Parker David: General Debate 
Parker David: General Debate 
[Volume:674;Page:20263] 
Hon DAVID PARKER (Labour) 
: 
 The Savings Working Group reported to the Government earlier this year. It stated that “the economy”—that is the New Zealand economy—“faces serious structural and other problems.” What structural problems was it referring to? Primarily it was referring to the fact that we are not earning our way in the world. It was not so worried about Government debt; Government debt is bad and under this Government it is worse than it was because we have a $16 billion deficit. But the greater problem in New Zealand is that approximately 86 percent of New Zealand’s overseas debt is private. That amount is going up every year and is projected under the Government’s own Budget to go up every year because every year from now the current account deficit gets worse and that hole is plugged by more borrowing from overseas meaning that New Zealand gets poorer every year until the end of the Government’s projection period. 
I am not talking about the Government deficit here; I am talking about the overall wealth of our nation including both public and private debt. The Government’s own projection shows that at the end of its projection period if New Zealand is unfortunate enough to have a National Government re-elected for another term New Zealand will get poorer and then in the next year it will get poorer and in the next year it will get poorer still. That is why the Savings Working Group said New Zealand has structural working problems and it is right. Treasury agrees. If we have a structural problem we need a structural fix; we need to pull the levers that the Government can pull in order to get investment going into the right section of the economy—to grow the economy to grow exports to grow jobs and to reduce debt. 
Gareth Morgan said of the lack of a capital gains tax that it is “the biggest tax rort in the country and one that has cost us all dearly in terms of efficient allocation of capital economic growth and employment.” Westpac chief economist Dominick Stephens said “New Zealanders are incentivised to borrow money to buy land rather than invest in productive assets.” He said that if we introduced a capital gains tax then that incentive would be diminished and there would be a greater incentive for people to save via bank deposits or productive business ownership. 
He is not the only one who thinks that the Labour Party tax switch is a good idea. The New Zealand Manufacturers and Exporters Association says “The eradication of the capital gains tax harbour will help to lift productive investment. A more balanced tax system will see investment flow to the most intrinsically profitable areas of the economy rather than those that are tax advantaged.” The Productive Economy Council said the same thing: “A capital gains tax sends the right signals for investors and means those choosing to take the path of unproductive property investment will have to pay their fair share of tax. While fairness in tax is good the real long-term benefit is the chance to get more of our limited capital invested in making New Zealand more not less competitive.” 
As a consequence of that in part we have comments like this from John Roughan at the  
New Zealand Herald.  
He wrote “Tax-free capital gains on property investment is the one crippling flaw remaining in our economy. Economists know it accountants know it even if they don’t like it. Politicians of every party know it though none have had the courage to do anything about it.” That is until Phil Goff and the Labour Party took this on. The  
Dominion Post 
 said the same thing: “There is a gaping hole in the tax system. Different sources of income are taxed differently. Earn $50000 by working 40 hours a week and you will be taxed at the going rate for income. Make a $50000 profit on the sale of a rental property and you will not be taxed at all”. Even the  
National Business Review 
 says “Capital gains and property taxes may be touchstone issues—because of the logic of taxing all income regardless of source”. 
Pattrick Smellie pointed out that the poll of the Minister of Finance Bill English came out 88 percent in favour of our proposal. But still the rudderless National Government—without a plan for the economy—puts its head in the sand and accuses us of tax and spend. It cut one tax and increased another—and it is a tax switch. It says that when we cut one tax and increase another it is tax and spend. Patently it is not; this is a tax switch that enables 98 percent of New Zealanders to get an income tax cut and enables us to pay off debt faster than the National Government was going to and to return to surplus in the same year in which the National Government was going to. This is good policy. National is on the wrong side of this debate.