Budget Debate 
Budget Debate 
[Volume:654;Page:4077] 
Budget Debate 
Debate resumed from 28 May on the Appropriation (2009/10 Estimates) Bill. 
Hon GERRY BROWNLEE (Minister for Economic Development) 
: 
 One of the interesting things about the delivery of the Budget last week and the public commentary on it afterwards has been the way in which the Government has been greeted almost universally as having delivered exactly the right mix that is required for the times. I say “almost universally” because it has also been interesting to watch the Labour Party being totally caught in the headlights and unable to deal with this Budget in any concise or I suppose we could say organised fashion. 
At the start of the debate on the Appropriation (2009/10) Estimates Bill the Hon Phil Goff moved an amendment that amongst its many requests of the House suggested that the Budget needed to have a “plan to address the growing number of jobs lost and the increasing number of New Zealanders worried about losing their livelihoods and their homes.” At the same time we have Mr Goff out there railing against the decision to postpone payments into the New Zealand Superannuation Fund. Mr Goff appears not to understand that the money for those payments would have had to be borrowed. Each year that would have made a $2 billion addition to the growing deficit that the Government is currently trying to deal with. 
Hon Phil Goff 
: No effect at all on the net debt. The member would know that if he understood it. 
Hon GERRY BROWNLEE 
: Mr Goff can sit over there for as long as he likes saying it would have had no effect but the reality is that when someone borrows money that creates debt. There is no way that someone can borrow money without having debt. The consequence of that borrowing might well have been that the various rating agencies throughout the world took a dimmer view of the New Zealand economy. 
It gets interesting here because Mr Goff says we should not listen to the rating agencies as they are the people who loaned into the US markets in the last few years. His classic response is to say those agencies said Enron had a triple A rating and all the rest of it so we should just ignore them. Well if New Zealand was to just ignore them we would pay the price of their putting a negative rating on us. The reality is that this Government past Governments and all Governments for as long as New Zealand has existed as a sovereign nation have borrowed and need to borrow at the most favourable rates. The effect of what Mr Goff is suggesting would have been perhaps a 1 to 1.5 percent increase in the mortgage rates of all the people out there whom he claims in his amendment to be concerned about. So he is saying his party wants the Government to go into more debt in order to try to hold up a superannuation fund that may or may not be successful over the years to come and in so doing Labour is quite happy for the mortgage rates of New Zealanders out there to be put up by 1 to 1.5 percent. 
Hon Steve Chadwick 
: What about the personal guarantees? 
Hon Phil Goff 
: That’s right. 
Hon GERRY BROWNLEE 
: He is saying that is right. I ask him what sort of analysis he is getting there in Opposition. How many people in his research unit really understand anything about economics at all? 
The first point that needs to be made is that if the Superannuation Fund continued to receive its contributions at the current rate right out to 2030 at the very best it would have started to contribute to the payment of New Zealand superannuation at a rate of about 12 percent. That would mean that beyond 2030 the total amount of superannuation paid to New Zealanders under current entitlements from revenue collected at that time would be no less than 88 percent. Effectively that means that Mr Goff is prepared to say he wants a couple of generations of New Zealanders to pay higher interest rates for what might be a 12 percent discount on future superannuation payments. That is completely unacceptable. 
Hon Shane Jones 
: You’re cutting the pension Gerry. 
Hon GERRY BROWNLEE 
: Unfortunately Mr Goff has managed to convince some of the more gullible members in his caucus to believe in the sort of wizardry that he is trying to put out there such as the idea that we can just stack the bills up or whack it on the bill as has been suggested and expect future generations to pay for it. 
I heard Mr Jones over there ask about entitlements. I say to Mr Jones that he should breathe easy. I know that he is a man who is approaching 65 and that he is looking forward to collecting the pension. There is an absolute certainty that he will collect it and that successive generations of New Zealanders will collect it. A long time ago this country went through the argument about the age of entitlement and the percentage basis of the entitlement and all the rest of it. The National Government stands by those decisions completely utterly and totally to the extent that the Prime Minister has said he would resign if that was ever changed. 
Hon Shane Jones 
: He’ll be gone in 3 years. 
