English Bill: Debate on Budget Policy Statement 
English Bill: Debate on Budget Policy Statement 
[Volume:653;Page:2065] 
Hon BILL ENGLISH (Minister of Finance) 
: 
 The previous speech shows why no one is listening to the Labour Party. Eventually when those members have been in Opposition long enough they will realise that it is not all about them; it is about what the country requires. 
Hon Members 
: Oh! 
Hon BILL ENGLISH 
: I am offering free advice based on experience. What is so striking about Labour Party members is that they are more arrogant in Opposition than they were in Government. They are still struggling with the reality that having run all their conspiracy theories for a whole year backed by the whole machinery of Government they quite decisively lost the election. I think it will take them some time yet to adapt to that reality. In the meantime the rest of the country is getting to grips with one of the most— 
Hon Darren Hughes 
: This is so 2002. 
Hon Chris Carter 
: Yes—remember 2002? 
Hon BILL ENGLISH 
: I do and that is why I am giving the advice. If they do not take it they will repeat the same experience—that is the point. Labour will get rid of Phil Goff and then there will be no leader until Andrew Little turns up—and man will they be fighting then! Who will keep order when Helen Clark and Dr Cullen are gone? Nobody. There is no one to keep order in the Labour Party once Helen Clark and Dr Cullen are gone. 
Hon Anne Tolley 
: Cunliffe. 
Hon BILL ENGLISH 
: Oh the most popular member of the caucus the Hon David Cunliffe! Yes he will do it. In the meantime the rest of the country is focusing on the very considerable economic challenges that New Zealand faces. 
This debate is about the Budget Policy Statement. As we talk about the Budget Policy Statement I want to take people back to the 2008 Budget. The 2008 Budget set down a foundation that made the Budget Policy Statement pretty difficult to put together. I remind the House about what happened in the 2008 Budget. It showed a couple of things. Firstly the 2008 Budget was when New Zealand switched from surplus to deficit. In the 2008 Budget the Government forecast $13.5 billion of cash deficits over the forecast period. That meant that the New Zealand Government would have to go out and raise $13.5 billion in debt. 
The 2008 Budget also showed that the current account deficit was running at about 9 percent. As I noted in question time this is one particular failure of the previous Government. Labour came into office in 1999 saying that the Budget deficit at the time—which was about 5 percent of GDP—was so bad. It indicated that the previous 15 years of economic policy had failed and that Labour would fix that. By the time the previous Government left the deficit had doubled. Why does that matter? It means that of all the OECD countries apart from Iceland New Zealand has more need to borrow money in overseas markets. Anyone who has been following any kind of media in the last 6 months knows that those overseas markets are volatile unpredictable and in a state of turmoil. 
That is the main vulnerability of the New Zealand economy as we head through this recession. So that leaves New Zealand with two chronic deficits. One is the current account deficit the other is a fiscal deficit and I remind the House and the Opposition that these were as plain as day in the 2008 Budget. Then when the global financial crisis turned up in September and October the Labour Government had to put together a Budget Policy Statement against the background of that vulnerability. Along the way we had the pre-election fiscal update which actually forecast a decade of deficits. 
So as the previous Government left office it did not leave the accounts in surplus as it likes to claim. It left us with forecasts of 10 years of deficits and we know from events since then that that decade of deficits did not include the $300 million of accident compensation liability that that Government had hidden from the New Zealand public. So the fiscal outlook has been deteriorating since the 2008 Budget and I have to say that with the impacts of global recession we are likely to see further deterioration in the fiscal outlook over the next few months. Those two things are signs of the major shift that the New Zealand economy has to make. 
It is now apparent that the growth of the last decade has been to a large extent driven by debt and that that debt has been used largely on consumption. The switch that the New Zealand economy has to make is a move away from debt-driven and consumption-driven growth. That option will not be available so we need to move to export-driven and investment-driven growth. 
Hon David Cunliffe 
: Hear hear! 
Hon BILL ENGLISH 
: The member who is saying “Hear hear!” was part of a Government that made that problem worse particularly with its strong uplifts in Government expenditure. 
Hon David Cunliffe 
: Rubbish! 
Hon BILL ENGLISH 
: If he does not believe that Government expenditure was getting out of control I will give him a very simple fact. In the 2005 year the Government spent $44.8 billion and by 2008 that had risen to $62.4 billion—in just over 3 years. 
There is absolutely no choice for the current Government—we will not be able to increase spending at anything like that rate over the next 3 years. We have had debt-driven and consumption-driven growth and the expansion of Government and now we are going through an adjustment process—largely forced on us by the rest of the world—where we have to move to growth that is based on savings investment and exports and we have to do this at a time when international markets are particularly volatile. 
So the Government has a two-pronged attack on this problem. The first prong is the one that seems to bother the Opposition particularly and that is our commitment to protecting New Zealanders from the sharpest edge of recession. We do not believe that we can roll the recession back—we do not believe that the waves that are coming at us from the world in coordinated recession can be rolled back. That is why the Government has rolled out a series of measures such as the ReStart programme for people who have been made redundant the 9-day fortnight the bringing forward of infrastructure spending and the tax cuts on 1 April to help to protect people from the sharpest edges of recession in the short term. 
Of course what goes with those measures and what goes with protecting entitlements is a pretty rapid increase in public debt and that is the measure of the extent to which the Government is committed to maintaining entitlements and protecting people from the sharpest edges of recession. We have to gear up now to start getting ready to pay back the debt that is being incurred as we speak. Public debt is likely to double in the next 3 years. Every dollar we are borrowing now will have to be repaid with interest and that is why we have a longer-term plan to lift the productivity of the economy and to get this economy into top gear as it comes out of recession. 
We have announced for instance a significant programme of regulatory change all of which are designed to lift business confidence to give businesses the opportunity to invest and most important to fulfil this Government’s ambition to replace every job that is lost. We cannot retain the jobs that are being lost now but we can make every effort to replace those jobs as this economy comes out of recession.