Parker David: Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
Text is incorporated into the Bound Volume 
Parker David: Taxation (Budget Measures) Bill — First Reading Second Reading In Committee 
[Sitting date: 24 May 2012. Volume:680;Page:2426. Text is incorporated into the Bound Volume.] 
Hon DAVID PARKER (Labour) 
: 
 This Budget has already been termed by some of the commentators as a drab Budget without any really pro-growth agenda. This Budget legislation the first piece of Budget legislation that the Government is passing under urgency is illustrative of how little of substance there is in this Budget. The Taxation (Budget Measures) Bill runs to nine pages. Although it is dropped on us under urgency without any forewarning in the 5 minutes that I have had to study it it is abundantly clear it is not a substantial piece of legislation that is going to affect the future growth prospects of our country because it does not deal with the difficult issues.  
There are three parts to this legislation. The first part deals with as the Minister has said removing some tax credits. I think we have already heard the phrase that this Budget picks the pockets of paper deliverers. It picks the pockets— 
Hon Trevor Mallard 
: Who said that? 
Hon DAVID PARKER 
: I think it was Trevor Mallard who said that first. It was a very good characterisation of this Budget—picking the pockets of paper girls and paper boys up and down the country and ignoring the big issues that this country faces.  
Now why do I criticise the fact that the Taxation (Budget Measures) Bill does not have more substantial measures in it? Well the reality is that the Government’s own forecasts show that under current settings it has had to downgrade its growth forecast. Not only have we already had the lowest growth under any Government in the last 50 years for the period that this Government has been in office so far but also for this coming year it has downgraded the growth forecast from 4 percent to 3 percent and for the following year it has downgraded it even more to 2.6 percent. We have got lower growth than was previously projected. We have got lower employment growth than was previously projected which has gone down from 170000 new jobs to 154000 new jobs over a 4-year period. So the growth in our economy is not as good as was previously predicted.  
In addition to that we have got rising net international indebtedness and the sorts of measures that are needed to address that are a lot more substantial than those that are in this taxation bill. The Government’s own Budget figures show that the current account balance gets worse every year from here. So under the current tax settings in this economy our current account deficit goes from negative 3.6 percent of GDP this year to negative 6.7 percent of GDP in 2016 and it is negative every year in between. The current account deficit gets worse every year. What does that mean? That means that every year New Zealand has to sell more assets and borrow more money from overseas to bridge the gap. Even after the Government limps back into surplus in the Government’s books it will not have dealt with the structural imbalances in our economy.  
What does that mean in terms of New Zealand’s net investment liabilities in the world? What we owe to the rest of the world grows and our net investment position goes backwards so that by 2016 New Zealand’s net international indebtedness our net international liabilities increase to 80 percent of GDP—80.1 percent. That totals an astounding $205 billion—$205 billion—of net international liabilities by then which is up from where it is currently this year at $134 billion. That is just about all private debt; it is not Government debt. It is because we do not earn enough from our exports to pay for the cost of our imports and our interest. And what does this Budget show? It shows that getting worse not better.  
In terms of the pretty miserable GDP growth that we have got in this Budget just about all of it comes from residential investment. The great majority of it comes from residential investment rather than from investment in our export economy and growth in exports. In fact our growth in exports is miserable. We heard the Prime Minister today reading a speech that had been prepared some days ago saying that exports were up on the very day that Statistics New Zealand said that exports are down by about $700 million compared with last year. No wonder this bill from the Government is so narrow in its focus.  
There are some measures in it that we agree with. In fact I was one of the ones with Stuart Nash who called for overhauling the rort that we had in the agricultural system whereby you could change from revenue account to capital account for your capital livestock. What farmers could do was—if dairy prices were going up and they had 1000 cows and those 1000 cows were going to increase in value by $200 each that would be a $200000 increase in their assets. If it looked like the cows were going up in value they could elect early enough to put it on capital account and they would pay no tax on that increase in value. But if it was going the other way and dairy prices were going down there could be a $200000 decrease in the value of their livestock. They could put it on revenue account claim a tax deduction and reduce their taxable income. That was a real rort. We called for its overhaul. We are glad to see that is being fixed up.  
We also agree with changes to abolish the 10 percent bonus on early student loan repayments. We opposed that when it was brought in because we knew it would not work. This is the Government reversing one of its own measures from one of its recent Budgets. The measure was so silly that 3 years or 2 years later the Government is having to repeal it because it did not work. The Government created a 10 percent bonus for early repayments and the only thing it found was that it was not getting any extra repayments. So it gave away the 10 percent voluntary repayment bonus for no increase in overall voluntary repayments. It is that sort of mismanagement of the economy that means that this Government is not growing the economy in the way it should. [ 
Interruption 
] That is right. If we had performance pay in these ministries and on the part of the Government then there would be a fair number of its Ministers who would be having a drop in salary. They would be earning less than backbenchers in Labour because they are not as good as we are on this side. They will not do that for themselves even though they are enforcing it upon the teaching profession.  
This Budget is a “no-growth in exports” Budget. The export profile going forward is flat. As a consequence the current account deficit goes up and the New Zealand deficit goes up. Debt goes up and we have to sell more assets as well as borrow more money to meet that gap.  
The fiddling around with the tax credits that were previously available to some low-income people is necessary partly because the Government’s income tax cuts in prior Budgets spent $2.5 billion per annum in respect of income tax cuts to the top 10 percent of income earners. I think that 40 percent—was it Mr Cunliffe—of the income tax cuts in that Budget went to the top 10 percent and as a consequence of the pressure that that has put on the Government’s finances it is now having to take away the small amount of tax break that a person doing a paper round used to get.  
This Taxation (Budget Measures) Bill will do nothing to stop the flow of people to Australia. Indeed the Budget documents themselves show that New Zealand’s changes in population and labour force assume that a large number of people will continue to head to Australia for the next 2 or 3 years. They assume that we are going to be losing a large number of people. As David Shearer said today it was somewhat ironic to have the Prime Minister before he was elected saying that if he was elected he was going to stop the equivalent of a Westpac Stadium crowd going to Australia every year. And now of course he would have to make that same speech and substitute Eden Park with some extra seats because that is the number of people who are leaving. More than 1000 a week are going to— 
Hon Trevor Mallard 
: The stands—the temporary stands. 
Hon DAVID PARKER 
: What is that? 
Hon Trevor Mallard 
: You’d have to bring back the temporary stands. 
Hon DAVID PARKER 
: Bring back the temporary stands—yeah that is right. The ones that they had up at the Rugby World Cup would have to be rolled out so that the stadium in Auckland could fit in enough people to represent the number of people who are going to Australia in a year—now more than 1000 people a week.  
This Budget has lower growth forecasts lower employment growth forecasts higher external debt rising to over $200 billion and a $70 billion increase in external liabilities—net international liabilities—over the next 5 years. This is a very very narrow bill which does not do anything to cure the fundamental problems in the New Zealand economy.