Parker David: Debate on Budget Policy Statement 
Parker David: Debate on Budget Policy Statement 
[Volume:653;Page:2081] 
Hon DAVID PARKER (Labour) 
: 
 One issue that I agree with most members of the House on is that there is not much doubt that the world is experiencing the worst financial crisis that has been seen in more than one generation. Indeed the level of financial turmoil in international financial markets is unprecedented during my lifetime and the worst since the 1930s. It differs from some of the other financial crises that have been seen in recent decades—the likes of the Asian financial crisis—in that it pervades the whole world rather than just parts of the world. It truly is significant. 
It is against that background that we are today considering the Budget Policy Statement. It really is true—as one commentator has said—that the tectonic plates of the world economy are moving. I think that is quite a powerful phrase—and it is true. It is at a time like this that Governments should be leading. Governments should be leading countries to position themselves to take advantage of the changes that come from movement in the tectonic plates of the world economy and to avoid the risks that open up through those changes. 
This Government has unfortunately not yet moved from Opposition mode to Government mode. That is another statement that commentators have quite accurately made. They have pointed out that the National - Maori Party - ACT Government is still in an Opposition mind frame and has not yet taken on the mantle of leadership that is required of Government. It is not for Government members to take pot-shots at others at the moment; it is for them to take responsibility for governing the country and to position New Zealand as it ought to be positioned to take advantage of the changes in the world economy and to avoid the risks that await those who do not prepare or properly take account of those changes. What saddens me is that in official documents we have acknowledgments as to the soundness of the fiscal position the current Government inherited from the previous Government but it is denied in the public utterances of the National Government members. 
I will mention just two matters that are contained in the Finance and Expenditure Committee report on the Budget Policy Statement and will quote from it. Before that committee the Minister of Finance acknowledged “that the Government started with a relatively low level of debt at 17 to 18 percent of GDP whereas some other countries started going into recession with gross debt at about 40 to 50 percent of GDP.” That is the first and the most fundamental difference between the position of New Zealand now and the position that New Zealand was in when Sir Roger Douglas and David Lange inherited the books from the Rt Hon Robert Muldoon’s National Government which left the economy in tatters. Now we have low Government debt as a proportion of GDP; then it was very high. That is a benefit that the current National Government inherited. 
The other benefit it inherited was one of the lowest rates of unemployment in the world. In recent years New Zealand’s rate of unemployment has been the lowest or second-lowest in the OECD. We have been flipping with South Korea for the honour of having the lowest unemployment rate in the OECD. Even at the end of last year unemployment in New Zealand was running at 4 percent when in most OECD countries it was a lot higher. Again in the official document—the Finance and Expenditure Committee report on the Budget Policy Statement—National members acknowledge this. They do not acknowledge this benefit in public discourse when they try to say they have inherited a difficult set of events but in the official document they are forced to acknowledge it. Again I will quote from the report from the Finance and Expenditure Committee: “The Minister noted that the Government started from a position of low unemployment and that Government forecasts do not predict New Zealand reaching the same levels”—of employment that is—“as the United Kingdom and the United States of America.” 
One of the changes happening here is that we are seeing the relative wealth of nations change. Even if the National Government completely mucks it up as it may well do New Zealand will rise in the OECD rankings because other OECD countries are on their way down the rankings and will pass us on their way to the bottom. The National Government cannot take credit for that. It will try to but the reality is that over the next few years even if the National Government does nothing New Zealand’s ranking in the OECD will improve. Countries like Great Britain and many others in Europe and the United States which clearly has problems are declining in their economies more than the New Zealand economy is suffering recession. Those countries already have high levels of Government debt. In some cases it is already at 50 percent of GDP. Huge deficits were being run at a time of plenty and as we come into a recession deficits in those countries will be even more difficult to control. 
When we listened to Bill English today not once did we hear him remind the public that in recent years he was calling for tax cuts to fuel the very fires of debt-funded consumption that he now criticises. In recent years we heard a call from the National Party for “tax cuts tax cuts tax cuts” at a time when Mr English knew those tax cuts would have been spent and would have further inflated the property bubble which would have further increased levels of private debt—which I acknowledge are a problem in New Zealand. 
Hon Dr Jonathan Coleman 
: Then in an election year you guys did them too. 
Hon DAVID PARKER 
: I beg your pardon I say to Mr Coleman? 
Hon Dr Jonathan Coleman 
: In an election year you guys decided you’d better do them as well. What was that about? 
Hon DAVID PARKER 
: Yes we did. That is right I say to Mr Coleman. We agreed to tax cuts that were counter-cyclical. We did not agree to tax cuts at the time when the economy was booming. We agreed to tax cuts when the economy was coming into a slower patch. That is how tax cuts ought to be managed not as that member’s party proposed in recent years. 
Let us also look at where risks and opportunities lie and at what the Government is doing. The Government says it is trying to position New Zealand for economic growth as we come out of this recession. What has it done? It has cut the research and development tax credit. We are one of the few OECD countries that do not have a research and development tax credit. The National Government cut that. The Government says we have a problem with too much private consumption fed by increasing levels of debt. I agree that that is a problem. What is the appropriate response? It is to encourage people to save more and consume less. What has the National Government done? It has cut KiwiSaver tax credits so that it can redistribute tax cuts on another front giving more money to the already wealthy at the cost of low and middle income people. The way the Government has distributed its tax cuts is in itself a bad thing. Perhaps even more important the Government cut the tax credit for KiwiSaver—so New Zealanders will not be saving as much. As a consequence we will have more consumption less saving and fewer investment funds available for investment in productive enterprise. 
What else has the Government done? It has been trying to spin this line that it inherited a very difficult financial position. I have already dealt with that largely but that does not stop National members turning up in this House and trying to blame previous Ministers for some cover-up that they assert has occurred in respect of the accident compensation scheme’s liabilities. The Government had a ministerial inquiry on that but the inquiry did not prove the Government’s thesis. It did not even get to the point of having to interview the previous Ministers the Hon Dr Michael Cullen or the Hon Maryan Street because the inquiry found that there was no ministerial cover-up; it was a mistake by Treasury. 
Even after that little fire that the Government tried to ignite was extinguished we then had Dr Nick Smith trying to invent another crisis by exaggerating problems within the accident compensation scheme. He exaggerated them to such an extent that not just one columnist but the  
New Zealand Herald 
 through Brian Fallow and John Armstrong the  
Dominion Post 
 through Vernon Small the  
New Zealand Herald 
 again through Fran O’Sullivan and the  
Sunday Star-Times 
 through Rod Oram all roundly criticised Dr Smith for trying to invent a catastrophe in order to justify his ends. Indeed Fran O’Sullivan went so far as to say: “There is a fine line between leveraging the impact of the international recession on the financial health of the Government’s own assets to create what in management speak is often referred to as a ‘burning deck’ to force radical change and downright chicanery.” 
That is one of the things the Government is trying to do. It is trying to hide its own mismanagement of the economy. It is trying to say that it inherited a difficult set of affairs and therefore ought not to be held responsible for its own mismanagement. What else has the Government done? It has cut fledgling industries like the biofuels industry. It has taken steps that will increase New Zealand’s carbon emissions and make the environment worse. That has a fiscal as well as an environmental cost. What will the Government do next? Superannuation is next.