Norman Russel: Debate on Budget Policy StatementText is incorporated into the Bound VolumeNorman Russel: Debate on Budget Policy Statement[Sitting date: 12 March 2014. Volume:697;Page:16587. Text is incorporated into the Bound Volume.]Dr RUSSEL NORMAN (Co-Leader—Green):I rise on behalf of the Green Party. I think it is important—just to frame this debate around the Government’s economic management and fiscal management—that we are coming up to an election on 20 September. Of course the Green Party will be putting up an alternative to the Government’s economic and fiscal strategy at that election that could be summarised as being that we need a smarter greener more compassionate Government than the one we have.I think that when you look at the economic and fiscal policies of this Government you get a sense of how badly it is doing. I wanted to talk about one way in which National has been consistent over all of these years because I think consistency is an important value and that is with regard to debt reduction. From 1999 to 2004 the National Party consistently opposed debt reduction at every opportunity. At every Budget from 1999 to 2008 when it was in Opposition it opposed debt reduction. It said that the surpluses the Government had should be given away as tax cuts to the wealthiest New Zealanders. National from 1999 to 2008 when it was in Opposition said that surpluses should be given away as tax cuts rather than being used to pay debt. John Key and Bill English put out press releases saying that the surpluses should be given away as tax cuts rather than being used to pay down Government debt.Fortunately the parties that had the dominant position in the House during those years—which I think probably were New Zealand First the Greens and Labour—were able to vote for Budgets that reduced debt. That meant that when there was the global financial crisis the Government of the day was in a position and had some fiscal headroom to deal with the challenges it faced. We would not have had that had we taken the advice of Bill English John Key and the National Party because they consistently said from 1999 to 2008: “Don’t use the surpluses to pay down debt; use the surpluses to give tax cuts to the wealthy.” Fortunately everyone ignored the National Party.Then there was a change of Government. Since the change of Government National has consistently advocated for increased debt. So every Budget since National took over has been a deficit Budget which has increased the Government’s debt—every Budget. Throughout the entire period of 1999 to 2014 a 15-year period National has consistently opposed every effort to reduce debt. That is quite an achievement in terms of consistency—it has consistently opposed it. Since National has been in Government since it took over the Government benches it has borrowed $50 billion to $60 billion.So you think well there was a global financial crisis and there was a Christchurch earthquake so there was reason to borrow money and there is certainly some truth in that but it was borrowing money for other things as well. Let me give you an example. National is borrowing $1.1 billion a year—that is $1100 million per year—to pay for the tax cuts for the top 10 percent of income earners which are the tax cuts that National introduced right in the middle of the crisis in 2010. When National became the Government after advocating for all those years to increase not reduce debt it immediately threw the Budget into a big hole by giving tax cuts to the wealthiest people in the country at an ongoing cost—we are still paying for this—of $1.1 billion every year which is a big hole in the Budget. You would have to say National has been entirely consistent over this 15-year period in increasing debt and advocating for increases in Government debt. Then when it got an opportunity to be in the Government it actually managed to do it—a $52 billion increase in debt since it has taken over the Government benches. So it is a very consistent position from National.I also wanted to talk more broadly about costs of living for people. We know that tomorrow the Reserve Bank may well increase interest rates—the official cash rate. We will find out in the morning. The two major drivers of inflation in the New Zealand economy at the moment are coming out of the housing market and coming out of the electricity market or so-called market—it is not actually a market; it is a jack-up. But they are the two key drivers of increases in the CPI at the moment. It is the increase in inflation coming out of electricity and housing that is putting pressure on the Reserve Bank to increase interest rates.The Government has persistently and consistently refused to take action to reduce increasing prices in housing and the increased prices in electricity. For example in Auckland since John Key became Prime Minister house prices have gone up 44 percent.Rt Hon Winston Peters: How much?Dr RUSSEL NORMAN: There has been a 44 percent increase in house prices since John Key became Prime Minister. This is just after the global financial crisis. So in terms of electricity since John Key became Prime Minister prices have gone up 20 percent. What we have seen is very significant increases in the cost of living for ordinary New Zealanders. The National members opposite are laughing about this because they could not give a damn about ordinary New Zealanders. They are laughing about the fact that ordinary people are getting priced out of the housing market. Ordinary people are struggling to pay their electricity bills and National thinks it is funny and says there is nothing it can do about it.National has made no efforts to deal with the inflationary pressures coming out of housing and electricity. The effect of that is that the Reserve Bank is very likely to put up interest rates tomorrow. Think about what that means for ordinary families. Not only can they thank National for the fact that house price inflation is out of control; they can thank National for electricity price inflation and their big bills in electricity which are out of control. Also their mortgage payments will go up because the National Government has failed to control inflationary pressure coming out of housing and electricity.Instead National has been defending the big electricity companies the vertically integrated generator retailers which have been pushing up the price of power. During the whole privatisation debate the Green Party was saying if you go ahead with privatisation the electricity companies will push to increase prices. Now what has happened? The National Government proceeded with privatisation and all around the country people are getting bills in the mail telling them that the price of electricity is going to go up because National forced through privatisation on a single vote opposed by most New Zealanders. Since privatisation the price of electricity is rapidly escalating.On top of that National refuses to actually make sure there is competition in the electricity sector that could actually put competitive pressure on prices. The result of that is that ordinary New Zealand families are facing very significant pressures in terms of electricity bills very significant pressures in terms of housing costs and rents and soon-to-be-increased mortgage costs because the National Government has failed to deal with these problems because National protects the big electricity companies rather than protecting New Zealand households. That is the fundamental reality of our economy right now.I want to now step back a little bit. We have talked about the fiscal performance of the National Party which has been to consistently support increases in debt over a 15-year period. I have talked a little bit about the pressures that are coming on households as a result of National’s agenda and policy—increased electricity prices increased housing prices and soon-to-be-increased mortgage costs. I want to talk now about some of the macroeconomic indicators for the New Zealand economy. The Government has made a lot of the macroeconomic indicators of the economy. So let us put together two basic numbers. We are looking at the best terms of trade for the New Zealand economy in about 40 years—our best terms of trade. The terms of trade are not determined by the Government of the day; they are simply the prices for what we sell to the rest of the world so they are controlled by the global economy. So the Government cannot take credit for the fact that we have the best terms of trade in 40 years. However at the same time we have a current account deficit that is one of the highest in the OECD. It is over 4 percent of GDP—one of the worst current account deficits in the developed world—at the same time that we have some of the best export prices in several generations.What does that tell you? Is this an economy that is performing well when even at the best point when prices are the highest we are still running very significant current account deficits? How do you pay for a current account deficit? I have asked Ministers of Finance from National about this before; they do not know. The answer is there are two ways to pay for a current account deficit. Firstly you borrow more—well we have seen that the Government is doing quite a lot of that—or secondly you sell assets and well we have seen quite a lot of the Government doing that.Across the New Zealand economy more and more large corporations are falling into foreign ownership to pay for the current account deficit. So when you look at it at a macro level—that is what is going on on the big scale for the New Zealand economy—we see that actually it is performing extremely poorly. Let me give you some other macro indicators—for example the number of unemployed. There are 50000 more unemployed than when John Key became Prime Minister. So in spite of all the talk from the Government about how well things are going there are in fact more people unemployed than when John Key became Prime Minister—50000 more unemployed.Let us talk about manufacturing. Manufacturing exports are in decline in real terms both simply transformed manufactures and elaborately transformed manufactures. That is the macro picture of a failure in fiscal and economic policy by this Government and that is why we need a smarter greener and more compassionate Government. On 20 September we are going to get one.