Groser Tim: Debate on Budget Policy Statement 
Groser Tim: Debate on Budget Policy Statement 
[Volume:645;Page:14855] 
TIM GROSER (National) 
: 
 For a little over 8 years now we have had to live with a political fiction this Government has been promulgating to New Zealanders. That political fiction could I guess be expressed in different ways but it generally takes the form of arguments that we have never had it so good and that the Government has a coherent strategy for dealing with New Zealand’s long-term structural issues. I think it is apparent and not just to people who spend their entire lives in this Chamber watching politics 24/7 that this is becoming a bit threadbare. I think it is abundantly clear that other New Zealanders are also regarding it as threadbare. If the members of the Labour Government cannot sense there is a mood for change out there I think they are living in a parallel universe. 
It is not hard to understand why there is a mood for change. Let us just survey briefly some of the principal internal and economic factors bearing down on the state of the country and on what should be shaping the Budget in the next few weeks. I mention first of all the growth picture. We now have anaemic growth. The Reserve Bank is saying that it will be 2 percent but the risks will be on the downside. Translated from the jargon that means essentially 2 percent at best. On the inflation side it is the other way around. It is above the band with the risks on the upside meaning in plain language that it is already outside the band of acceptable behaviour and it is likely to be worse. 
We have falling productivity. I think that this is the single largest issue facing New Zealand. Paul Krugman the great American economist said: “Productivity isn’t everything you know.” Then he corrected himself and said: “It is almost everything.” We have falling productivity which is a crucial issue facing this country. 
We have the highest interest rates in the developed world. That is not some minor academic point; it feeds through into the actual pockets of New Zealanders. When this Government took over in 1999 it took 41 percent of the average wage to buy the average house on the median New Zealand income using standard mortgage tables. That was a pretty hefty amount but just manageable. We now have the second least affordable housing in the developed world. It takes 81 percent of the median wage to service the average price on a standard table mortgage basis. 
On top of all this is the statistic of real concern about the outflow of New Zealanders—75000 of them last year 80 percent of whom were under the age of 40. We have about half a million New Zealanders in Australia and 1 million New Zealanders in the South Island. About 50000 of them have gone to Australia. If we do not arrest this departure it will mean that more New Zealanders will be living in Australia than in the South Island in about 10 years’ time. We should just think about the implications of that politically for the sustainability of this country. 
In external terms—well we had excellent weather economically in the first 5 years of this 3-term Government but the picture is becoming uncertain to say the least. There is division of opinion amongst experts internationally on this but quite clearly we are in a very difficult situation as the subprime crisis feeds its way through the world economy and as the possibility of a US recession sits out there. Talk about the end of the golden weather! This is a very much less benign environment for New Zealand with those internal statistics to be looked into. So it is not hard to understand why the public senses that a change is needed. If the Labour members of the House cannot sense that they are living in a parallel universe. 
I know it is very unfashionable to use rugby clichés this year but I will go ahead and use one anyway. 
Chris Auchinvole 
: Go on! 
TIM GROSER 
: I will; thank you colleague. I think when the history of this 3-term Labour Government is written it will literally be a tale of two halves. The first half is the period from late 1999 to—well we could argue about this—probably late 2004 when the Labour Government was playing with a stiff and favourable breeze behind its back. Labour inherited power and had an arrogant cocky “we won you lost” attitude with the ideological disposition to deny the reasons why so much wind was in the sails of the New Zealand economy that it inherited. 
Hon Member 
: It was all their good. 
TIM GROSER 
: Yes—apparently New Zealand woke up one day with a Labour Government in power and everything turned rosy! That is unbelievable political fiction when we know for example—off the top of my head and going back to my favourite point about productivity—that the average rate of labour productivity growth in the 3 years from 1997 to 2000 was 3.5 percent. That was absolutely stellar and had we been able to maintain that type of labour productivity growth particularly with rising participation rates coming through in the labour input side this country would indeed be moving back into the first half of the OECD. 
So we had the first half with the wind behind the Labour Government’s back but the second half has not been so rosy. The Government has sat there and milked the economy for everything it could with essentially mediocre policy frameworks and nothing I would argue that was absolutely disastrous or catastrophic. I do not use adjectives like that to describe Labour Government policies which are much more akin to “death by a thousand cuts” material. The chickens economically are starting to come home to roost and politically I believe they will well and truly come home to roost in a little over 6 months’ time. 
All of this has of course been masked by forward-looking rhetoric. Those members who have followed the debates over the last 9 years will remember that firstly we had the knowledge wave economy. What could be better than the knowledge wave economy? We then lost track of that so we got into the growth in innovation framework—the “GIF” framework. I remember that inside the bureaucracy we could get any type of expenditure through the system as long as we said it was part of the “GIF” framework. Then that fell by the wayside and we had economic transformation as the latest clothing we were asked to wear. And now we have sustainability. We cannot have a statement from the Prime Minister that does not have sustainability mentioned any less than 24 times in a 10-minute speech. I do not have any problem at all with any of that rhetoric—it all sounds like the right stuff—but what is it backed with? 
I was pleased to hear Rodney Hide refer to our leader John Key’s speech today. In the middle of John Key’s speech there was a statistic that I think is truly awesome: in the 8½ years of this Government there have been 250 strategy documents. All of them are beautifully written with polished pictures of happy Kiwis riding bikes through the pine tree forest—you name it it is all there—but it is absolute rhetoric. They are not worth the dust now covering them on the bookshelves of Government departments throughout Wellington. I must say that Wellington is having a golden time in terms of rentals if one happens to be lucky enough to own a commercial property here. But I am afraid that the first half of the summer is well and truly over. The summer of very favourable external and internal economic conditions—we had stellar productivity growth just at the point of political change and high economic growth from 1992 onwards with inflation falling dramatically and unemployment falling dramatically—is all turning a little bit darker now in its second half which I would argue started in late 2004 or perhaps in early 2005. 
I have to worry a little bit about a couple of things that happened last week in our political debate. I thought that the happiest man in New Zealand politics last week was Michael Cullen. He was partly happy because he discovered a deficit for the first time. Given the restructuring of the New Zealand financial accounts it would be easier to find a yeti in the Himalayas than to find a deficit in the New Zealand fiscal envelope. But Michael Cullen finally found his yeti last week—he found a deficit. 
Jacqui Dean 
: A hairy monster! 
TIM GROSER 
: It was quite a hairy monster really. It was called “OBERGAL”. Just when we were getting used to “OBERAC” along comes “OBERGAL”. They sound a little bit like the names of Viking maidens but then we know that the Labour Party likes Scandinavian myths. In fact these are accounting identities. I was very pleased that Peter Dunne understands how irrelevant this mythical deficit is when it is to be used as a metric for the fiscal envelope for tax cuts. Actually Peter Dunne understands perfectly how irrelevant it is because when we strip out the revaluations as a consequence of the collapse in world equity markets through this subprime crisis we find there is not a deficit at all and there is still scope for proper comprehensive reform.