Parker David: Taxation (Annual Rates and Budget Measures) Bill — First Reading Second Reading In Committee 
Parker David: Taxation (Annual Rates and Budget Measures) Bill — First Reading Second Reading In Committee 
[Volume:672;Page:18910] 
Hon DAVID PARKER (Labour) 
: 
 I will begin by correcting what I think is a misrepresentation of the real position in respect of wages that the previous speaker Mr Foss made in his contribution. He said that real wages after tax had increased by 6 percent since the date of the last election. Of course these averages can be very deceptive. That figure is only right if we include the top 10 percent of income earners. 
Craig Foss 
: Ha! 
Hon DAVID PARKER 
: That is true. If we look at the spectrum of wage increases across societal wages we see that more than half of New Zealand wage earners are earning less in real terms than they were at the last election. It is only if we weight that average by including the 10 percent of salary earners and wage earners who profited handsomely under National’s income tax cuts—in fact got 42 percent of the tax cuts—that the average that Mr Foss gave is correct. For the vast majority of New Zealanders that is not the position they personally have found themselves in. 
I will speak more on a topic that Mr Foss agreed was important which is savings. One of the things I want to emphasise as I said in an earlier contribution is what page 70 of the Budget shows being New Zealand’s net international investment position as a percentage of GDP. This is the figure that the Minister of Finance quite rightly has been emphasising in the House. This is the sum of all of New Zealand’s assets overseas—that is assets owned by the Government and private—less all of the debts that are owed to overseas and other people’s investments in New Zealand. It is our net investment position. In 2011 it is 78.6 percent of GDP which is slightly better than it was in 2010. From here on it gets worse every year. 
The Minister of Finance has been telling us that the biggest problem in the country is our net investment position and from here on it gets worse every year. That is the effect of the Budget and this legislation we are passing. How can the Government crow about that? It gets worse every year. In fact it grows from 78.6 percent of GDP now to 85.3 percent of GDP in 2015. We are told that we are already one of the worst countries in the world and the effect of this Budget and of the economic management of the Government is that by 2015 that figure gets worse and will be 85.3 percent of GDP. It is a sobering reality. It is a sobering reality in regard to the effectiveness—or ineffectiveness—of the Government’s management. 
Another point that I agreed with Russel Norman on in an earlier contribution was when he said “And to get there you’ve got to have a return to effectively property-based consumption.” In his view that is signalled by these Budget documents. Inside that figure is also an assumption that KiwiSaver will grow in the way the Government thinks it will as a consequence of the changes it is making to KiwiSaver. The regulatory impact statement that we provided in Parliament today talks about its assessment of the changes to KiwiSaver. 
Members should remember that the Government is predicting that as a consequence of this savings will still increase but that does not make common sense to me. If we are going to require people to contribute more to their savings with fewer incentives how can we credibly conclude that more people will do that voluntarily? How does that work? 
I am not the only one who is concerned about that. When I read the regulatory impact statement I see lots of riders in it about how the Government does not really know how this will pan out and it is not very confident about that. I will read out a couple of sentences. “The impacts of each option cannot be easily modelled using historical data given the relative newness of the KiwiSaver savings model nor is international comparison always appropriate given many of KiwiSaver’s unique features and New Zealand’s TTE model of taxation. Our analysis of the options is therefore dependent on behavioural assumptions for which there is minimal empirical evidence about individuals’ and employers’ responses to changes in savings incentives and other regulatory requirements.” That is the first thing I will read out. 
The next thing is: “We have also recognised that KiwiSaver is less than five years old. Since its launch in July 2007 there have been several significant changes to contribution requirements which have mostly affected employees and their employers as well as new providers entering into the KiwiSaver market. The KiwiSaver industry has not experienced any period of stability in which to establish its core products and this uncertainty and unpredictability is not helpful to either the industry or savers.” It then goes on to say: “The proposal to increase the compulsory employer contribution rate at the same time as increasing the minimum employee contribution rate will lead to some additional costs on businesses that employ staff”— as well as of course the employees who are contributing—“… in the short term this may reduce firm profitability.” 
Against that background and all those uncertainties how can the Government have any confidence that its changes to KiwiSaver will result in the level of savings that it is assuming? Therefore it is possible in my submission that if those people are not saving that money—the savings that this country so desperately needs to improve the productivity of our businesses so that we have more capital available to our businesses to grow and to invest in more expensive capital plant and other things to improve productivity—then we can have no confidence that the Government’s projections will be met. I tell Mr Foss in regard to his point about there being an upside and a downside in forecast that there is always an upside and a downside in revenue forecasts. The point the Opposition was making is that even the Budget documents note that there is a very large discrepancy between the forecast from the Inland Revenue Department and Treasury as to tax forthcoming from the corporate sector— 
Craig Foss 
: Over 4 years. 
Hon DAVID PARKER 
: Correct. In the face of that uncertainty the Government has not taken the prudent course in taking the lower number. It has not even split the difference between them. It has taken the most optimistic number and plugged it into its forecast. That is another example of wishful thinking on the part of the Government. 
Another area of poor practice according to the Opposition of which there is no precedent that I am aware is that the Government has said it will save $330 million per annum in respect of programmes it will cut but it has not identified them. We are expected to believe what the Government is saying that it can be relied upon to find those savings yet we are not told where Government departments are meant to look to find them. 
Another example of what seems to me to be voodoo economics is that the Government has imposed on every school in New Zealand the requirement to co-fund the superannuation savings of their teachers. The teachers are entitled as is any other employee to opt into the superannuation savings scheme called KiwiSaver. If they do that then under that scheme they will be saving 3 percent of their own salary plus the employer—in this case the schools—will have to match that with another 3 percent. That 3 percent—2 years ago it was 4 percent then it dropped down to 2 percent and now it is going to 3 percent in the middle—has to be funded by the schools now whereas previously it was funded by the Government. The Government used to fund that contribution to match the teachers’ savings. 
Where are the schools going to find that? Where will they magic that money from? There is silence from Government members; their heads are down. They know there is no answer to that. That is effectively a significant decrease in the funding of every school. I have been on a school board of trustees as have a number of other members of this House. Those schools are constantly fighting to balance their budgets. They are facing inflationary pressures in any event from power prices going up which by the way will only get worse if the Government sells off State-owned enterprises. That is also counted in its Budget forecast. Despite the fact that the Government pretends that this is not yet upon New Zealanders and that they have a choice it has already counted this in the Budget as if they had already been sold.