Parker David: Debate on Budget Policy Statement 
Parker David: Debate on Budget Policy Statement 
[Volume:670;Page:17065] 
Hon DAVID PARKER (Labour) 
: 
 When the National Government was elected 2½ years ago its members said that they were going to go for broke—go for broke. They were going to close the wage gap with Australia they were going to cause a step change in the New Zealand economy they were going to keep debt low they were going to reduce taxes and they were going to reduce unemployment. Well “go for broke” has proved to be true: New Zealand is more broke now than it was then. National has failed to achieve any one of the promises upon which it was elected. 
Let us take the first one: the wage gap with Australia. New Zealand is going backwards in terms of the wage gap. It is but one example of where New Zealand under National is going backwards. National members promised that they would close the wage gap with Australia. Yet in that respect New Zealand is going backwards. It is growing ever larger—so much so that rather than the number of New Zealanders going to Australia going down it has increased and increased. The Prime Minister of Australia Julia Gillard was here recently and I was embarrassed when she said that Australia really like having New Zealand as a neighbour because we train people really well who then go and work in Australia for decent wages. 
The National-led Government was elected on the promise that it would fix that gap. For the past 2 years Labour members have tried to pin the Government down as to the date by which it will have fixed it. National members will not give us a date by which they will have fixed it so we moderated our request and asked them to at least give us a milestone by which we can judge their performance—to at least tell us a date by which they think they will have stemmed the flow so that the gap between wages in New Zealand and Australia will cease growing wider or at least will get back to the point that it was when they came into office but they will not. The reality is that under National New Zealand is going backwards. 
Until recently National’s literature on its website was promising a step change in the New Zealand economy. Do members remember that phrase—a “step change” in the New Zealand economy? That is another of the things that National members promised New Zealand before the election. They were going to cause a step change in the New Zealand economy. Actually there has been a step change in the New Zealand economy: we have not had just one recession; it sounds like we are in the middle of a second. We have a second recession. We are one of two countries in the Western World to have a double-dip recession. 
This second recession is undoubtedly National’s recession. It is the National Government’s recession it is responsible for it and it was National that promised New Zealand a brighter future. A “brighter future” was another of the phrases that does not really measure up with the duller future that we are now experiencing as New Zealand goes backwards under National. The step change has gone closing the wage gap with Australia has gone and the “brighter future” is very dull. 
In this Budget Policy Statement we have acknowledgment by Treasury that more than two-thirds of the reduction in New Zealand’s forecast relates to events pre-earthquake. Although the Government might say: “Woe is me.” for having to deal with the consequences of the earthquake—and there is something in that—let its members not say that it is the majority of the problem. Two-thirds of the problem pre-dates the earthquake and the tragedy and economic costs that flow from it. 
The reality is that National has done very little to change the way in which the economy operates. National members talked big about their tax switch. They called it a tax switch; that was clever language for changes that increased the proportion of taxes paid by low and middle income people and decreased the proportion paid by higher-income people. The tax switch from income tax to GST for lower-income people makes no difference to them so long as the total amount is identical because they still have to spend all their income. It is effectively still a tax upon their labour whether they pay it through income tax or whether they pay it out of their wages through GST for the things they buy at the supermarket. The only people for whom it made a substantial difference were the top 10 percent of earners who managed to garner 42 percent of the income tax cuts. 
The Government does not have a plan to get the economy going. It has only a very small part of what would be a prudent economic plan and that relates to tax policy. Its tax policy is in the view of the Labour Party wrong because it so disproportionately benefits the very narrow section of New Zealand for whom National plainly governs. But even if we accept that tax policy as being right which we on this side of the House do not it is but a small part of a good economic policy. 
What are the other parts of the economic policy of the Government? We should mention a couple such as the cut to the research and development tax credit which is needed to stimulate the sectors in the economy that will grow exports in non-traditional export areas. We all know that agriculture forestry and fishing are very important sectors of the economy and will continue to be so but growth in those sectors alone will not lift New Zealand’s fortunes sufficiently for us to bridge that gap with Australia. We know that from amongst other things the report by the New Zealand Institute  
A goal is not a strategy 
. The title itself was a flick at the Government for its economic mismanagement. 
We know that in order to grow our exports we have to have exports in new sectors. What did the Government do? It cut the research and development tax credit when virtually every other OECD country has one and most important Australia has one. Given that Australia is our competition for some of this innovative endeavour it is obvious that as a consequence more of that work will be done in Australia than in New Zealand. 
The other major blue on the part of the Government underlines the fallaciousness of the contribution we heard from the previous speaker for National David Bennett that we need more savings. If we look at National’s record on savings through the decades we see that it cut the Kirk savings scheme introduced under Labour. That scheme was designed by Sir Roger Douglas who is now in ACT. National cut that scheme. If we had it New Zealand would be in a similar position to Australia with savings and investment markets similar to those of Australia. The stand-out difference between New Zealand and Australia is the quality of savings and the depth of the investment market. 
What did it do subsequently? The last Labour Government ran surpluses. We ran public surpluses on the Crown balance sheet and we reduced Government debt. Every one of those Budgets was opposed by the National Party. Its clarion call Budget after Budget was: “Tax cuts tax cuts tax cuts! Do not run surpluses!”. If the prior Labour Government had done that New Zealand would be in the position of some of those countries like Portugal Italy and Greece which are having to drastically cut social expenditure at the moment because public debt is so out of control. Instead Labour reduced net Government debt to zero and brought gross Government debt down from 38 percent to 17 percent of GDP. Every one of those Budgets was opposed by National. 
National said that there was an increase in private debt at the time and that is a problem. That is very true. No one in Labour has denied that. What did we do in response? We pushed against it in two main ways. First we ran Government surpluses which were opposed by National and reduced Government debt. 
David Bennett 
: What did you do? 
Hon DAVID PARKER 
: Secondly I tell Mr Bennett we introduced KiwiSaver. He shakes his head because he has obviously forgotten that. We introduced KiwiSaver because we knew there was a problem with increasing private debt. Interest rates were increased through the Reserve Bank independently of the Government—it does that independently—to try to take the top off some of the asset bubbles. We did more than National has done since then to stimulate savings both to take pressure off that burgeoning private debt and to increase the depth of our investment markets. What did the National Government do in return? It cut KiwiSaver. 
It says that the focus of this Budget will be savings. I say to Mr Bennett and other National members that it is 2 years too late. They have undermined savings until now and not many people will be fooled by their rhetoric and belated steps at this point. They are out of touch with Kiwis. Costs are going through the roof. Living costs are up. Ordinary Kiwis cannot afford their power bills. Those members are putting them at risk by flogging off State-owned enterprises which will put further upward pressure on power prices. New Zealand is going backwards. 
The Government does not have an adequate plan for the economy. Therefore the contest at the end of the year is open. The contest at the end of the year is open because people are increasingly recognising that although it might be true that the earthquake has exaggerated New Zealand’s economic problems National is the cause of them. 
Debate interrupted.