Boscawen John: Supplementary Estimates — Imprest Supply Debate 
Boscawen John: Supplementary Estimates — Imprest Supply Debate 
[Volume:673;Page:19528] 
Hon JOHN BOSCAWEN (Leader—ACT) 
: 
 It has been interesting sitting in the House this afternoon listening to the debate on the Imprest Supply (First for 2011/12) Bill and on the Appropriation (2010/11 Supplementary Estimates) Bill. I will go back and comment on some of the contributions made earlier this afternoon. If I was to summarise the speech made by the Hon Bill English I would say that it is the Government’s argument that the economy is improving that there is a more positive atmosphere out there and that New Zealanders are optimistic. Having gone through 2 or 3 years of recession New Zealanders are optimistic. They are benefiting from the lowest interest rates in 45 years albeit higher interest rates than in the euro countries the United Kingdom and the United States but nevertheless the lowest interest rates New Zealanders have enjoyed for the last 45 years. They are also benefiting from very high export prices.  
The Government’s economic magic—if we want to call it that; the ACT Party would not—or its economic prescription has been to invest in infrastructure and to rework the tax system to create an incentive for New Zealanders to work and to save. All tax rates have been reduced to a point where approximately three-quarters of New Zealanders pay no more than 17.5 percent in the dollar as a tax on their income. So yes that is a positive story to tell. Yes there are signs that the economy is turning. But ACT has grave concerns about the assumptions in the Budget. The Budget’s prediction of a surplus in 2015 is based on a growth rate of 4 percent in 2014 and 3 percent in 2015. We think that those figures could be wildly optimistic but for the moment those are the figures in the Budget.  
It was interesting to listen also to the contribution of Amy Adams a contribution that David Parker took great umbrage at. David Parker said that on the contrary the economy was not a cot-case when the National Government took it over; in actual fact it had 8 years of surpluses. Well I have to say that the Labour Government probably did a good job during its first 6 years in Government. I see the smiles and the laughter from Mr Sam Lotu-Iiga. [ 
Interruption 
] I say to Mr Lotu-Iiga in response to his comments that in 2004 Government spending under the Labour Government was 29 percent of GDP—29 percent of GDP. There was very tight fiscal restraint in the first 5 years of the last Labour Government. It got Government spending down to 29 percent of GDP. That compares with 36 percent today—36 percent. What followed those first 5 years of a Labour Government? It went on a huge orgy of spending. It blew all the good work it had previously done. 
Hon Tau Henare 
: That’s right; orgy. 
Hon JOHN BOSCAWEN 
: Absolutely; an orgy of spending. That Government tried to buy the 2005 election. That was exactly what it did. It bought the 2005 election and the people of New Zealand have been paying for it ever since. It commenced a whole series of programmes to try to buy support. Let us look simply at interest-free student loans. Sir if you were a parent sending your child— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: No no. 
Hon JOHN BOSCAWEN 
: The parents of New Zealand who send their children to tertiary education would be absolutely foolish not to advise their children to borrow the absolute maximum amount they could. The student loan scheme we have had in this country since 2005 has encouraged students to go out and borrow everything they can because they know they will have to pay it back in devalued dollars if they pay it back at all. Mr Parker is right to feel umbrage at the fact that his Government’s economic management had been criticised in respect of the first 5 years. But after that the thing did turn into a cot-case and National did take over a disaster.  
Interestingly Mr Parker highlighted the fact that this year will be the first year we run a current account surplus. This year will be the first time we have more money than we borrow from overseas. We will run a current account surplus. As he said that is the measure that National uses to judge the change in wealth of our country. Interestingly what Mr Parker did not say is that this year is the first year in 40 years—the first year in 40 years—that we have a current account surplus. Tragically it is because of the earthquakes in Christchurch. Tragically the current account surplus has happened only because billions of dollars have flowed into the New Zealand economy from foreign reinsurers and are forecasted to continue to flow. That is the reason we have a current account surplus. We have not had one since 1973—since 1973—nigh on 40 years.  
So in the 9 years of the Labour Government that Mr Parker was so very proud of we ran a current account deficit. That was a current account deficit—the same sort of current account deficit that Mr Parker would castigate the National Government for forecasting that it will run until 2015. Let us look at the impact of a current account deficit. When New Zealand consumes more from overseas than what it exports overseas we run a current account deficit. We have to borrow from the rest of the world. The impact of that is to increase the value of our currency. Foreigners if they are going to lend us their foreign dollars need to buy New Zealand dollars and that bids up the price of our currency. Nothing does more to undermine the viability of our exporters and our farming industries than an overvalued dollar.  
Interestingly Mr Parker talked about putting in place structural reforms the reforms that would encourage exporters and the import substitution industries. One of the ways we can do that is to reduce New Zealand’s current account deficit but we can also do it by reducing our own internal deficit. We are forecast to run a deficit of $16.8 billion this year. We have to fund that from overseas. That is the equivalent of $300 million a week. It is not particularly relevant whether we borrow $380 billion this year and we over-borrow and we under-borrow next year. The blunt reality is that we are spending as a country about $300 million per week more than what we are taking in in income. That money is being borrowed and it adds to our current account deficit.  
If we are serious about putting in place the policies that will help our exporters and that will actually rebalance our economy in the way that both the Labour Party and the National Party say they want to do we can do nothing more successful and nothing better than cut back reduce our expenditure and reduce waste. It is the shame of the Labour Government that in a desperate effort to buy the 2005 election to get re-elected it committed to extending the interest-free student loan scheme so that any person studying tertiary education at an institution would be absolutely foolish not to borrow the maximum. It also doubled—in fact almost tripled—the cost of Working for Families. Working for Families is social welfare for people on in some cases over $100000 a year and the cost of Working for Families has gone from about $1 billion in 2005 before the election to just under $2.8 billion today.  
If we actually want to restructure the economy we have to make tough decisions. Yes National has done a lot and yes it has made moves. It could have moved a lot faster and it could have moved a lot earlier. It could have made some of the changes it has made in this year’s Budget 2 years ago. That is a lost opportunity. That opportunity is gone. If we really want to restructure this economy if we really want to raise our living standards and if we really want to reduce the income gap between Australia and New Zealand we need to make those tough decisions. At question time I asked the Minister of Finance whether the gap between GDP per capita in Australia and New Zealand had widened or narrowed. He was not prepared to acknowledge that it had widened. We need to stop that. We need to turn it round. This country can be an awful lot more prosperous than it is and the ACT Party has the policies to ensure that that happens.