Cullen Michael: Appropriation (2002/03 Supplementary Estimates) Bill — Second Reading Imprest Supply Debate 
Cullen Michael: Appropriation (2002/03 Supplementary Estimates) Bill — Second Reading Imprest Supply Debate 
[Volume:609;Page:6362] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That the Appropriation (2002/03 Supplementary Estimates) Bill and the Imprest Supply (First for 2003/04) Bill be now read a second time 
. It is with pleasure that I rise to speak on these two bills. I noticed that while the Imprest Supply Bill was tabled not a single Opposition member went to pick it up to read what it says. That gives an indication of how informed they intend to be for the remainder of this debate. Opposition members will have had their speech notes written out long in advance without any reference to what is actually said in the Imprest Supply Bill. That is the nature of the modern Opposition. 
The supplementary estimates provide for new spending of some $312 million over and above that voted in the 2002-03 main votes. The majority of it $194 million goes to education in three main areas one of which is purely technical—depreciation of $83 million because of higher asset valuations requiring therefore higher depreciation provision. The other areas are the teachers’ pay settlement which cost $45 million in this year—somewhat less than the National Party thought we should have settled for—and the tertiary subsidy of $58 million which is a result of growth in the tertiary education system being higher than that forecast. Most of the rest consists of a series of technical adjustments rather than representing major new spending initiatives. 
The Imprest Supply Bill provides for supply for 2 months—in other words through to the end of August because the main bill has to be passed by 23 August. So funding will be sufficient for that 2-month period which is the norm—differentiated last year because of the Air New Zealand situation requiring rather more. Also the oncoming election required the Government to carry through to later in the year because the bill would not have been passed in time. 
It is worth repeating many features of the Government’s accounts and the economy and indeed the fiscal position that New Zealand faces at the present time. Over the last year or two—indeed the last 3 years—New Zealand has experienced strong economic growth. In the year ended March we had almost certainly one of the highest levels in the OECD and we are expecting continued growth above the OECD average over the coming 2 years despite the expected slow-down. It is the relative rate of growth that counts not the absolute rate of growth in terms of our relative standard of living. We have seen low unemployment dropping down to 5 percent which is the lowest for 15 years. It is not expected to rise significantly above that level over the forecast horizon. We have seen modest inflation of around 2.5 percent or so and we are expecting to see that figure fall back significantly as a result of the falling United States dollar impacting therefore on a strengthening New Zealand dollar. 
We are expecting as every forecaster is a slow-down during this year. Indeed it is clear that that slow-down is already occurring at the present time. It is not impossible that one of the quarters in the middle of this year will produce a negative figure. The second quarter in particular could produce that given the impact of reduced hydroelectricity generation and the impact that that has on the calculation of gross domestic product as a value-added measure compared with thermal generation of electricity. It is a technical effect rather than a real economy effect. We are expecting those figures to pick up again later in the year but there is great uncertainty still around the international outlook. We still have the follow-on impacts of the sudden acute respiratory syndrome epidemic (Sars); there is still considerable uncertainty in the Middle East; the European economy is clearly showing considerable inability to grow; and the Japanese economy is not moving outside the frame that it has been in for a good decade or more. 
But against that a number of things can be said. The United States economy's numbers are all starting now to move in the same direction; up until the last 3 or 4 weeks one could have said the numbers were looking pretty conflicting but those coming in now pretty much look towards a US recovery in the latter part of this year. The Sars epidemic seems to be getting under control and that I think will have an impact upon the regrowth of tourism in New Zealand later this year. As I said the slow-down is beginning to show up in some of the data—in retail sales figures in  
ANZ Job Ads  
indices and so on—but they are pretty much in line with the forecast within the Budget of a slow-down to growth of 2 percent or so over the coming year picking up thereafter but with a small increase in unemployment then falling back again subsequently. 
