Brash Don: Estimates Debate —  
Brash Don: Estimates Debate —  
[Volume:610;Page:7158] 
Dr DON BRASH (NZ National) 
: 
 Mr Cosgrove made reference to the fact that the economy has been buoyant in recent times and indeed that is absolutely true. But as I have pointed out a number of times in this Chamber the reasons for that good growth have nothing at all to do with the present Government’s policies. The latest strong growth last year was due to the fact that in 1999 2000 and 2001 the exchange rate was at an all-time record low. It started falling in 1997 when Mr Peters was Treasurer and it declined right through 1997 1998 1999 and into 2000. That was the first reason we had strong growth. Secondly we had strong immigration caused by the very uncertain world economic environment—September 11 and similar factors. That had nothing at all to do with the present Government. Then we had good growing weather and even Dr Cullen would not claim credit for that. 
I will claim credit for the fact—often ignored in this Chamber—that through 2000 and 2001 we had damn good monetary policy that kept the economy moving at a brisk pace. None of those things have anything to do with the present Government’s policies. 
We are debating an appropriation of roughly $57 million for funding the Minister’s Treasury advisers. My worry is that the Government appears absolutely hell-bent on ignoring Treasury’s advice. In 2001 a Treasury economist estimated that if this country were to overtake the top half of the OECD within a decade it would require per capita growth in income levels of between 4.5 and 7 percent per annum. What did we get? We have a Government that appears to have abandoned any attempt to reach the top half of the OECD. In fact it has explicitly denied ever aiming at that objective. The Government did aim at that objective but it has now had to acknowledge that there is not a dog’s chance of meeting it. Far from trying to meet that objective almost every single policy the Government put in place is designed to slow down the economy. 
 For example Mr Cosgrove referred to the fact that this Government is committed to holding on to all State-owned enterprises. Yet we have Treasury advising the Government that the case for doing that is relatively weak—reported as recently as in last Sunday’s  
Sunday Star-Times 
. This Government puts its finger in the air and says what does the public—the lowest common denominator—want? There is no attempt to explain to the public why it makes sense to sell most State-owned enterprises. 
Mr Cosgrove referred to the fact that Government debt was down because the Fiscal Responsibility Act had mandated strong surpluses which he says this Government has continued. But most of the public sector debt reduction occurred during the term of the last Government—a result of large fiscal surpluses and the sale of certain State-owned assets. Instead of explaining to the public why that made good sense the Government simply says: “Whoops the public have not understood this issue. They do not understand why Treasury is telling us to continue this policy. We will simply stop the policy because that is what the public wants.” There is no attempt to explain to the public that unless the growth rate of the country is picked up this society will not survive. 
What do we have? Over the last 10 years we have had per capita growth in incomes of 2.5 percent. As Treasury pointed out that is not as good as we need but it is nevertheless better than it has been in the past. Looking forward what do we see? We see an economy that the Minister’s own Budget documents suggest will gradually slow down. It is based on an assumption that productivity per person will continue growing at about 1.5 percent per annum. That is about enough to get 1.5 percent per annum growth in per capita incomes—about one-third of that estimated to be required by Treasury in 2001. 
What on earth is the point of spending $57 million on Treasury advice when the Government simply ignores that advice? It listens to what the public is saying in their partial ignorance and says that whatever the public wants we will do—even if that is suicidal for the long-term future of this society. That is an abrogation of responsibility. It is focus-group politics—do whatever the lowest common denominator of the public wants; do not try to explain to them why different policies would make sense. As recently as last Sunday the Treasury reported in the media a relatively weak case for holding on to most State-owned enterprises. The Minister simply says that we said we would not sell them therefore we cannot. What on earth is the point of paying for good Treasury advice when the Minister routinely ignores it? 
In some cases the Government does not even seek Treasury input. The other day my colleague Bill English made the point that when Mr Mallard announced $34 million for the America’s Cup he did so with no evidence at all that Treasury had been consulted. Cabinet papers apparently make no reference to any check with Treasury in respect of that $34 million. Why? I suspect it is because the Government knew perfectly well that Treasury would suggest that it was an ill-advised use of taxpayers’ money. 
This Government talks about the need for economic growth. It has had it very easy for the last couple of years for reasons beyond anything it could control. It is forecasting a slowdown in growth and it is doing nothing discernible to increase that growth rate. That seems to me a serious indictment on what the Government is doing. 
Let me talk briefly about tax. The Government said in 1999 that it would increase the income tax rate from 33 percent to 39 percent but that would affect only 5 percent of taxpayers. We now know that that increase in the tax rate affects 10 percent of all taxpayers and the almost 20 percent of full-time earners who are now in the 39 percent tax bracket. We know that many New Zealanders paying less than that are hardworking diligent workers but we also know that the people in that 39 percent tax bracket are by and large those with the most skill the most incentive to innovate and invest—and those are the ones who have the most option to leave. If we are serious about economic growth we cannot afford a situation where roughly 20 percent of full-time taxpayers are into the 39 percent income tax bracket—which means that almost half the income earned above $60000 goes in a combination of income tax and other taxes. This is a Government that talks about a need for growth but at every step makes it less likely. 
Quite apart from that increase in tax—which was at least acknowledged by the Government before it was elected in 1999—there has been a whole plethora of other tax increases that it did not talk about at all before the election. We have seen the tax on income from trusts going to minors increased from 19.5 percent to 33 percent and there was no advice of that before the election. We saw the tobacco excise tax increased in 2001 by 23 percent. We saw an increase in the excise tax applying to petrol last year.