Cullen Michael: Debate on Budget Policy Statement 
Cullen Michael: Debate on Budget Policy Statement 
[Volume:606;Page:3999] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 There is a wonderful Kiwi phrase: “Get a life!” and that is all I can say to that member. We are discussing a $40 billion-a-year Budget the forecast for the next 3 years is $120 billion - odd and all he can do is fail to acknowledge a very simple fact that I told him yesterday—that is on 27 February 2002 in answer to an oral question from one of his own members—I think it might have been him—I pointed out that there was no goal in terms of a specific date because of the advice we had had from Treasury. So let us now pass on to some more important matters in life because that was the speech of a dying man—a man who has to take his shirt off in a crowd to get noticed. 
This year’s Budget will be presented on—[ 
Interruption 
] I say to Dr Lockwood Smith: “Please don’t take your shirt off in front of me again. I still remember it from the mid-1980s!” This year’s Budget will be presented on 15 May. It will be the fourth Budget that I have presented as Minister of Finance. The Budget will be presented within the framework of higher living standards for all—which is what this debate is actually about I say to Dr Lockwood Smith—through growth and innovation. It is about supporting a productive and cohesive society. It is about reducing crime and the impacts of crime. It is about investing for the future and building infrastructure for New Zealand. I congratulate the Finance and Expenditure Committee on the lucid nature of the report it presented on the Budget Policy Statement. It incorporated a wide variety of views and if one cared to read it I think one would see that it was laid out in a way that led to some interesting thoughts about where New Zealand is going. 
The forecast within the Budget Policy Statement shows a surplus for this year of some $2.5 billion—though it seems now likely that that will be exceeded by the end of the year—and $3.8 billion for 2003-04. Those are very substantial surpluses even allowing for the transfers that have to be made into the New Zealand Superannuation Fund over the coming 2 years. The Government is continuing to take a very cautious approach about large ongoing expenditure or revenue reduction programmes that would affect that operating surplus. The reasons for that should be clear to many. Firstly and obviously some economic slow-down in the rate of growth is anticipated this year as a result of international circumstances the increase in the dollar the drought we have had on much of the East Coast and a number of other factors. What is not clear is how much those surpluses may reduce under those situations. Clearly the Budget Policy Statement incorporates within its forecast the assumption of a decline in the rate of growth over the coming year but one of the things I have said to this House on many occasions is that revenue continues to run well ahead of forecast and that leads to some concern and therefore some caution that as economic growth slows the slow-down in revenue could be higher than is anticipated. 
It is not desirable to spend surpluses before we are sure that they are structural and not simply cyclical. Both the United States and the United Kingdom have made that fundamental mistake. Both countries are now reverting to forecasts of long-term operating deficits—a situation that this country has taken many many years to get out of and one that we must not get back into because it is so hard to get out of. Plenty of people want to spend that money in advance not least most of the members of the National Party who call for increased spending in every area but for a reduction in the total. In the National Party of course the total is less than the sum of its parts when it comes to fiscal provision. 
The Government has a clear programme about how to expand economic growth and how to transform this economy over time. It will take a long time to catch up to the top half of the OECD on economic measures though on many social measures we are already securely within the top half of the OECD. It is on the issues of per capita gross domestic product (GDP) that we have fallen behind most obviously. The Government is addressing issues of innovation investment in research and development the commercialisation of that research and development and the provision of venture capital funding. I expect to be making more announcements over the coming year in terms of the tax issues surrounding some of those matters relating to commercialisation of research and development. 
We have a major reform programme in the area of tertiary education—the most significant reforms in tertiary education for many many decades. The fact that many people do not understand those changes well does not detract from the fact that they are enormously significant changes that are designed to shift the entire direction of the tertiary education system over time. We are putting more resources into early childhood education which is crucial for addressing our real problem in education in New Zealand in terms of standards which is our long tail. We perform well in the middle and we perform well at the top—we are in the top three or four of the OECD in our achievements at those levels—but in the bottom areas we are worse than the bottom levels of many other countries. That is not good enough particularly because that tail tends to have brown faces rather than white. So it is a social issue as much as an economic issue within New Zealand. We are addressing issues of attracting investment by reforming the Government’s own agencies in that respect and in the Budget I will begin making announcements about how we are going to change the environment for savings. There is already before the House legislation to assist infrastructure development in terms of roading. 
The public has a right to ask what the alternative is. The alternative is not in fact New Zealand First. No—as I said three digits will become two by the time of the next election. The alternative is the blueprint—or the blue as we prefer to call it—put out by the National Party. It is a document with not a single target not a single date and not a single detail about policy. It has nothing at all except one clear statement: National is not going to lower the company tax rate—which has been the central National Party policy for all the last 3½ years. Suddenly it was denied. Unfortunately National brought in a new person to go on the road to Damascus and he decided to have a revelation on the way in that respect. What National has of course is a policy of reducing the size of the Government because we all know that countries with smaller Governments grow faster than countries with bigger Governments. Does Dr Lockwood Smith not agree? He cannot answer that question but it was a pretty easy one—it was the first item of policy. If we look at the countries higher than us on the OECD almost every one except about two the United States and Australia have bigger Governments as a percentage of GDP than New Zealand does. They spend more on health more on education and far more on social welfare than New Zealand does and that is true of all the European countries that are above us on the OECD tables. The evidence simply is not there. 
National’s second policy is of course to reduce the burden of tax. But again the fact is that our tax burden is below the average of the OECD and particularly below that of nearly all the countries above us in the OECD. The countries that we have higher tax levels than by and large are the countries below us on the OECD tables—such as Turkey and Mexico. The National Party’s models are Turkey and Mexico and looking at them I can see why. It is always “tomorrow” and it is always an early Christmas as far as National is concerned. As Ralph Waters an Australian businessman has pointed out in Australia there are worse depreciation provisions there is a payroll tax people have to pay for Medicare there is a super tax stamp duty a capital gains tax and a land tax none of which exists in the New Zealand tax system for companies. Then that National Party document in the most extraordinary statement I have seen for many years states that National’s priority is to lower the tax at the top end of the income system. It seems clear that if National could afford to do only one thing in tax it would lower the tax at the top end of the tax system and do nothing for those at the bottom. 
If we look at the reform programme of the last 20 years what stands out? What stands out is the fact that this country has seen the highest growth in inequality of any developed country. The bottom deciles all lost real income between 1982 and 1998. The top decile gained 43 percent. If inequality is the engine of growth we should have been moving like an express train by the end of the 1990s. We were not. It is simply an excuse for greed on the part of the National Party and its base support group. It has nothing to do with economic growth. It is all about how they reward themselves and their mates. It is not about how to make an economy grow faster how to create a cohesive society or how to create social capital as Jim Bolger was once trying to create within this country. Then to improve the education system National is going to abolish zoning. I have just said that our biggest problem is at the bottom end of the system—and very few primary schools have zoning. We have a fully competitive system in the primary sector where kids can move from school to school and do move from school to school. Has that solved the problems of underachievement? No it has not. Indeed moving from school to school too much is one of the causes of underachievement amongst New Zealanders particularly low-income New Zealanders and it will continue. The National Party has no answers no timetable no solutions and no hope.