Hon GERRY BROWNLEE 
: Well he may not be gone by 2030. Things are going very well at the moment I say to Mr Jones. Mr Key is a young man and by 2030 he will be just a young chap. He will be only 69 and what would be wrong with him continuing in the role of Prime Minister? I find the ageist attitude from the Labour Party is just a little too much to take. 
Mr Goff also expressed in his amendment concern about the livelihoods of New Zealanders. Another thing he does not seem to understand is that ensuring access to capital for businesses is paramount for the maintenance of the workforce. There is absolutely no question about that. Not only would Mr Goff’s recipe see mortgage rates rise but also it would cause business lending to become much more costly putting considerable stress on the businesses that employ many New Zealanders. Mr Goff wanted to talk about his recipe in the House even today suggesting that some Treasury official backs him up. He is saying there is more money to be made by borrowing and putting money into foreign stock markets than by saving the money and putting it back into the economy of New Zealand. I ask whether Mr Goff and his finance spokesperson Mr Cunliffe are prepared to give a few tips to New Zealanders about where they might put their money in order to make such fantastic returns on the stock market. The alleged Treasury advice—and I stress that it is “alleged” Treasury advice—suggests that this particular method would return some 6.75 percent. The history of the New Zealand Superannuation Fund is that it has had an average return of just 3.65 percent since it started. 
We all know that if we ring up a broker and we have some sort of superannuation policy we are likely to be told that over a 30-year period we rely on about 10 to 15 good days in order to seriously move the funds forward. We know that in the last year thousands tens of thousands hundreds of thousands indeed millions of people throughout the world have had their retirement savings slashed to bits because those same funds had at least 10 to 15 bad days in a much shorter period of time. If Mr Goff and Mr Cunliffe know something that the rest of the world does not they need to share that information with Parliament today so that New Zealanders can make the decision to go down to their banks to raise loans and to put their borrowed money into the stock market or into other funds that Mr Cunliffe and Mr Goff seem to think would be very good for New Zealand. 
This Budget has focused on protecting jobs in the economy and indeed on creating jobs. In that regard I am delighted by the funding that has been committed to the fund for home insulation. Jeanette Fitzsimons and I have worked on that and we will be announcing further details of it on 18 June. We know it will effectively be a billion-dollar exercise because the Government contribution over the next 4 years of $323 million is just one-third of what will be spent on the insulation of New Zealand homes. Let us be clear that there are significant health benefits to be had through this programme. We are told that for a person who suffers from respiratory illness the cost of staying one night in Wellington Regional Hospital is about the same as the cost of insulating one home. Once again I congratulate the Greens on being able to get something out of a Government for once. Nine years of trying to cooperate with Labour gave them very very little indeed. It did not take a lot of convincing on our part that this was a very good policy and I am delighted to have been part of negotiating the policy and its design with Ms Fitzsimons. Appropriately this policy was announced prior to her stepping aside as co-leader of the Greens. 
METIRIA TUREI (Co-Leader—Green) 
: 
 Last week my colleague the Green co-leader Russel Norman said that environment funding had been shaved to the scalp—shaved to the scalp. We know that for every dollar invested in our environment many many more dollars are returned in the form of clean water flood protection native forest regeneration tourism sustainable fisheries healthy forests and high-quality agricultural products. New Zealand’s economy is 100 percent dependent on our environment. So only the foolish would use the scarce funds we have in a recession in such a way as to reduce our medium-term economic prosperity and our long-term environmental prosperity. Investment in our environment is an investment in our economy. 
We need only look at the hard numbers to see this proved. Some research that was commissioned from the period 2004-07 showed that economic activities arising on public conservation land on the West Coast led to 1900 extra jobs and extra spending in that region of $200 million a year. The Fiordland National Park produced 1600 extra jobs and nearly $200 million a year was spent in the Southland and Queenstown Lakes districts. Work on the Abel Tasman National Park produced 370 jobs and resulted in $45 million a year spent in that region. Work on the Queen Charlotte Track produced 98 jobs and resulted in $9.5 million a year spent in Marlborough. At Te Papanui Conservation Park in Otago near where I live something like $136 million of freshwater services were provided from that conservation area to the Otago region. The Department of Conservation does essential work environmentally and economically but because of underfunding it is forced to triage species and ecosystems. It has to care intensively for the few often at the cost of the many which continue to decline. 
