Brash Don: Debate on Budget Policy Statement 
Brash Don: Debate on Budget Policy Statement 
[Volume:623;Page:18884] 
Dr DON BRASH (Leader of the Opposition) 
: 
 It is not really worth responding to that extraordinary diatribe. Let me just say that page 1 of the Budget Policy Statement states: “The Government’s objective is to increase New Zealand’s long-term sustainable rate of economic growth and to ensure—” 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. I would like to congratulate— 
The ASSISTANT SPEAKER (Hon Clem Simich) 
: No no. 
Simon Power 
: I raise a point of order Mr Speaker. Not only was that interjection by Mr Mallard not a point of order but it was deliberately designed to interrupt the speech being given by the Leader of the Opposition. The Minister should either be made to withdraw and apologise or be asked to leave the Chamber. 
The ASSISTANT SPEAKER (Hon Clem Simich) 
: The Minister knows that that was not a point of order and it should not have been raised. I will not require him to withdraw it but I am aware that he was trying to break up Dr Brash’s speech. There will be no repeat. 
Dr DON BRASH 
: On page 1 of the Budget Policy Statement the Government states that its objective is to: “increase New Zealand’s long-term sustainable rate of economic growth and to ensure the benefits of growth are spread across society.” Well how has the Government been doing? Despite the strongest commodity prices in a generation despite good seasons for the farming sector despite easy monetary conditions around the world and despite a strong inflow of people following September 11 the Budget Policy Statement notes that over the last 5 years growth averaged 3.7 percent per annum which is exactly the same growth rate as the average growth rate since 1993—and that was despite the adverse effects of drought and the Asian crisis in the second part of the 1990s. There has been no increase in the average growth rate in the last 5 years as compared with that rate in the 1990s. 
The Budget Policy Statement makes it clear that there has been no improvement in the trend growth rate since this Government came to office and that is not surprising. The Budget Policy Statement acknowledges explicitly that: “New Zealand’s recent growth performance can be attributed to past structural reforms that began in the mid-1980s which have resulted in a trend increase in New Zealand’s growth rate since the early 1990s . . ”. What has this Government done to improve the situation? Absolutely nothing—in fact worse than nothing! This Government has sharply increased the total tax burden. The real tax burden per capita has gone up from just over $9000 in 1999 to almost $11000 currently in real terms. 
 Secondly this Government has extended the range of incomes over which low-income people experience very high effective marginal tax rates—80c to 90c in the dollar. Is it any wonder that Treasury stated in relation to Working for Families that only 2 percent of sole parents might be encouraged off a benefit because of that package? The Government has increased business compliance costs. It has not reduced them; it has increased them. It has threatened future productivity growth by making the labour market less flexible than it was. 
What is the result of all this? First of all it is clear that the after-tax real income of the average household in New Zealand has not increased over the last 5 years. It is also clear that the gap between New Zealand and Australia in terms of average after-tax wages is widening. In 1999 it was just over $5000. Today it is almost $9000 a year. Last month the OECD put out a report that looked at the living standards in developed countries. Countries were grouped into four income groups: high high-middle low-middle and low. The high-middle income countries included Australia Canada the UK Italy France Germany—the countries with which we are normally associated. But we find that in that report we are in the low-middle income countries along with Hungary the Czech Republic Malta Korea and Spain. That is where we are after 5 years of this Government’s operation. 
When we look ahead we find that growth is projected by the Budget Policy Statement—not by the National Party but by the Budget Policy Statement itself—to be slower over the next few years. It has been 3.7 percent on average over the last 5 and the last 10 years but it is predicted to be 2.5 to 3 percent over the next 3 or 4 years. 
Hon Trevor Mallard 
: Let Gerry Brownlee speak! 
Dr DON BRASH 
: That is markedly slower than projections for Australian GDP growth I say to Mr Mallard. 
Perhaps aggregate GDP growth is not the best way of measuring growth. Let us look at per capita GDP. What we find is that for the last decade per capita GDP growth has been 2.5 percent per annum. The Budget Policy Statement states that it will slow down to only 1.9 percent per annum over the next few years. There will be slower growth over the next few years after nearly 6 years of this Government than there has been over the last 10 years. In other words the Government has failed miserably to increase New Zealand’s sustainable rate of growth which the Budget Policy Statement notes as a key objective. 
Nowhere in the Budget Policy Statement is there any indication that the Government intends to change its fiscal policy to improve the long-term growth rate. The Government seems intent on spending all the extra tax revenue it gets from growth and tax increases as fast as it gets it and a massive expansion of Government spending is projected over the next few years. We know—because Treasury has calculated it—that the extra tax and extra spending is costly in growth terms. A Treasury paper written last November and quoted in the Finance and Expenditure Committee report on the Budget Policy Statement estimated that a lower and flatter tax scale could add between 0.5 and 1 percent to our per capita growth rate a phenomenally large gain that would see us make rapid progress relative to other developed countries. 
Tragically the Minister of Finance disagrees with his own Treasury advisers and prefers to go on taxing and spending. Perhaps there would be some justification for that if there were any evidence at all that the additional spending would actually produce some social dividend. But we know that the Government has been wasting taxpayers’ money on a prodigious scale. Waste in the area of tertiary education appears to be absolutely enormous. We have been talking about Te Wananga o Aotearoa. We also know—because my colleague Bill English pointed it out the other day—that in the last 4 years the Government has spent $1.5 billion on sub-degree courses that students have not even completed. 
We know that there has been waste in the area of social welfare. Since 1999 there has been a 40 percent increase in the numbers of people on the sickness benefit and the invalids benefit. That is an incredible waste. There has been waste and bureaucracy in the health sector. Mr Cosgrove referred to the huge increase in Government spending on Vote Health in the last few years but where is the significant improvement in the number of operations conducted and where is the improvement in the health of New Zealanders? There has not been a measurable improvement in their health. The Budget Policy Statement is silent about this waste. It does not even attempt to question the huge surge in Government spending or the waste involved in that spending. This Budget Policy Statement is a testament to the failure of the Government’s fiscal policy.