What that does say is both with the slow-down and with the uncertainty surrounding the outlook for the coming year and with indeed some somewhat contradictory taxation numbers starting to come through in the figures—which will be released before too long—the Government’s indication of fiscal caution is the wise one. This is not the time for Governments to be engaged in massive new structural spending or massive changes on the revenue side given the uncertainty of that outlook. [ 
Interruption 
] Of course Muriel Newman would give a structural adjustment. The ACT party has said that the figure for the operating balance excluding revaluations and accounting changes—$4 billion—should all be spent. It would actually spend the entire difference between cash movement in and out. 
I think the member should correct herself. She should read the pamphlet she has been having put out to every household which rashly is promising a tax cut that requires us to spend the entire $4 billion surplus. Of course the final operating balance is $1.4 billion. But more than that—as Dr Brash will realise not being silly enough to have made those kinds of remarks following the Budget—if we did that we would be rapidly moving back into substantial borrowing on the Government’s accounts because that $4 billion surplus does not include a large amount of capital spending which of course is not counted against the operating surplus under accruals accounting. We would very rapidly start moving back to rising debt-to-gross-domestic-product ratios with all the implications that would have for future Government financing. 
This Government has no intention of taking New Zealand back down that path and we are supported by 70 percent of New Zealanders in that respect; 70 percent of New Zealanders said in a poll that the Government was right to take a cautious approach and to keep its fiscal surplus. Those who argue otherwise are in the 30 percent minority and we are quite happy for all the other minor parties opposite to fight amongst themselves for that 30 percent of the vote if the parties on this side of the House can maintain the support of something like 70 percent of New Zealanders. There was a time in our history I have to say when the leaders of a Labour Government thought that getting more than 30 percent support for any measure meant it must be wrong and proved that the Government was being insufficiently courageous. This Government tends to take the rather different view that in fact it is desirable to work in harmony with the people rather than be in continuous warfare with them—not least because we all come up for a 3-yearly performance review carried out by the public at large and they tend to make their decisions in a fairly brutal fashion if a Government has got offside with them. 
The key budgetary features were funding for the growth and innovation framework in terms of support for research and development support for business incubators support for a whole range of initiatives in the business development area and looking forward to some significant tax changes particularly in the small to medium-sized business area. What we have had from the Opposition ever since then is simply a continuation of its history of sort of scab-scratching incompetence which is all it seems able to manage as a party. Mr English has fled to friendlier pastures in Washington DC. The latest polls show and we will see some more tonight on TV3 that the National Party is continuing to muck around in the doldrums while the Government is maintaining support at well over 50 percent within the opinion polls even the one the National Party relies on—the Colmar Brunton. 
On every key issue National members have decided to oppose what New Zealanders want. When we said we wanted more electricity they said that it should be free that there should be no cost attached to increasing the electricity supply within New Zealand. A brilliant piece of economics! 
On rail they have said we should flog it off again 100 percent to the Australians. That was actively supported by Mr Key in the House today despite the fact that on Monday night it became clear that Mr Little does not even know there is no subsidy of Tranz Rail at the moment—he thinks there is a $20 million a year subsidy of Tranz Rail now that the Government offered—despite the fact that Toll Holdings does not know about the safety problems on Tranz Rail which are public knowledge and in the public arena; and despite the fact that it seems to think it can have carry-forward of tax losses when it takes over Tranz Rail. It has not read our tax laws in that particular respect. The Toll Holdings business is a kind of “toll of doom” in terms of its approach to Tranz Rail. Meanwhile National Party members run around like a flock of sodden sheep in the rain hoping that Mary Poppins is coming down with an umbrella to try to turn them dry again at some time in the future. 
The ACT party has got itself into the funny position of being the biggest suckers on the public teat that there is keeping Mrs Awatere Huata’s $110000 while denying her a vote. Then we have the fraud over the operation of its electorate offices which all suddenly happen to be in Wellington. Then we have Ms Coddington going off at the Government’s expense for 4 months at Cambridge University while being paid a full parliamentary salary. And Mr Hide comes down to the House and talks about Maori broadcasters! That is from a party— 
Mr SPEAKER 
: I am sorry to interrupt the honourable member but his time has expired.