Parker David: Budget DebateText is incorporated into the Bound VolumeParker David: Budget Debate[Sitting date: 26 May 2015. Volume:705;Page:3984. Text is incorporated into the Bound Volume.]Hon DAVID PARKER (Labour): The speaker who has just resumed his seat Jonathan Young asked what the Labour Government did with its nine surpluses in a row. We reduced Government debt—Hon Michael Woodhouse: There weren’t nine surpluses. There were eight.Hon DAVID PARKER: No we ran nine surpluses in a row—nine. Every Budget that we ran was a surplus for 9 years in a row in contrast—[Interruption] Obviously it is a matter of great sensitivity on the other side because the score is currently 9 nil. What did we do with those surpluses? We actually applied them to a range of things like improved education and health services but we also used a large amount to reduce Government debt. Gross Government debt was reduced from 40 percent of GDP to 18 percent of GDP and net Government debt was reduced from roughly 18 percent of GDP to zero zilch nothing nada—none was left—so much so that when Bill English inherited the books one of the first things he said when the global financial crisis hit and he was asked about the state of the Government’s books was that this was the rainy day that the Government had been saving for. I think his exact words were: “This is the rainy day that the Government has been saving for.”It is true that the Budget bounced well for the Government on the first day. It is normally the way in respect of Budgets and it was also true of this Budget. Why was that? In this case the Government had so depressed people’s expectations of the Budget that they were expecting that its promise in respect of reaching surplus would be broken and they were not expecting any money in it whatsoever for the vulnerable. So when the Government did announce $25 per week for beneficiary families people were surprised and gave the Government some credit for that. As Andrew Little has said on our behalf we give the Government some credit for that. We make a couple of points: the Government is now at the point where at long last it acknowledges that amongst some of our families we have very serious levels of deprivation and the Government’s own surveys show that. In those measures of deprivation they include things like quite often not having breakfast or quite often not having lunch never being able to pay your school fees sometimes not having shoes or a raincoat—those sorts of things. The Government now acknowledges that we have that sort of deprivation in New Zealand and yet the parents of those children have to look them in the eye and say that in this wealthy country that is New Zealand which has a rock star economy you cannot get breakfast until 1 April next year because this $25 a week does not start until next year. I contrast that with what the Labour Party plan was at the last election: for low-income families it was $60 a week for every child for the first 3 years of their life.I want to turn now to some of the other problems that are becoming clear the longer you look at the Budget. We of course now all know that the Government’s promise of reaching surplus has not been met. We also know that its promise not to introduce new taxes has not been met. We know that there is nothing meaningful to overcome the problems that we have in housing particularly in Auckland where we have the lowest rate of homeownership since the 1950s. Indeed one of the centrepieces of the legislation passed following the Budget was stopping the Government getting advice from Housing New Zealand despite the fact that we have a crisis in housing in Auckland. We have also got some terribly substandard housing in other parts of the country including in the provinces.I want to talk about the areas that relate to my portfolio which is export growth and trade. Today’s figures of merchandise trade—they came out today for April—show that for April 2015 compared with April 2014 exports fell by 5.5 percent. It is a drop of 5.5 percent year on year. This shows up in the Government’s forecasts in the external deficit that we have as a country. I know that I have taken many barbs over the years from Bill English saying that I rattle on too often about the external deficit. But the truth is that an economy is a bit like a household budget. If your economy is leaking money to the rest of the world it is just like your own family budget leaking money to somebody else. If you do not earn enough money to pay your bills then at the end of the year you either have to sell something or take on debt. Our economy is exactly the same. As an economy we do not sell enough in our exports to pay for our imports plus our interest and the dividends that we pay overseas. The current account deficit this year is projected to go to $13.7 billion. It is a huge amount of money. It is an extra $13.7 billion that we owe to the rest of the world in a combination of debts to the rest of the world and extra amounts that the rest of the world owns of us because we sell more of ourselves to them in order to meet that deficit.It is against that background that you have to ask what it is that the Government has done since it came to power 7 years ago to change the shape of the economy. How do you judge it? Well for a start you would say that one of the ways you could reasonably judge it is by assessing its progress against the very targets it set itself. The National Government came to office saying that we consumed too much in New Zealand we did not save enough and we needed to increase exports and savings. What has happened? Well it is true that New Zealand in the last 7 years has saved a little bit more. The vast majority of that is insurance receipts that have come in following the insurance claims in Canterbury following the Canterbury earthquakes and also when New Zealanders put their cheque books away because they felt vulnerable in the recession. But it is also true that we are now verging on the point—if we have not already crossed over it—where as a nation we are overall dissaving. We are overall dissaving at a household level.In addition to that our exports rather than going up from 30 percent of GDP to 40 percent of GDP which was the Government’s target have raced backwards. I say “raced” because they started at about 30 percent of GDP. The Government got them up to close to 31 percent of GDP and since then our exports as a percentage of the economy have dropped back. A couple of years ago they went to under 30 percent of GDP and now in the year we are having they are forecast to be 26.4 percent of GDP. So 7 years after this Government came into power saying it was going to increase exports from 30 to 40 percent of GDP the figure has gone back to 26.4 percent of GDP. Indeed even to the end of the forecast period which is 4 years out it does not even get up to 28 percent of GDP. That is a massive fail. What is causing it? Well as Gareth Morgan says in New Zealand we are a wealthy country but we misapply capital. We put our capital in the wrong parts of the economy. We do not save enough because we do not encourage enough savings and then the capital that we do apply we apply to the wrong parts of the economy rather than to the more productive parts of the economy. There is no doubt that the biases we have that encourage that outcome remain.That leads me to KiwiSaver. KiwiSaver has had the incentives for it cut. In the last week at great length we went through the eight changes that have been made to KiwiSaver by this National Government seven of which are cuts. I could not understand the Prime Minister at question time today when he said that this change will not change savings behaviour. It is just a nonsense. I think that all of us know that the days when economics was overrun with statistical formula are over. Behavioural economics is a very real part of economics and we know that if you are a young person starting out in your first part-time job probably earning only $50 or $100 a week and you are saving only a few percent of that and your tax is deducted from that then the amount of increments you are saving of $2 or $3 a week does not seem much. It would almost seem like you are not going to give up much if you do not do it. So a lot of people will not. If you have already got $1000 in your KiwiSaver account from the kick-start contribution and it is growing by $2 or $3 a week when you are earning only a small amount anyway it seems like progress and it seems like you have already got a significant nest egg.Good Governments build countries; this Government does not. This Government cannot build the export economy it cannot even build enough houses for people to live in and it certainly has not built the diversity of economic output that we need in order to employ people in well-paid jobs.