Parker David: Regulatory Reform Bill — First Reading 
Parker David: Regulatory Reform Bill — First Reading 
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Hon DAVID PARKER (Labour) 
: 
 As the Hon Lianne Dalziel has previously said the Labour Party supports the Regulatory Reform Bill. I am not sure whether she mentioned it because she was probably a little modest but she was the Minister of Commerce when we as the last Labour Government decided that it was necessary to have an annual Regulatory Improvement Bill which has now had its name changed to the Regulatory Reform Bill—but it is the same beast. Obviously it is always necessary for Governments to look at what is over-regulated what regulations have become outdated or what regulations go too far. As the previous speaker Tim Macindoe pointed out there was a regulation that went too far in respect of the packaging of some products. It was not going to ban all the soap powders or detergents as the previous member suggested but there was— 
Tim Macindoe 
: It would have done if you had put them out of business. 
Hon DAVID PARKER 
: No it would not have. That is just nonsense. No one has ever suggested that we should ban soap in New Zealand. Any member who stands in this House and suggests otherwise is lacking in credibility. What was proposed at the time related to some of those products that were accessible to children. Given that if those children drank them it could cause them great illness there was a need for more child-proof packaging. That was the essence of those regulations: an improvement to child-proof packaging. The drafting of it did go too far and too many things were put on that list. But there was never any suggestion that those products ought to be banned. So the previous speaker is just exaggerating when it comes to that. 
What I would say in respect of the Regulatory Reform Bill is that I find it surprising that we are a country that is languishing in a double-dip recession—and National cannot deny responsibility for the second of these recessions; this recession we are going into is National’s recession—and here we are dallying with the Regulatory Reform Bill rather than actually doing things that are more substantial in terms of resetting the nature of our economy and investments in it. This bill does nothing to address the very poor imbalance in investment in the New Zealand economy. 
Last year we had a Tax Working Group that was set up by the incoming Government. The Labour Party gave it plenty of room; in fact the Secretary to the Treasury came to see the Leader of the Opposition Phil Goff and asked him not to be critical of measures that would affect the resetting of investment in New Zealand. Labour gave the National Government plenty of room to look at things like ring-fencing losses and other taxes. We did not criticise the report when it came from the committee of experts who were appointed by the Government because it contained some good recommendations to try to reset the New Zealand economy towards the export economy. 
New Zealand has a great problem in that we over-invest in areas relating to property. One of the reasons why we over-invest in those areas is that our tax settings encourage it; they effectively give tax advantages to people who invest in property. They can deduct their interest costs their rates cost and their maintenance costs so that their property investment overall makes a taxable loss. That taxable loss is used by many taxpayers to reduce their tax on their other income. By offsetting that loss against their other income they reduce their overall tax. So they make a taxable loss and get tax deductibility for all of those interest charges yet when they make a profit when they sell the property because the property goes up in value they pocket the profit and pay no tax on it. That compares with the rate of return one gets on non - property investments where there is no tax deductibility for the losses. For example if someone was investing in an export-based company that person would not have the tax advantages he or she would get from investment in property. That is one of the reasons why New Zealand over-invests in residential property and under-invests in the export economy. 
We know from figures that have been produced by the Tax Working Group by Treasury and by the Inland Revenue Department that New Zealand has $200 billion of investment in residential rental property. That makes a loss for the taxpayer overall—no net tax is paid on any of that area of investment. Yet the export sector of our economy which also wants investment money to expand its businesses to spend money on expensive plant and equipment and to spend money on export development is competing for funds with the residential properties sector. 
The Government having had all of these recommendations from the Tax Working Group to say that this was one of the most important imbalances in our economy to be fixed for the growth of New Zealand jobs for the growth of our exports and to make New Zealand wealthier—so that we could afford the things we want in health education and our private lives—blinked. It had room to move from the Labour Party and from other Opposition parties like the Greens. It had recommendations from the Tax Working Group it had recommendations from Treasury and it ignored them all. All it did was fiddle around with depreciation rates. It did not ring-fence losses and it took Phil Goff in a speech earlier this year to say that regulatory reform is important and that we need to do these things but that we should really get to the main game. The main game here is to reset New Zealand’s economy away from over-investment in property away from over-consumption towards investment in the productive sector so that we grow more jobs and we have more exports. 
We have had third-party thinktanks like the New Zealand Institute say that this is fundamentally important. Its recent report  
A 
goal is not a strategy: Focusing efforts to improve New Zealand’s prosperity 
 was I thought an implicit criticism of the jingoistic nature of the National Party policy that pretends that we are going to catch up with Australia that pretends we will have a step change in the economy but then does nothing substantial to achieve that end. That report noted that New Zealand needs to expand the breadth of its exports. Again we heard Bill English in the House today say that we need to expand the volume of our exports. I took that to be a reference to our existing sources of exports: primary produce forestry and the like. They are very important but they alone are not going to grow our economy sufficiently. We need to grow the breadth of our exports so that we have more jobs for people—well-paying jobs so that we can have the lifestyle that people have in Australia; and of course bridging the earnings gap between Australia and New Zealand which is what the Government said it was elected to do. 
This Regulatory Reform Bill falls under the heading of the little housekeeping things that we need to do to keep the country running efficiently and we do not disagree with the things that are being done as a result of it but the fact is that the Government has failed to take the initiative on the more important steps to reset New Zealand’s economy. The fact that it has failed to take any measurable step to improve New Zealand’s savings—in fact the steps that it has taken to date have actually taken us backward on the savings route—stands in stark contrast to what it is doing with this bill which although important compared with those more important things is trifling. 
This Government is being increasingly exposed as being bereft of ideas to grow our economy. As a consequence we are dipping into a second recession—National’s recession. It cannot blame anyone else for this but its own management or mismanagement of the economy because it has not had the gumption to do what needs to be done to reset the signals in the economy. If we contrast that with the policy that Labour has already announced Phil Goff in a speech earlier this year said that Labour would tackle the overinvestment in property by ring-fencing losses on residential property investment which would in part go some way to pay for a tax-free exemption for every taxpayer so that the first so many dollars of their income would be free of income tax. 
This Regulatory Reform Bill does so little to grow our economy. It will have an effect but the effect in terms of the macroeconomic effect will be minuscule—it will be absolutely minuscule. We heard Government members say when they came to power that regulatory reform was one of their key causes of change in the New Zealand economy. They pretended that changes to the Resource Management Act and change to regulations like this would somehow drive the economy forward and achieve the step change in the economy that they promised. That was the language they were promising—a step change in the economy. Indeed as late as last year they were saying in their publications that National sought a step change in economic performance. In February 2010 they were saying that. 
If we go through all the National material now we see that National members have completely dropped that language. They no longer talk about a step change in the economy; they have given up on that aspiration. They have stopped talking about bridging the wage gap with Australia and instead we are left dealing with the Regulatory Reform Bill here today which is really tinkering with things at a time when more active management is needed by the Government to reset the economy towards exports in a way that would stop the droves of people who are increasingly going to Australia because they lack the employment opportunities and wages that they want here in New Zealand. 
This bill is supported by Labour but we lament the lack of a credible economic plan from the Government.