English Bill: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — First Reading 
English Bill: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — First Reading 
[Volume:639;Page:9409] 
Hon BILL ENGLISH (Deputy Leader—National) 
: 
 I do not recall Dr Cullen voting for any National Budget even when he agreed with quite a lot in quite a few of them. What a pathetic effort by him to say that somehow his Budget is so compelling that the Opposition will join the Government in confidence in its programme. 
Darren Hughes 
: You will. 
Hon BILL ENGLISH 
: We will not actually because this Budget could have been miles better. If over the last 4 or 5 years Dr Cullen had not been so dog in the manger about reducing taxes we could have had in this Budget—and we will in 2009—a much better balanced approach to how this economy should develop. We could have had a better balance between incentives to save which are certainly an issue and incentives for growth. 
This country is not retiring. There are a whole lot of 19 and 20-year-olds out there who do not think that the biggest problem with the economy is what will happen when they turn 65. This Budget is all about retirement. Between now and then we have to grow because if the economy does not grow— 
Dr the Hon Lockwood Smith 
: Labour is about to retire. 
Hon BILL ENGLISH 
: That is right. Dr Cullen is about to retire which is why he is so interested in the scheme. If the economy is two-thirds the size it could have been then it will not matter how many savings are in the bank; we will be two-thirds poorer than we should have been. That is why we have to have a more balanced approach. 
Dr Cullen contradicted himself. For instance he said that 0.5 percent reduction in wage growth will cover half the cost to employers of their contribution. Look if the cost to wages is so small then the savings cannot be big. If there is only a 1 percent moderation in wages and consumption then there can be only a 1 percent increase in savings. Dr Cullen cannot have it both ways. If this scheme is to fix the current account deficit and if it is to supply endless new capital for our investment markets then it can come only at a cost to consumption. It can come only if the working people of New Zealand tighten their belts very tightly and cough up a lot of cash into these savings accounts. Dr Cullen cannot have it both ways. If there is a whole lot of new saving in order to have a big impact on the economy then it must mean that New Zealanders are going to have to cut their spending by a lot. 
That is why Dr Cullen is going to spend the next 6 months talking to businesses rather than to normal wage and salary earners. The message to wage and salary earners is that they must tighten their belts to save the economy while he goes on a giant spend-up in order for Labour to win the election. In the Budget today Dr Cullen will spend $3.8 billion of new money. That is a much bigger new spend than in his previous few Budgets. His spending is going up while he is telling everyone else that their spending has to go down. 
I would like Dr Cullen to sort out his strategy. If he is going to claim that this scheme will transform the economy it can come only at a cost to spending by the working people of New Zealand. That is not called an economic identity. Savings are only what one does not consume. That is it—savings are only what one does not consume. If one increases then the other shrinks. That is how the system works. I advise Dr Cullen to claim less. The most immediate impact of these measures will be that people who can afford to will now take their savings in very large quantity out of their bank accounts sell their shares—maybe even sell their house—and put the money into KiwiSaver to the extent that they get a tax break and probably no more than that. The biggest single impact of these measures will be to shift savings. I am sure that Treasury has told Dr Cullen that. That is the first impact. 
The second thing is that there will be some people on higher incomes who have been spending but who will save. Because they can save they will do so. That will make some small increase to savings—and that will be it. You see there is more to growing the economy than having savings. That is part of it; we need some savings because we need investment. But we also need an environment where we can make efficient allocation of that investment where people have strong incentives to get ahead where profitability is rewarded where the infrastructure is unblocked and unplugged where businesses feel like the Government is doing everything it can to keep them competitive and where local bodies do not put up their rates by 10 percent per year. 
Dr Cullen is talking as if the only thing we need for an economy is savings. He should go to Japan. Japan has the biggest savings in the world yet it has had a 10-year recession. House prices have dropped by about 80 percent in Tokyo. Dr Cullen should go to Australia. Australia has had compulsory superannuation at 9 percent contribution. Its national savings rate is about 20 percent better than ours and much worse than in many other countries. Australia has a large current account deficit with a much bigger savings scheme than this one. That is not to say that there is no merit in Dr Cullen’s scheme but it is to say that he is simply being misleading when he says that the answer to everything is more savings. The scheme may have some impact on incomes and returns— 
Shane Jones 
: The people like it. 
Hon BILL ENGLISH 
: People might like it but we are talking here about a long-term view for the economy. It does not matter whether people have a big KiwiSaver account if when they get to retirement there is a small economy. They will be poorer. It is simple as that. 
I would also like Dr Cullen to explain why he has decided to undermine the Cullen fund so soon. What does he think will happen? The public are going to ask why when they now have an account that the Government is putting money into the Government does not take the money it is putting into the Cullen fund and instead put that money into their accounts. [ 
Interruption 
] Winston Peters has promoted that policy. He is going around telling people that that is what will happen. He has actively promoted that policy. We agreed with the Cullen fund. We signed the legislation. We have made the commitment. Why is Dr Cullen setting out to undermine the very policy he put in place? 
The National Party is voting against this legislation because there is nothing in it that provides the balance of policy to actually grow the economy. Dr Cullen is not providing a balance of policy to actually grow the economy. We also oppose Dr Cullen’s view that this scheme will save the world. It may have some impact on national savings. If we look at these schemes all around the world—and they have all been tried—we see that they may make some difference but there needs to be an economy— 
Hon Lianne Dalziel 
: What about Australia? Talk about Australia. 
Hon BILL ENGLISH 
: I talked about Australia to members before. Australia has a 6 percent GDP current account deficit. It has a national savings rate slightly better than ours because everyone takes their savings and puts them into a tax-favoured system. That is why Dr Cullen’s strategy is so unbalanced. Sure he should take some action on savings but he should balance that up with an economy in which someone who goes to work tomorrow knows that it is worth getting ahead and an economy in which workers can keep more of their take-home pay. That is not about savings; that is about getting ahead. In the long run most New Zealanders will be able to save if their incomes are higher. 
 But in a low growth economy such as this Budget is predicting incomes will not go up rapidly—they will not. People need their incomes to be rising. There is nothing in this Budget that says the Government is getting behind a dynamic economy that will raise people’s incomes. The Government is getting behind savings; that is one component. But it is not the way to raise the growth of the economy all on its own. We look forward to the economic debate over the next few months because National will be talking about a balanced approach Labour has decided that it will tell everyone how to spend their money and Kiwis will get to decide.