Cullen Michael: Address in Reply 
Cullen Michael: Address in Reply 
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Hon Dr MICHAEL CULLEN (Labour) 
: 
 It is appropriate that the member Maurice Williamson finished with a classic bit of National Party spin. Let me remind him that the Resource Management Act which he just condemned as holding back the New Zealand economy was passed by the National Government that he was part of in 1991. National has spent 9 years working on its spin lines and not 9 days working on its policies and that has been its problem ever since the election. 
We have seen two spin lines coming out in this debate. One is that New Zealand was the first and only country to have a recession in the last year. Let me correct that. The National Bureau of Economic Research in the United States is the official determiner of when the US is in recession. About 4 weeks ago it said that the US had been in recession since the fourth quarter of 2007. That is the official United States view. 
The second spin line is about all these things being unfunded. This is cute stuff. This is simply saying that when we say something is happening in 2 or 3 years’ time it has not yet been appropriated—it is unfunded. Well practically everything is unfunded at this point as far as 2010 2011 and 2012 are concerned. Right through the campaign it was National that pretended the economy was better than it was and that was summed up by Mr Key always telling us that New Zealand did not have a debt problem. Well the sound we hear from members opposite now is the sound of chickens coming home to roost faster than I have ever seen following a change of Government. 
This Government’s actions will now be measured against the scale of the problem we face. We do face the worst economic crisis in the world since the Second World War. There are two sources of that crisis. The first is the folly greed and dishonesty of those in international financial markets. Within the last 48 hours the chief executive of JPMorgan Chase announced that he got a US$27 million bonus last year having picked up US$10 billion from the US Government to fix up the mess that was made in that business. There have been US$18 billion in bonuses in the US financial system at a time when the US taxpayer is pouring money out hand over fist for people who never properly assessed risk and reward who disguised their behaviour who acted utterly improperly and who are now threatening to bring the world into a great depression. Those are the people whom members opposite admire. 
The second source of the crisis is the growing imbalance between the countries that have been borrowers and the countries that have been savers over the last 10 years. That fact was brought to the attention of every international economic conference over the last few years. 
What do we need to do in this situation? First we need to cushion the effects of this recession. Second we need to take advantage of the opportunities that are opened up as resources are being freed up. Some things that were not possible a year or two ago are actually possible now. Thirdly we must deal with the financial market issues and fourthly we have to deal with those imbalances. 
Let me take those in reverse order and judge the Government’s actions against them. On the question of imbalances this Government’s response has not merely been inadequate; it has been completely the opposite of what is required. We have been one of the borrowing countries and this has led to the growing imbalances in the world. Whereas the Chinese have to learn to spend more we have to learn to save more over the long term. 
And what is the Government’s answer? The Government’s answer has been to cut KiwiSaver—the first real attempt to lift private sector household savings in New Zealand—and to have unsustainable tax cuts which will lead to a fiscal position that the Minister of Finance admitted yesterday will on the present best estimates take us back to where we were in the early 1990s. What I left this Government was gross Government debt under 20 percent of GDP— 
Hon Dr Nick Smith 
: A decade of deficits. 
Hon Dr MICHAEL CULLEN 
: —and I remind the member opposite that he attacked the Government every year for running too big a surplus. Every year National promised to spend the surplus. Now it can live off that surplus for a year or two but within 3 years it will be looking at debt going back to being worse than it was in 1999 and within 5 or 6 years it will be back to where it was in the early 1990s. It will be a long haul through the next decade in that regard. 
To correct those imbalances New Zealand needs more exports and more research and development but the Government’s answer was to can the research and development incentive to cancel the Fast Forward fund and to cancel the Broadband Investment Fund which was ready to roll. So this will not be a year for asking business what it wants which is what Mr Joyce announced it would be today. By the time National decides that the rest of the world will have moved forward to the next stage and we will be catching up again in that regard. 
What about the extraordinary claim from Mr Key that New Zealand does not have a debt problem? New Zealand has always had a debt problem. For a while the Government did not have a debt problem but the new Government solved that pretty quickly. Now we have a household debt problem within New Zealand. Unfortunately the Government’s obsession with tax cuts will not work because the individual in the household acts pro-cyclically. When the economy is turning down and people are afraid of losing their jobs they will actually start to save more not spend unless money is given to those at the bottom. What did the Government do? It introduced a tax cut programme that took away tax cuts from those at the bottom and redistributed them to those at the top who will not be spending that money in stimulating the New Zealand economy. 
What of the financial markets? There is no sign of a comprehensive understanding of what needs to be done. The Government is still locked into a right-wing agenda in that respect. New Zealand needs a new social contract around a market economy that states clearly that capitalism succeeds best not merely in producing wealth but when there is a fair sharing of that wealth. That was the contract that dominated the first three-quarters of the 20th century. It has been broken over the last quarter of a century and that has led directly to the crisis that we are now in. Unless there is a move to have much greater disclosure in financial markets both within countries and across countries unless there is much greater commonality of rules and unless there is the ability to intervene by regulators without tight brightline rules that create means for financial sector people to move around them we will simply see the next recession being worse than this. This recession is worse than the last one precisely because those issues have not been addressed. 
What about the cushioning effects and taking advantage of them? It is much too little much too timid and it is constrained by National’s tax decisions. There should have been bold moves on sustainability on public transport and on skills and these areas have not been mentioned at all so far in the Government’s announcements. A whole strategy has been agreed between Business New Zealand the Council of Trade Unions and the Government and it is ready to roll out. It could be funded much more—Business New Zealand wants that. Where is the announcement around that? There is nothing so far. Where are we building the skills for when the economy takes up again? Luckily the Government will get Kiwis coming back from Australia. Luckily there will be fewer Kiwis going to Australia. That will be the great success in the next year. Why? Because Australia is in recession and therefore there will not be so many people going. It is a great move but it does not mean anything for the future of this country. 
Where are the moves to retool industry while we have the chance to do so in this situation? Instead there will be 69 new State houses which is actually a reduction of 11 even on the Government’s own numbers. There will be a $42 million roading package. In terms of the cost of bringing it forward half will be spent on a bridge designed merely to get people to and from their holidays faster. What will that do to productivity? Well if the Government is going to take a week off people’s holidays they will need to get to and from their holidays faster! Of course the doozy concerns Transpower and the network—the Government is going to paint the pylons. So it is not a case of  
Fawlty Towers 
; rather “Monty Pylon” is the Government’s answer to an infrastructure package. Painting pylons will be the answer to New Zealand’s economic problems! Well it is slightly better than the situation in the 1930s—but not an awful lot. 
It is no wonder that yesterday and today Mr English has looked overwhelmed by the problems. I know that the numbers he is getting from Treasury are enough to frighten any Minister of Finance. It is no wonder that he said yesterday in a slip of the tongue that it is the worst recession for 90 years. If that is true the Minister of Finance yesterday told us that it is worse than the Great Depression. That was a frightening comment from a Minister of Finance. This Government does not have an answer at all. It is fiddling and fiddling around and it does not know what to do. It simply has spin lines to try to blame the previous Government. It will not work.