Parker David: Budget DebateText is incorporated into the Bound VolumeParker David: Budget Debate[Sitting date: 20 May 2014. Volume:699;Page:18091. Text is incorporated into the Bound Volume.]Hon DAVID PARKER (Deputy Leader—Labour): It was interesting that the Hon Steven Joyce did not talk about his own Budget. There is nothing in it to talk about. Those members on the other side are one-trick ponies. They think that the only thing to be done is to balance the Budget. I say one thing to Mr Joyce and that is that we would not have distributed our tax cuts in the way National has—40 percent to the top 10 percent of income earners.This Budget is underwhelming. I do give some credit to the Minister of Finance for getting back to break even. I do call it “break even” rather than “surplus” because there are enough “fudge-its” in there to show that it really is just a break even—the delaying of the ACC payback to New Zealanders through overcharging for ACC and the swizzle in respect of the Christchurch rebuild numbers. When Christchurch sees infrastructure rebuild costs going up it is because the Crown has decreased its allowance for Christchurch on the Government side of the ledger. It is hard to believe that that is right. Then it took out except in the contingency the cost of increasing KiwiSaver. None the less it is good that we are back to break even because Governments should live within their means.But this Budget is so underwhelming overall because a Budget should do more than just balance the books. Any responsible Government would address the long-term issues facing the country and this Budget does not. Let us start with low wages. What has happened in the last year? Forty-six percent—46 percent—of New Zealanders have had no increase in their wage rate in the last year and that is the official statistic from the labour cost index prepared by Statistics New Zealand. It is even projected that wage growth—real wage growth—going forward after inflation is on average less than 1 percent per annum over the next 3 years. That is really lacklustre in a country that has a low-wage problem. When people cannot afford to buy a house that is a terrible outcome. Why? Because the Government is so lacking in economic vision that it will not pull the levers that most people know should be pulled.We need deeper pools of saving in New Zealand. That is why we need universal KiwiSaver. The vast majority of New Zealanders agree with us and so does the business community. The reason that Australian businesses pay higher wages than New Zealand businesses is that they have invested more in their businesses through the product of their universal work-based savings scheme. What does National say? It will not go there—it will not go there.What is next on the agenda? We know that we need to push that money out of the speculative economy and into the productive economy so we need some pro-growth tax reform like with a capital gains tax. The Government says: “Oh it won’t work. It won’t work unless every house is included including the owner-occupied home which we would not endorse.” Well the Government’s problem is that—see page 1 of theNew Zealand Heraldtoday: “Support for capital gains tax”. Economists say that Labour’s 15 percent capital gains tax on investment property would work—it would work. So the Government fails on that front too.What is it doing more generally in respect of housing? It is drawing lines on maps. That is what its policy has been to date—draw some lines on maps. Not only that but when it had the opportunity to improve consenting for housing in Auckland through giving effect to provisions in the plan that would have enabled more dense housinginside the urban limit it would not do that because it is so doctrinaire in its opposition to things that actually work.What is it doing on superannuation? Well actually this year the New Zealand Government will spend more on superannuation than it spends on preschool primary intermediate secondary and tertiary education combined—this year. Is that not shocking? We as a country are going to spend more on superannuation than we spend on educating our young people. I think that that shows there is a need for reform of the age of eligibility for superannuation. The Government has not got any vision to fix that. It will not fix that on the saving side and it will not fix it on the expense side.On exports the Government was going to increase exports to 40 percent of GDP. It patently failed to do that. What do you need to do that? You actually need Labour Party policy whether it is on savings capital gains tax research and development tax credits accelerated depreciation or addressing monetary policy in the way that we have most recently proposed. All those things are connected. The reason why our monetary policy went down so well was actually that the public is seeing that. The public is starting to understand that rampant house price inflation in Auckland causes the Reserve Bank to push up interest rates despite the fact that general non - house price inflation is close to zero. And those increases in interest rates do not just hurt everyone paying a mortgage their credit card their hire purchase on their car or their borrowings for their business. Those increases also hurt exporters because they put up the exchange rate because New Zealand’s interest rates go further above international norms.Then what does that cost? That costs jobs. That costs jobs in the regions especially where we do not process our timber. We instead send more logs out raw. This Budget is underwhelming as evidenced by what the Government pushed through under urgency. Under urgency through all stages it pushed through the abolition of cheque duty to save 35c per person per year. That was the big idea in this Budget economically—35c a year saved on cheque duty pushed through under urgency because there was nothing else in this Budget that the Government could pretend was more significant.The Government has adopted some of our social policy—a pale comparison of it. Its extension to the parental tax credit does not touch the most vulnerable in a country where we have got increasing deprivation caused by higher house prices higher rents and higher electricity prices above the rate of inflation. Our most vulnerable people and the most vulnerable children get nothing. The National Government turns round and it says: “Oh this is all about beneficiaries.” You know New Zealanders have actually got a social conscience. They do not like to see these gaps rising. When their children are playing with the next door neighbour’s children who might be in impoverished circumstances they do not like to see those gaps getting bigger. This Budget is a disgrace on that front given that we have done nothing—nothing—other than to put off until next year children who are 12 years and under getting free doctors visits. Free doctors visits for under-13s is a good thing but it really does nothing to decrease the increasing gap between the most vulnerable children and others.We have rising inequality in New Zealand. I thought the most disgraceful part of the Prime Minister’s speech last week was when he pretended that we have not got rising inequality in New Zealand. He took the Bryan Perry data and he did not acknowledge the limitations of it. First of all it excludes capital gains so therefore it understates the economic income differences between low and high-income people because those capital gains are concentrated amongst the wealthy. In fact the top 5 or 10 percent earn more than 90 percent of the capital gains. We know that from the research we did around our capital gains tax. It understates income inequality but more than that we have moved as a country from being in the best third of countries in the OECD with low levels of income inequality to being in the worst 40 percent. We have gone right up thescale of income inequality at a time when the OECD overall was getting worse. We bucked the trend by being worse than the trend and the trend was already bad.The next thing to say in respect of overall inequality is that the longer you have that income inequality carrying on the more consequences pile up. They show up in things like homeownership. That is why New Zealand has the lowest rate of homeownership in 50 years. What did this Budget do about it? Absolutely nothing—nothing. A very minor measure around tariffs on imported building products that would save in respect of a new house—and that would only be about 1 percent of your houses—less than 1 percent of 1 percent of your houses which is so insignificant as to be derisory.Health spending is going down in real terms. The Government has lauded this change to general practitioner visit costs for children 12 years and under but it has ignored the fact that in real terms according to Treasury’s own model spending has gone down by 2.3 percent.Labour’s economic upgrade package will lift wages. It will lift investment into our productive export sector. It will dampen house prices. New Zealanders will be better off as a consequence. It will mean that New Zealand can have lower interest rates. We can get New Zealand’s interest rates back to where they are for our international peers rather than being perpetually higher than them. Those are the sorts of policies that New Zealanders need.The fact that the Prime Minister was so ashamed of this Budget that he went out there on the day of the Budget spinning about tax cuts and increases in GST shows how the Government’s policies have failed. National is falling apart on these things. He did not even tell Bill English that he was going to go out and say it because the Hon Bill English was so obviously blindsided and had to put down cover because its promises were not affordable. National has got no economic plan.