Norman Russel: Debate on Budget Policy Statement 
Text is incorporated into the Bound Volume 
Norman Russel: Debate on Budget Policy Statement 
[Sitting date: 13 March 2013. Volume:688;Page:8484. Text is incorporated into the Bound Volume.] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I want to use my speech to talk about three particular areas that I think are important areas on which to judge the Government’s performance. One is around external imbalances and looking at the challenge that Bill English set himself in order to rebalance the economy—the external accounts. The second one is around sustainability and the third one is around inequality. I think those three areas are good areas to judge how the Government has performed. 
If we look at the external imbalances Bill English rightly said that New Zealand had a major problem in its external imbalances. Essentially that is manifest in the current account deficit. The current account deficit is running at about 5 percent of GDP or $10 billion a year. The way that we finance the current account deficit currently is that we borrow more money from overseas collectively as a country—not just the Government but the whole country—and we sell assets such as land in order to cover that large current account deficit. Bill English identified that this was something that needed to be dealt with and yet what we are seeing now is that the current account deficit has become large again and it is projected to keep growing. It will keep growing upwards to at least 6.5 percent of GDP and possibly more. So on the Government’s own terms which are dealing with the external imbalances in the New Zealand economy it has failed. That is why the Government does not like to talk much about the external imbalances problem. 
If we were to take just a microcosm if we were to look at say oil imports in 2002 New Zealand spent $2 billion importing oil—for transport basically—which was about 2 percent of GDP. In 2012 that had increased to NZ$8 billion or about 4 percent of GDP. So what we have seen is a doubling of the relative cost to the overall economy of importing oil for transport. That is why a strategy of reducing our oil dependence not only makes sense in terms of greenhouse emissions but also makes sense in terms of the external imbalances. We are having to spend more and more of our export earnings importing oil to pay for our transport oil costs. According to the IMF the International Energy Agency—you name it—oil prices over time are predicted to increase. So in New Zealand as a result of the Government’s policies to lock us into road-based transport systems our imports of oil are likely to increase. 
That will put further pressure on our external imbalances as we have to pay for that imported oil and more and more of our exports will have to be spent importing oil. That is one microcosm of where the Government has got this problem fundamentally wrong. It has got it wrong in terms of the external imbalances so we have seen a big growth in the external imbalances around oil imports for transport but it has also got it wrong in terms of sustainability. Obviously in terms of greenhouse emissions increasing our oil dependence increases our greenhouse emissions. 
Another way to cut the external imbalances is to look at the value of the New Zealand dollar which is radically overvalued compared with other currencies. The Green Party has put out various proposals around this. The export sector and the tradable sector are saying with one voice that the Government should be intervening to lower the level of the New Zealand dollar. The options on the table include a lower official cash rate. To make that possible we need to de-link housing market inflation from the rest of the larger inflation issue so that there is more space for the Reserve Bank to lower the official cash rate. That means using complementary measures to control house price inflation which the Greens have been talking about since at least 2006 and probably earlier. There are such things as loan devaluation ratios. There are such things as capital adequacy ratios which try to target housing market inflation and so enable the Reserve Bank to have a lower official cash rate because the housing market inflation would be being controlled separately. 
Another option on the table is the use of quantitative easing which most of our trading partners are using. They are using Government-created money in order to drive down the level of their currencies in order to make their tradable sectors more competitive. Most of our trading partners are doing this and the effect is that the New Zealand dollar is getting higher. We have opportunities to use quantitative easing or Government-created credit in order to pay for the Christchurch rebuild. It is of course exactly what Japan is doing in order to pay for the rebuild after the tsunami and earthquake up there so this is a very mainstream policy internationally. Of course when you look at all of this together what you realise is that we have a major problem in terms of our external imbalances and the Government has simply failed to grasp the nettle. As much as I think Bill English genuinely wanted to deal with this issue he has failed to do so. 
The second area I want to just touch on is around sustainability. There are a number of dimensions to this but climate change is probably the right one to start with. This Government has championed coal and lignite which of course have very high greenhouse emissions. The Government has lowered the proper price on carbon. By continually weakening the emissions trading scheme it has withdrawn from binding commitments under the Kyoto II agreement and of course it is subsidising fossil fuels and transport. The effect of all of that is that instead of de-linking our economy from greenhouse emissions we are actually linking it much more closely to greenhouse emissions and that is a major problem. When you look at New Zealand and you think how vulnerable we are to drought because a large part of our economy is agricultural New Zealand and the New Zealand primary sector have a specific interest in addressing climate change and yet this Government is doing the exact opposite. So it is undermining efforts internationally to deal with climate change and it is reducing its own domestic efforts to deal with climate change. 
If we were to look at water of course it is a terrible story. New Zealand under the Yale University study which the Prime Minister used to quote a lot has gone from having the second-best water quality to the 43rd-best water quality. That is under the Yale University study so the Government has now stopped quoting from the Yale University study. So whether you are looking at external imbalances in the New Zealand economy in the performance of this Government or whether you are looking in terms of the sustainability indicators like climate change or water quality it is all going in the wrong direction and it is all going in the wrong direction pretty rapidly. 
The third area I want to touch on is inequality. Inequality is important. It is important both economically and also I think morally. We have one of the most unequal societies in the OECD now and our inequality rates are rapidly increasing. The Ministry of Social Development’s report from August 2012 reported that New Zealand now has the highest level of inequality ever recorded. That has happened over the course of this Government. What it reported was that middle and lower income workers saw incomes fall sharply while the top 10 percent saw their incomes rise sharply. You know that was in part a result of the Government’s tax cuts where the rich got a very big tax cut and the poor got virtually nothing. We have seen this big increase in inequality in New Zealand. So that is what the Ministry of Social Development’s report found when it looked into it—the Government’s own report. Of course this is reflected in the fact that we have a quarter of a million children living in poverty which is a shameful statistic about our country. 
So when you are looking at inequality the reason why all of this matters—aside from it just being wrong that we have taken a strategy that has resulted in this massive inequality in our society—is that it also has these downstream effects. Unequal societies have more crime. They have more ill-health. You have all these impacts in terms of education. More unequal societies have less movement and less social mobility so the more unequal a society the harder it is to move from the bottom decile to deciles higher up. In some of the most unequal societies on the planet such as ours or that of the United States it is very difficult to move between the different decile units because the levels of inequality are so high. Having a more equal society gives people the chance to get ahead on their own efforts. Of course this is one of the ideologies that the National Party promotes yet it is specifically introducing policies to stop social mobility so it is very difficult for those at the bottom of the heap to get ahead under the kind of policies it has introduced. 
I think really after 4 years there is no more blaming the Labour Government for the record of this Government. Obviously National has made a great deal about blaming the previous Government but I think now after 4 years we can actually look at the record and judge the Government. The external imbalances have got worse under this Government. Sustainability indicators have got worse under this Government. Inequality has got worse under this Government. So whichever particular criteria you choose to use the Government has failed. I think that is sad for this Government because there are some good people in there but it is particularly sad for New Zealand that we have a Government that has been unable to address these critical issues for our future and it is why we need a change of Government.