The Department of Conservation is mandated to advocate for our natural heritage by the Conservation Act but it is forced to ration its advocacy for our natural heritage as a result of the Government’s fiscal actions. These cuts come at a time when New Zealand desperately needs to protect the clean green brand that underpins many of our export industries as well as our tourism industry. This is a time when we should increase our efforts to restore our environment and to look after the wildlife and the wild places that make Aotearoa New Zealand unique. From 2007 the tourism industry alone in this country has been worth $20 billion to the New Zealand economy and to New Zealand businesses. 
Last year under Labour the Department of Conservation was forced to restructure in order to save $8 million. But of course that was only a precursor to the new National Government’s crippling blow of a further cut in last week’s Budget—a cut that is $54 million deep. Communities around the country in long-established conservation organisations continue to pour their time and energy into protecting our water land and wildlife. The Government abandoned those organisations by cutting the Community Conservation Fund which is designed to support that local volunteer effort. Earlier today the Prime Minister described these cuts as modest and said it was not such a big ask to require the Department of Conservation to spend less in the current difficult economic times. Only 20 percent of the Department of Conservation estate receives the pest and weed control that is needed for it to thrive. The areas that do receive that service are already the highest-priority areas in the continuing battle to protect native trees native bird species and native plant species. The Minister of Conservation Tim Groser clearly knows nothing about the issues when he claims to be reducing low-priority pest and weed controls. Those areas that are of low priority get no service because this Government and previous Governments have failed to invest in that control. 
Similarly farmers fishers and tourism operators might respond to the Prime Minister and the Minister of Conservation by saying that it is not such a big ask to make protecting vital industries and the reputation of our country the Government’s highest priority and they may take issue with the Prime Minister for his description today of the conservation budget as excessive. On the contrary for New Zealand this budget is essential. The Bluegreens as Russel Norman said in his Budget speech will hang their heads in shame at the actions of the National-led Government. 
Charles Chauvel 
: So they should. 
METIRIA TUREI 
: I agree. As the Department of Conservation must reduce its work one wonders which further species and places will have to be abandoned. Which of our special places will the Department of Conservation no longer be able to defend? Which of our indigenous species does John Key think are OK to go extinct? That is the effect of last week’s Budget. It is outrageous. 
One area where our environmental protection laws are the weakest and where destruction and degradation continues—out of sight of course—is that of our oceans. Our ocean area is 15 times larger than our land area and we have recently gained the continental shelf to manage as well. There is no environmental regulation of the ocean beyond our coastal zone. We have no marine reserves in exclusive economic zone. Our much-vaunted oceans policy has been lost at sea for a decade. Scientists tell us that the oceans are acidifying and absorbing extra carbon dioxide from the atmosphere which is changing the pH level of the sea. This makes it much harder for sea life such as corals shellfish and krill to create the shells and skeletons they need. The impact of this on our marine biodiversity will be devastating and it will damage our kai moana resources and the communities and the jobs on which they rely. The UN reports that 80 percent of the world’s coral reefs may die within decades. Let us be clear that the seafood industry in this country contributes $1.7 billion to GDP and more than 26000 full-time jobs. Those jobs and that contribution are at risk if we do not protect our marine environment. 
In this context of weak laws vast geographic areas and vital economic interests budget cuts to fisheries compliance including cuts to the observer programmes are a form of economic suicide as well as being a form of environmental genocide. Members may have noticed recently that the seafood industry is running TV advertisements promoting its supposedly sustainable and environmentally friendly credentials to the New Zealand public. Indeed the Government has provided funding to the seafood industry to seek Marine Stewardship Council certification for a further five species. But this is utter “greenwash” by the seafood industry. The fishing industry knows that many of its practices are not sustainable yet rather than move to responsible and ecologically acceptable practices it seeks to woo the public with feel-good public relations. But it is the fishing industry that will suffer if our marine environment is allowed to degrade any further and our fish stocks fall any lower. It is its industry that will suffer and its jobs that will go. We cannot afford that at this time of economic recession. 
