Brash Don: Debate on Budget Policy Statement 
Brash Don: Debate on Budget Policy Statement 
[Volume:606;Page:4010] 
Dr DON BRASH (NZ National) 
: 
 The Budget Policy Statement is a requirement of the Fiscal Responsibility Act. It is one of the very good policies put in place in the 1990s which I am pleased to see the present Government has continued to have in place. It does not really stop a Government from doing anything it wants to do so it is not anti-democratic in any sense. However it does require the Government to be quite transparent and honest about what it is doing and what its intentions are. It provides a very important discipline on Governments. A Government cannot introduce a policy and say that it costs only $10 million if in fact it will cost $50 million $100 million or $200 million in the next 2 or 3 years. This statement is a very important policy and I am delighted that this Government is continuing to issue such statements. 
In the document the key priorities of the Government over the next little while are set out and I want to speak to two of them today. The first one—in fact the one listed first on page 5 of the document—states: “A key focus for the Government is building the conditions for enhancing New Zealand’s sustainable economic growth rate and moving back into the top half of the OECD in terms of per capita income.” It does not state when that objective will be achieved and as my colleague Mr Bill English said recently it is not at all clear that on present policies they will move up at any point although 2049 may be a possibility. 
But I want to report that every single submitter from the business sector who appeared before the Finance and Expenditure Committee to comment on this statement expressed grave concern that the Government’s policy fell a long way short of delivering on its own announced goal of raising living standards and the trend growth rate in New Zealand to get New Zealand back to the top half of the OECD. They wanted to see some attempt to reduce the company tax rate and to flatten the personal tax scale—as the Government’s own specialist tax advisors the McLeod committee recommended. They wanted to see a serious attempt made to reduce the costs of excessive regulation in areas like the Resource Management Act and so on. But there is no indication at all either in this statement or indeed in other documents put out by the Government that it has anything planned in this area at all. 
The Minister of Finance has suggested that if he can reduce taxes next year those tax cuts will be used again to redistribute wealth rather than create more wealth—as if the income tax structure were not already very progressive indeed. I said in this House last night that a person earning $25000 a year with a dependent spouse and two children under the age of 13 pays less than $27 a year in income tax after family tax credit and so on is allowed for. Someone earning four times as much on $100000 by contrast with the same family circumstances is paying more than 1000 times as much—not four times as much not 40 times as much but more than 1000 times as much. So the tax structure is currently penalising the people who are most likely to invest to take business risk and so on. The Minister proposes to exacerbate that situation in any tax cuts he can afford next year. 
Is it any wonder that the Government has abandoned its own goal and reneged on its commitment to get New Zealand back into the top half of the OECD by 2011? The growth projections underlying the December Economic and Fiscal Update are for steadily reducing growth over the next decade. The highest growth rate in the decade projected by Treasury in this document is the growth rate in this year—the year we are now in. 
David Cunliffe 
: They are not forecasts. 
Dr DON BRASH 
: Well I think I know the difference between a forecast and a projection. I have been working in this territory for a while. Certainly they are not forecasts of what will happen this year next year or the year after but Treasury is saying that at this stage there is no evidence at all that per capita growth can exceed 1.5 percent per annum. The reason that growth is projected to decline is that the workforce is expected to grow at a slower rate so that we get about 3.something growth this year and a 2.1 percent growth at the end of 10 years. There is no evidence at all of an increase in the trend growth in productivity and frankly at 1.5 percent we will not climb up the OECD ladder very quickly. 
The second key priority in this document which I want to speak about briefly is to support a productive and cohesive society. That is also clearly a very important objective indeed. Well at the Finance and Expenditure Committee we had a number of submitters before the committee expressing concern as Mr Donald has said about the increase in child poverty. What does the Budget Policy Statement do about that? The statement is based on the assumption that there will be a steady increase from this point on in the number of those on a benefit. In 1975 those on the domestic purposes benefit numbered 17231. In 2002 that number had increased by 532 percent to 108980 and the Budget Policy Statement is based on the assumption that there will be an additional 4000 people on that benefit in 2007. 
In 1975 those on the invalids benefit numbered 9414. In 2002 that number had increased by 586 percent to 64603. The Budget Policy Statement is based on the assumption that there will be an additional 17000 people on the invalids benefit by 2007. We have had no great war involving New Zealand since 1975 we have had a decline in the road toll since 1975 but we have had a 586 percent increase in those on the invalids benefit—in 27 years—and we are projecting in this Budget Policy Statement a further substantial rise in the number of people on that benefit. 
In 1975 those on the unemployment benefit numbered 2894. In 2002 that number had increased by over 4000 percent to 123067 and the Budget Policy Statement is based on the assumption that there will be an additional 9000 people on that benefit in 2007. 
Ron Mark 
: They are all Labour voters. 
Dr DON BRASH 
: That may explain it. The story is similar for the sickness benefit though I will not read out all the numbers. The total number of people on those four benefits—invalids benefit sickness benefit domestic purposes benefit and unemployment benefit—has increased from 37369 in 1975 to 333262 in 2002. It is projected to rise further to 371000 people of working age by 2007. These figures do not include national superannuitants; they include just the people on those four benefits. It seems to me that there is something fundamentally wrong in a system that creates that number of additional beneficiaries particularly at a time when the economy has been very buoyant indeed. It has been very buoyant not may I say from any particular policy that this Government has put in place but because of the reforms of the 1980s and 1990s the very low exchange rate we had until recently and of course good export prices. I ask members how that increase in people on benefits is supporting a productive and cohesive society.