Bayly Andrew: Appropriation (2015/16 Estimates) Bill — Third Reading Imprest Supply DebateText is incorporated into the Bound VolumeBayly Andrew: Appropriation (2015/16 Estimates) Bill — Third Reading Imprest Supply Debate[Sitting date: 18 August 2015. Volume:707;Page:5872. Text is incorporated into the Bound Volume.]ANDREW BAYLY (National—Hunua): It is a pleasure to be talking about this Appropriation (2015/16 Estimates) Bill. Of course there are so many good things that we could talk about but I have chosen to talk about three of them today. I want to focus on the Budget outlook looking after New Zealand families and the issue of diversification of our economy which we hear a lot about.The 2015 Budget builds on an improving economic outlook of sustained growth rising wages more jobs lower inflation and of course lower interest rates. This Government is focused on delivering a financial package and an economic outlook that all New Zealanders can be proud of. In the latest Reserve Bank forecast the economy grew by just under 3.3 percent and for the next 3 years it is forecast to grow at roughly 2.5 percent. This rate compares very favourably of course with our international trading partners. Just to put it into context Australia is currently growing at about 2.3 percent which is close to America’s growth rate of about 2.5 percent and of course Europe being in the state in which it is at the moment is growing a bit slower than that at less than 2 percent.What is more we may even achieve our Budget surplus which all the naysayers have been going on about and saying: “No we won’t.” In the 11-month period to 31 May we had achieved a Budget surplus of $1.2 billion. It is not completely assured that we will get a Budget surplus for the financial year just ended but it would be a fantastic outcome if we did and one that all New Zealanders could be proud of.In terms of the financial position of this country I think it is worthwhile just having a look at our debt figures. As at 31 May 2015 New Zealand’s net Crown debt stood at just at $60 billion which represented about 25 percent of GDP. I think many of us are aware that this Government is focused on getting our net debt to GDP ratio down to 20 percent by 2020. Interestingly again if we do a little bit of a comparison the Australian debt position at the moment is just slightly higher than our 25 percent but by the year 2020 when we will be at 20 percent it is projected to be at 40 percent—i.e. double our debt ratio.When you turn to the UK it is currently at 90 percent and will decline over the 5-year period to 2020 to about 80 percent—i.e. four times the rate that New Zealand’s debt is when we look at that same period. If we go to America it is currently sitting at about 110 percent and in 5 years’ time it will still be greater than its combined GDP for that period. So thankfully through good fiscal management we have got a growing economy with relatively low debt figures and it is heading in the right direction.The other thing is that we have got a robust banking structure and of course we heard a little bit about that today with some reviews of our banking structure going on. As some of the more attentive members of the Finance and Expenditure Committee will be aware last year the Reserve Bank undertook some very detailed modelling of our banking system just to see how robust it actually was. It assumed two scenarios. The first scenario assumed that a sharp decline in growth rates would bring about a catastrophic change in the Chinese market which would trigger—this is the assumption—a real GDP decline of about 4 percent unemployment peaking at 13 percent housing declining by 40 percent nationally and the agricultural sector falling by about 40 percent. Even for some of our Opposition members I know that sounds pretty optimistic but for most of us that is a fairly gloomy outlook. In the second scenario the Reserve Bank assumed even more significant increases in interest rates.What was apparent from the financial modelling that this group did was that the loan ratios increased to about 1.3 to 1.5 percent of banks’ total loans but because of the existing profitability in the banking system the banks could withstand these shocks. Also through the good prudential management of those banks they were able to be in a position where our banking system even under those extreme pressures was in a position where it could withstand the shocks and that shows what a robust banking sector we have which is important to us all.The second area that I want to talk about today is families.Hon Clayton Cosgrove: Who?ANDREW BAYLY: Families—families. We are determined to implement measures that look after and protect our families. Of course the standout in the Budget was the $790 million package for our families. It is a balanced package because what it does is increase the benefit rates for families with children. It also increases the childcare arrangements for low-income families and there is also an obligation on beneficiary parents to enter the workforce when it gets apparent that they can and it is appropriate that they should. That $790 million is focused on the 160000 families with 300000 children earning less than $36350.Not only did we spend the $790 million but we also put more money into important areas. The previous speaker Annette King was talking about health of course. A record amount went into health. There is $15.9 billion now being spent on health in New Zealand. Another substantial amount went into education. We are now spending a record $10.8 billion in education. There are the announcements around special housing areas partly to do with allowing first-home buyers to get into the market so we have—Phil Twyford: Special housing areas—what a joke.ANDREW BAYLY: Yes and even in my electorate Mr Twyford we announced one very recently—Glenbrook Beach. There are another 800 houses going in there and 200 of them will be low-cost housing for people on top of the 4500 going into Wesley and Pukekohe and the 700 new houses going into Belmont probably about 3 kilometres away from Wesley. All are going to generate new low-cost housing for those first-home buyers whom we are keen to get into the market. The other thing in the Budget was the $500 million that we have committed over the next 3 years from savings in ACC—the fantastic job that the board has been doing there.The last thing that I want to turn my mind to is the diversification of the economy. And gee do we not hear a lot about that from lots of people particularly from the other side of the House? For some reason—and I do not know why—Labour in particular wants to myopically focus on the dairy industry. I have got to say to you that the dairy industry is important and we all know that but it is not fatal. We want to make sure that we have a viable dairy industry but it is not fatal. It represents only 5 percent of our economy.So what I thought I would just do is set out some of the breakdown of the New Zealand economy just to demonstrate that diversification. The total primary industry represents about 7.4 percent. People love to hit on and say horrible things about the manufacturing industry but the National Government does not have that view. We think it is a viable industry. It represents 11 percent. Construction is 7 percent.Services make up 64 percent of this economy. So all the good things—information and communications technology the smallest at 3 percent or roughly a billion dollars’ worth of earnings; education 4 percent; and health 6 percent. You keep going up to tourism which of course is the largest of the services sector at 7 percent. What is more we are also getting good growth rates across all the regions. So we have talked about some of the regions—Bay of Plenty has 4.4 percent Canterbury has a similar amount and Auckland has 4.3 percent. But even in the smaller regions there is good viable growth including in the region of the member sitting beside me. Sarah Dowie’s region of Southland is at 4 percent—a dynamic economy.But I also like the recent announcement around the new immigration changes that are going to make sure some of the new immigrants coming into this country move to the regions. So we have got two categories. First of all is the skilled migrants category where we have said: “We’re going to give you an extra 20 points if you move to a region and get work out of Auckland.”The ASSISTANT SPEAKER (Hon Trevor Mallard): Order!ANDREW BAYLY: Then of course we have got the entrepreneurs category which means that we are going to give an additional 20 points out of the total of 120 so that if these entrepreneurs coming into New Zealand with good skills and with money want to set up businesses out of Auckland then they can do so. They will be asked to move to those regions and help create new jobs for New Zealanders. Thank you very much.