Similarly this Government has cut biosecurity surveillance by more than 10 percent. This is an invitation for disaster and economic hardship. These surveillance measures are essential to protect both our ecosystems and our export resources. On this point I think the Government will find that environmental groups and industry groups are agreed. On this point the Government will find that the Green Party and Federated Farmers agree that we need good-quality biosecurity surveillance not more cuts. Our future depends on our environment yet despite National’s platitudes about our children being our future this Government has cut off at the knees the opportunity to develop in our children the high level of ecological literacy that they and we need if they are to continue to work to protect the environment on which their future economic prosperity depends. 
The slashing of funding to education for sustainability is a disaster for our future. We already have something like 675 schools in the Enviroschools programme; that is nearly one-quarter of New Zealand schools are involved in the programme. Something like 210000 children benefit from the Enviroschools programme the Matauranga Taiao and the Education for Sustainability teaching advisers. John Key obviously thinks that conservation gets too much money and that the $1 billion allocated over 4 years is excessive. Yet we know that the conservation funding has in the period 2004-07 produced some $22.5 billion in returns to our country and to our economy. But despite the facts it appears that this Government will choose foolishness over wisdom choose short-term profits for the few over the long-term economic and environmental prosperity of our children and their welfare. Kia ora. 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I take the opportunity to briefly congratulate the member who has just resumed her seat Metiria Turei on behalf of the Labour Opposition. We congratulate her on becoming the new co-leader of the Green Party and look forward to working closely with her and her colleagues in the years to come to demonstrate to New Zealanders that there is an alternative to the current Government: one that is red with a good hint of green. Growth that is not sustainable is not true growth; it is stealing from the future to give to the past. Although we may not have all the perfect answers we look forward to working together with the Greens on the same pathway. We know that that pathway is not slashing the conservation budget gutting the Resource Management Act weakening controls on our environment by the Overseas Investment Office review— 
Hon Shane Jones 
: Squandering fisheries. 
Hon DAVID CUNLIFFE 
: —squandering fisheries or pretending that climate change does not exist. New Zealanders face a clear choice and it will come from this side of the House. 
The importance of the Budget debate is to provide the public an opportunity to reflect in more depth on the issues that have been raised in the Budget. It is incumbent on us to understand how this Government and the Prime Minister can look in the eye the 50-something-year-old New Zealanders who have been told in the last week in effect that they can no longer count on superannuation as they knew it that the superannuation accord is dead and gone and that there is no way that their pension can be funded on current assumptions. How does Bill English look in the eye the young people of this country—the bright and hopeful Generation X and Generation Y or the vulnerable Maori and Pasifika young people—who will be the first to be thrown on the unemployment queue and say to those people that not only do they have to make it on their own but they have to pay for the superannuation of our old people and that the Government does not have the courage to partially pre-fund them now. That is why in the last week the level of insecurity in our nation has grown as the older and middle-aged New Zealanders wonder how they will provide for themselves and their families and our younger people wonder why on earth it should be left to them to make up the difference. There are 37 billion reasons why there is no free lunch and the Government is not answering any of them. 
If we strip it down there are four key issues that are wrong with this Budget. Firstly it replaces one great con with another. It says there is a free lunch: we can have all the superannuation benefits we have now we do not need to pre-fund superannuation and we will not have to make up the amount out of taxes. Secondly it exposes for ever the great con of election 2008. A party campaigned for tax cuts it knew it could not afford and rammed them through Parliament in a charade before Christmas and now has to own up and say the cuts could never have been done. Thirdly this Budget lacks vision and strategy it is a “Road to Nowhere Budget” it slashes the programmes that would have fuelled the engine of growth and it slashes the confidence of businesses in this country that there is a pathway through this thicket of recession. Finally and perhaps of most concern to members opposite it is a political time bomb. Although it preserves something of the previous Government’s programmes for 1 year it defers to next year and the one after which happens to be an election year the savage cuts that are unavoidable if projections are to be believed. Members opposite know this. 
I return to the first of those four themes. Budget 2009 replaces one great con with another. It is the great con of superannuation; 37 billion reasons why it cannot be true that we can have our lunch and eat it too. There are 37 billion reasons why our young people either are being asked to pay the bill for middle and older New Zealanders or will have their pension entitlements cut. They cannot have it both ways. Mr English cannot have it both ways. The superannuation accord is broken. Superannuation entitlements as we knew them are dead and New Zealand has been plunged into a generational debate about superannuation that I bet that Government did not want to have because it has been caught telling porkies once again on the same day it broke the last monumental con to New Zealanders. 
