and it is going up. 
Dr Cullen knows exactly what that means. It means that he is overtaxing the people of New Zealand and because he is now unable to get his message through—that somehow his spending is not enough and that there really is room for tax cuts—he is trying to recreate the wheel and invent a new title. Last week we saw a sort of thinly veiled attempt at that when he released some data on the available cash position and that will be what he will argue for in the coming weeks—that somehow New Zealanders are not bright enough to understand that an operating balance excluding revaluations and accounting changes of $7.4 billion means there is room for tax cuts. 
Peter Brown 
: How much? 
JOHN KEY 
: A $7.4 billion surplus is what the Government is running and yesterday it announced an increase in petrol tax of another $200 million a year. The message from Dr Cullen is that the Government does not have enough money. There is a $7.4 billion surplus but we are all thought to be so stupid that the only person who can understand it apparently is Michael Cullen. 
When one funds one’s capital programme it is a very interesting strategy. I suppose that Michael Cullen will tell New Zealanders that they should be looking at their household budget on an available cash basis as well—in which case very few of them will be buying houses or doing any repairs on them of any sort whatsoever. It is to do with intergenerational fairness which is an issue when a road is built that might last 50 years but it then has to be paid for by one generation in 1 year. I find it quite astounding. 
Dr the Hon Lockwood Smith 
: It’s naive. 
JOHN KEY 
: That is exactly right; it is naive. 
I want to turn to Dr Cullen’s spending history because it makes quite interesting reading for someone who tells us he is a fiscal conservative. He came to Parliament with a $6 billion spending cap in the 1999-2002 period and he could not keep to that cap. He broke it and spent a touch more than that—about $6.1 billion. He said he would get rid of the cap because it was a rather annoying thing to have some sort of control on his spending. And away he went; the horse was well and truly out of the barn at that point. 
So over the last 3 years Dr Cullen will have spent an additional $12.7 billion—a hundred and something percent increase on the term earlier—and all projections show that spending will increase by dramatically more than that going forward into the next term. If Labour gets another term it will be spending something like $14 billion $15 billion or $16 billion in additional spending. 
New Zealanders probably would not mind that additional spending if they could sit down and watch their TV sets at night and see evidence of how good a quality that spending was. But every night when they turn on the television they are faced with yet more horror stories of where their hard-earned taxpayer dollars have gone. They have seen spending in community education in wanangas and in some tertiary education areas where the quality has been so poor that the completion rates have been 30 percent. Yes we have to invest massively in upskilling New Zealanders—and a future National Government will absolutely be doing that—but that is not a licence for some individuals in New Zealand just to go out waste money and not deliver performance for the taxpayer. 
We are not seeing a Government that is building on the strong economic conditions of the last decade in order to future-proof New Zealand for future economic growth. We are not seeing investment made in infrastructure in any meaningful way at all. We are not seeing solutions to the energy crisis that New Zealand is going to suffer. We are not seeing New Zealanders able to keep a fair day’s pay for a fair day’s work. We are not getting people to see the benefits of rising wages because that benefit is stolen from them through inflation and fiscal drag and through being dragged up into higher tax brackets. We all know the stories that one in four secondary school teachers in New Zealand now pay the top rate of taxation and that the number of policemen paying the top rate has gone from 13 percent 3 years ago to 39 percent now. 
I predict the next Budget in large part will be very much what we have seen in the past—tax and spend from a Labour Government a Labour Government that will have spent the lot. There will be no tax cuts; it will be another very disappointing Budget. The only people cheering on Budget day will be Labour Party caucus members who will be told by their senior whip that if they do not cheer their future careers will be limited.