Cunliffe David: Financial Review Debate — In Committee 
Cunliffe David: Financial Review Debate — In Committee 
[Volume:671;Page:17452] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 It is hard to imagine a fiscal circumstance where this debate of the Appropriation (2009/10 Financial Review) Bill could be more important for New Zealanders because the Crown’s accounts which this debate seeks to discuss will take a hit to the tune of $8 billion to $10 billion from the recent 22 February 2011 and September 2010 earthquakes. That comes against the background of a recession that has gone on for months and months and years and years longer than it should have done and a Government that has revised downwards its growth forecasts and revenue forecasts sequentially at every Budget update and half-yearly update making the budgetary situation worse. In these brief remarks this afternoon I will cover three key points: firstly the fiscal baseline from which this debate springs; secondly important issues to do with the earthquake response and how it is funded; and thirdly the implications for ordinary New Zealanders of the fiscal position and what it means for the rising cost of living and the squeeze on lower and middle income earners particularly. 
On 18 December 2008 the Minister of Finance the Hon Bill English—the Minister in the chair—said: “I want to stress that New Zealand starts from a reasonable position in dealing with the uncertainty of our economic outlook. We have room to respond. This is the rainy day that Government has been saving up for.” He was referring of course to the onset of the global financial crisis. The backdrop to that was that the Labour Government had left the incoming National Government with a net debt position that was actually a surplus to the tune of 4.7 percent of GDP in 2008. There was a net credit position by the time the assets of the New Zealand Superannuation Fund—which the Government has done its best to run down since then—were added to the very modest amount of debt the Government was then carrying despite the urging of the now Minister of Finance to give tax cuts that would have worsened the fiscal position and further inflated the bubble of the preceding decade. That was the starting point. 
It is sad that today’s debate is against the background whereby that relatively sound position has been beggared by two Budgets which have showed no more imagination than firstly the jeopardising of New Zealand superannuation and secondly the delivery of $22 billion over 4 years in tax cuts two-thirds of which have gone to upper income earners who did not need it. 
Hon Parekura Horomia 
: How much? 
Hon DAVID CUNLIFFE 
: Two-thirds has gone to the top third who did not need it and who did not spend it all and from whom it has been lost from the economy. It has been lost from stimulus making the recession deeper and longer keeping people out of jobs and making the fiscal position more difficult in periods to come. 
So it is no surprise to us that the recession has ground on. A little spark of hope in 2009 was snuffed out by our deteriorating position through all of last year with a negative third quarter after a faltering mid-year and with every prospect that we will have zero or very low growth in the fourth quarter—possibly even negative growth. This is not the global recession; this is National’s recession. This is the recession brought on by $22 billion of misdirected tax cuts and the lack of a growth plan. It is a human-induced tragedy fuelled by a lack of planning and a lack of imagination from that Government. 
Then the earthquake hit. That was not the Government’s fault and I think that all members of this House have been at pains to show that we are putting Canterbury first and politics second in respect of the response to that earthquake. Our top priority all around this House has quite rightly been to get resources flowing to Christchurch to stabilise and to support the people of Christchurch and to commence the rebuild. We remain in support of the Government’s broad objectives in that respect. 
But what is disturbing to me is that in the last week in particular the Government’s fiscal response to that earthquake has been all over the map all over the road like a drunk driver behind the wheel of a car. Last week the Minister of Finance told this House that it would be fine for the Government to bear the whole cost of the earthquake response be it $8 billion or $10 billion—roughly half of out-of-pocket infrastructure costs and half of lost tax revenue that has to be made up—all of it on debt none of it on expenditure reprioritisation and none of it on a revenue response be that a levy or a backing off from some of those tax cuts. It was an extraordinary position and our colleague Dr Russel Norman rightly pointed out that it was a highly fiscally irresponsible position. 
There was no surprise then that on Sunday on nationwide TV the Prime Minister confirmed that it was a highly fiscally irresponsible position and he overrode it. He said that we would have a zero new-expenditure Budget in 2011. I ask New Zealanders to pinch themselves for a second. No I tell them they are not dreaming. That is not the ghost of Ruth Richardson; that is a real statement by the current Prime Minister about a Budget that will be the most radical surgery to the public sector that we have known in two decades. Coming in the middle of a recession it is a highly dangerous surgery from which the patient may not recover. It is dangerous because it will suck demand from out of the economy it will prolong the recession it will make tax receipts lower and it will create and produce a doom-loop from which this economy will be lucky to recover before the change of Government. 
It is no surprise that it took the International Monetary Fund to raise the alarm on the ninth floor in order for the Minister of Finance to be overridden on  
Q+A  
on Sunday. The International Monetary Fund is calling the shots in the Beehive not the Minister of Finance. He has been rolled in the last week—absolutely rolled. His “Whack It On the Bill Bill” strategy has been canned by the Prime Minister who has said “No no—we are going to cut the lot to pay for it.” 
What will that mean for ordinary New Zealanders? It means that firstly the Prime Minister is out of touch. He is a man who would have got well over a thousand dollars a week out of his own tax cuts because the man is a man of means. He is a man of independent and private wealth. How did he get there? It was by being one of those fancy-pants money men who brought the world to its knees in the global financial crisis. He was a paper shuffler and a money trader and he took a cool $50 million for himself. 
That is why he is out of touch today with the hard-working New Zealanders up and down the country who every time they go to the supermarket are asking how it is that their trolley of groceries is costing 20 bucks or 50 bucks more than it seemed to cost last week and how it is when they go to the petrol station it is costing them a hundred dollars to fill up a small car with gas—100 bucks. My little Toyota Prius cost a hundred bucks to fill up last week. It broke the hundred-dollar limit for the first time in history. I can afford that; I am an MP on 130 grand. That is not as much as the Prime Minister’s dividends but it is enough to get by. But a hell of lot—in fact about 90 percent—of New Zealanders are on less than that. In fact 70 percent of New Zealanders are on less than the average wage let us not forget. Seventy percent of New Zealanders are on less than the average wage and I can honestly say that I do not know how people are bringing up families with the cost of living rising in the way that it is at the moment and with a Government that does not care. Families that can barely pay the bills and that are dependent on Government support to have low doctors’ fees good-quality public schools and good-quality hospitals have just been kicked in the guts by John Key. He has said there will be no new money in this year’s Budget—ah except for the holiday highway; that is sacrosanct. There will be an exception for new missiles for the frigates; they are sacrosanct. Anything that goes to health and education will come out of something else. It will come out of stuff that ordinary people use because that seems to be the way of the world. 
In the last couple of weeks Steven Joyce has been running around cutting cosy deals with the broadcasting industry in an election year. Shame! I do not care whether he has sold his shares but those deals ought to be a breach of the Electoral Finance Act. He has also done a cosy deal with Telecom to hand the telecommunications and broadband markets back to them on a plate and beggar the rest of the industry. He may know where his bread is buttered but it is on a different side of the loaf from that of ordinary Kiwis who are struggling and finding that with rising rents power petrol and food and with GST on everything things are getting desperate.