Let us reflect on the only two real counterarguments that Mr English has raised to that proposition. The first is that pre-funding does not matter as the Superannuation Fund was only ever going to pay 12 percent of the cost of superannuation. We checked back on the previous Government’s analysis and statements and it turns out that after tax the fund was going to pay 25 percent of the cost of superannuation. That is now largely gone because the Government has created a $37 billion hole with no way of filling it. Mr English repeated the second counterargument today in question time. He asked if I had a mortgage whether I would invest in superannuation. Well most New Zealanders have mortgages and we have been encouraging them to have savings and a superannuation plan without which this country’s finances are screwed. So of course it is reasonable to have a mortgage and a superannuation plan because people cannot eat their houses. They either have to sell their houses to pay for their retirement or they have to have a pension plan too. Thirdly it is completely illegitimate to say that a Government is borrowing for superannuation any more than they might be borrowing to fund tax cuts of which it gave one-third to the top 3 percent of earners. They cannot have that argument both ways either. 
The second great theme of this Budget is that is exposes the great con of 2008. There has been a lot of public resonance on this one and it is not because the Government is repealing the tax cuts. Everyone knew the tax cuts were ridiculous everyone knew they were unaffordable and people are relieved to have the truth told. The tax cuts were ridiculous because on 1 April the Government took $750 million off the poor and gave it to the wealthy. The Government gave one-third of the total value of its 1 April tax cuts to the top 3 percent of earners. No wonder people are glad to see the tax cuts go! 
Hon Member 
: How much did they get? 
Hon DAVID CUNLIFFE 
: One-third to 3 percent of earners. Look at the members of the Government hanging their heads in shame. Did they really campaign throughout 2008 to do that? 
I note the cynicism of it. Mr Key is a smart guy. New Zealanders think he is a smart guy. He was on the Federal Reserve Board of New York no less which is a pretty good achievement for a boy from Christchurch. He expects us to believe that Lehman Brothers and his old firm Merrill Lynch could have hit the wall and he did not notice. Two months before New Zealand’s general election Lehman Brothers went bankrupt. One month before the election the IMF warned of a catastrophic recession yet Mr Key did not notice. He gave his personal guarantee to 3 years of tax cuts. He wrote that down on a piece of paper and here is the rub: that personal guarantee is worth exactly the same as his personal guarantee on superannuation. That is why New Zealanders are worried now. 
I have only 1½ minutes left and there is so much more to say; I will have another call later. Let me introduce two other key things we have to say. The first is that this Budget is a road to nowhere. As Rod Oram questioned what was Bill English doing for the last 6 months? Could members imagine even Sir Roger Douglas being made Minister of Finance and twiddling his thumbs for 6 months while Rome burnt? There are no new ideas in this Budget. There is no positive solution. There is no programme for growth. It is a road to nowhere. Even the programmes that were there—the research and development tax cuts KiwiSaver economic development with New Zealand Trade and Enterprise to get exports up—are all gone or cut back. What is there to replace them? There is nothing. There is no vision no strategy and no plan which means no confidence for New Zealanders and Kiwi businesses that they can grow their way through. Was that not the great lesson of the 1930s? Mickey Savage and Franklin Roosevelt built confidence with a plan. Bill English has no plan and that will drive New Zealand deeper into debt and deeper into the ground. 
Finally there was the political time bomb. National did not want to break the commitment that it would completely gut social spending in the first year so with a bit of sleight of hand it managed to keep most of it going for a year and then flatlined it. Only an idiot would pretend that there are no automatic inflators in health costs or superannuation. As a former Minister of Health I can tell members that one cannot avoid about $500 million a year of extra spending just to stand still because of the costs of medicines and our ageing population. 
Hon PHIL HEATLEY (Minister of Fisheries) 
: 
 I move  
That this debate be now adjourned 
. 
A party vote was called for on the question  
That the motion be agreed to. 
Ayes 69 
New Zealand National 58; ACT New Zealand 5; Maori Party 5; United Future 1. 
Noes 51 
New Zealand Labour 42; Green Party 8; Progressive 1. 
Motion agreed to.