English Bill: Debate on Budget Policy StatementText is incorporated into the Bound VolumeEnglish Bill: Debate on Budget Policy Statement[Sitting date: 11 March 2015. Volume:703;Page:2135. Text is incorporated into the Bound Volume.]Hon BILL ENGLISH (Minister of Finance): The Labour spokesman I think gave a speech about the economy he wishes existed with no growth no jobs rising inequality and Government finances going through the floor but I would suggest he does not follow his own advice. His own advice was: do not look at the numbers; look at reality. Well of course reality according to him and the Labour Party is reality on “Planet Labour” where numbers do not make any difference whatsoever. Of course if he looked at the numbers he would see that for a party that is campaigning on work there were 80000 new jobs in the last year. The participation rate in this economy—that is the proportion of working-age New Zealanders who see themselves as being in the labour market—is the highest ever. There have never been more New Zealanders who feel that they can access the labour market. There have never been more New Zealanders more confident that they can participate in this economy. That is what I mean about the Opposition giving a speech about the economy it wishes it had.In fact New Zealand is looking at a fairly unique opportunity over the next few years and that is sustained growth of over 3 percent for a period of 3 to 5 years when we have already had over the last couple of years growth of around 2.5 to 3 percent. That is pretty unusual actually. So it is the opportunity for continued business investment that builds our capacity to be more productive and produce more income and for households the opportunity for moderate but consistent wage and income increases.The Opposition spokesman said that last year half of all New Zealanders did not get a pay rise. Well that is absolutely typical. Every year about half of all New Zealanders do not get a pay rise. Last year the nurses did not get a pay rise. Why? Because their collective agreement was negotiated to cover 2 or 3 years. In any given year that is how it works. But of course what they do look forward to is the opportunity for consistent even if moderate pay increases year after year. That is what this economy has been delivering and it is what this economy will continue to deliver.The conditions for that sustained economic growth have been in some respects surprising. As there has been more work in the economy the labour supply has shown itself to be remarkably responsive both through migration—through New Zealanders not leaving for Australia—and through people particularly women and older people counting themselves now as part of the workforce where previously they were not. Another condition is low inflation and lower interest rates for longer which is a set of conditions we did not really expect but we have been importing low inflation from the world economy. That is good for New Zealand households even if it makes it a bit tougher for the New Zealand Government to balance its books.There is one significant imbalance that has been building up in this economy and that of course is the Auckland housing market. It is not in the rest of the country. The other two-thirds of our housing market with a partial exception in Christchurch is actually relatively stable if not becoming more affordable. The House has discussed many times the action the Government is taking to deal with increasing supply in Auckland.It was something of a milestone today for the Government accounts to show a surplus for the year to January. Back in 2010 our deficit was 9 percent of GDP around $18 billion in the red. In the last month we have just got to surplus. We have yet to see whether we will have one for the full financial year but what it indicates is that we are in the zone. The combination of a growing economy and good expenditure management having largely paid for the Christchurch earthquakes although not completely—and more costs coming through in Canterbury may affect our surplus this year—and having survived a recession has meant that our Government finances are headed in the right direction.But what matters more than that actual number are the significant changes going on in the management of Government expenditure. We have taken a view that the best way for the Government to control its costs is to do its job properly and that is to effectively change the lives of people who are dependent on the Government either for their income or for other support that they need. So we are moving the Budget process to a strong focus on people populations communities and families and not on Government departments. So for example the way we think about making progress with educational achievement is to focus on the children and families and the difference that better educational achievement will make to the course of their lives not on the latest bright idea from the Ministry of Education.This approach is most advanced in the case of welfare where the forward liability calculation of welfare has yielded a huge wealth of information about our beneficiary population that we simply did not have before. When we took over from the previous Labour Government we saw a system awash with cash and complacency where everyone was focused on spending more money as the way of showing that they cared whereas now the measure of whether we care is whether we change the life direction of for instance a young child in Government care through a children’s and young person’s service. Or whether we can with a 7-year-old who cannot read get them to where they can pass National Certificate of Educational Achievement level 2. Or when we lock someone up in prison as we should when they have committed a serious offence against the community when they come out we can reduce the chance of recidivism from what it was at 60 percent. Sixty percent of people leaving prison reoffended within 2 years. A lot of them ended up back inside at $115000 a year—a pretty reckless failure if you do not do anything about it.This strong focus on the quality and the impact of our expenditure on real people rather than on big numbers that Government agencies can throw around as a measure of effectiveness is now gradually working through into the system. It actually is one of the reasons we have got to surplus. The Government publishes 10 results. They are on the Beehive website and some of them are pretty hard stuff like a reduction in child violence. Whoever thought that that was an easy problem? What it is driving is a much more focused effective approach from Government departments. We know that the endless demand for more family violence programmes which are quite expensive and have questionable effectiveness will just continue endlessly. Politicians in election campaigns will say: “We’ll spend more on family violence.” Well actually you should be getting up to say: “We’ll be spending less on family violence because there’s less family violence. We’ll be spending less on fixing educational failure because there’s less educational failure. We’ll be spending less on crime and law enforcement because there’s less crime.”And that is where the lazy complacent Labour Party has not moved one bit from when it was in Government. Every measure this Government takes in that respect the Labour Party opposes. The changes in State housing—we want to have less serious housing needs but the Labour Party is opposing what are quite significant changes and how they work.I am proud to support this Budget Policy Statement. It sets out a clear direction for an economy that is showing sustainable growth which can deliver better incomes for households right across the income range over the next 3 to 4 years. It also indicates the increasing focus on the effectiveness of spending with some quite new tools for the Government. This means that not just over the next year or two but over the next 10 or 20 years Governments will be able to contain Government expenditure because we do our job properly by changing people’s lives for the better.