Groser Tim: Motions — Family Support Tax Credit—Increase 
Groser Tim: Motions — Family Support Tax Credit—Increase 
[Volume:638;Page:8337] 
TIM GROSER (National) 
: 
 Two quite separate issues face this House in relation to the motion. One is a substantive question about tax policy design and the use of tax credits—I will come to that presently—and the other is an overtly political question that is raised by this extraordinary move to put on notice the motion that is before us today. On the substantive question I want to address not the misrepresentation of National’s views we have just heard from the Labour Party but Mr Copeland’s obvious concern as he feels the squeeze that no doubt all third parties are feeling when this Government’s popularity slowly wanes and he looks towards a political future perhaps with National. I say to Mr Copeland that he should not be concerned. He should listen explicitly to what my deputy leader the Hon Bill English has said. We have used tax credits as part of a system of tax policy. We recognise that families have special needs. We will unquestionably use tax credits for families in some way in the future. That is not the question at issue. 
But what this debate and those simplistic answers from grateful Labour Party supporters illustrate is that the Government has not got its head around the truly important issues of the detail of policy design. It may well be that Government members do not really comprehend how effective marginal tax rates will work in practice. It may well be that the large majority of New Zealand taxpayers would not understand the term “effective marginal tax rate” but I tell you what in due course they will understand how it cuts in at middle-income levels without any question whatsoever. When two partners have a conversation about whether one of them should take a job under certain scenarios it may absolutely follow from the way in which this tax policy structure has been put forward that they may collect only 30c in the dollar. That is when middle-income New Zealanders will understand—without necessarily knowing the term for it—what effective marginal tax rate policy actually means and what bad and sloppy design of tax policy actually means for them in terms of their future. That is coming around the pike. But on the underlying issue raised by Mr Copeland I say that yes National understands that families have special needs. We will cater for those special needs. We will use tax credits as we have in the past but in a more coherent way than this current package represents. 
The second issue is a political issue and it is this extraordinary motion. We can look at it in two ways. One way is to look at it in the way that Mr English did when he opened up debate from the National Opposition which was to put it in the context of this Government. We can look at the Order Paper as a signal of third term - itis and as a signal of a Government that really no longer has anything useful to say to the New Zealand people. Looking down the list of issues—all of them worthy—on the Order Paper we see the Oaths Modernisation Bill Conservation (Protection of Trout as a Non-commercial Species) Amendment Bill and we must not forget the Palmerston North Reserves Empowering Amendment Bill. All of the bills are worthy in their own right but frankly 10 or 15 years from now when we look back these bills will be seen as irrelevant scribbling in the margins of New Zealand political history. They will perhaps be remembered only by some unfortunate MA thesis writer doing her or his thesis in political studies or history and trying to explain why the Labour Party did not succeed in attaining a fourth term because it ran out of steam. I suspect that they are about the only people who will be interested in this essentially trivial agenda the Government is trying to convince the New Zealand people addresses the real issues facing New Zealand. It is for that strategic reason that the National Party although reaffirming the proper role of tax credits for families in the system will oppose the political purpose behind this motion which is to conceal the reality that the Government has lost the plot. It has run out of steam. It no longer knows what to do with the privilege of running the country. For that reason we will oppose the motion. 
Let us look beyond that to the context of what we really would expect the Government to be doing and what we really would expect if the Government were trying to put forward a coherent view that would tackle the real long-term structural issues facing this country including the issue of comprehensive tax reform. We know that this Government has ridden on the coat-tails of hard decisions taken earlier which created a tripling of New Zealand’s average growth rate. [ 
Interruption 
] Members opposite do not want to hear that because they have somehow amazingly convinced themselves that New Zealand’s improved economic fortunes began on the day Labour was elected to Government for the first time. The doubling of New Zealand’s per capita income and the tripling of New Zealand’s real GDP long-term growth rate are consequences of people taking real decisions to stabilise the macroeconomic policy framework to reduce unemployment from a high of 11 percent—23 percent for the Maori population—in the early 1990s and actually to come to grips with the fundamental issues facing this country. The Government has ridden on the coat-tails of some successful but hard-won policy change. 
Its first response has been then to introduce a welter of blather about knowledge wave economies and the—now to be late lamented—growth and innovation framework. Now it is about economic transformation. Essentially that is the same thing; it is to talk talk talk the language of economic change but just to fix political problems as they arise. This is so ably demonstrated by the particular motion before us today. We are seeing the wrapping of New Zealand in a blanket of mediocrity which is not addressing the long-term fundamental issues facing this country. 
It is not addressing the reality that we have for example a revolving-door policy on migration by which roughly 72000 people—on the basis of the last annual statistics I have in my head—came through. They have moved to New Zealand to become New Zealand citizens—and we welcome them—but we have had about exactly the same number moving out of the country. These people are not moving out because they are looking for higher unemployment benefits or better tax credit schemes; they are moving out because they no longer fundamentally believe that the New Zealand economy can offer them and their families the best route to personal advancement. 
Somewhat under half of the one million New Zealanders who live overseas live in Australia. They are automatically disqualified from the unemployment benefit for a stand-down period but that does not stop them from getting off their back seat and moving across the Tasman to take advantage of the higher level of real wages that is available there for them. We have a situation even at the middle level of the workforce. I remember a figure being given for fork-lift drivers’ earnings in 2005 converted to Australian dollars and applying then. The average fork-lift driver in New Zealand was earning A$10 less than his or her counterpart in Australia. New Zealanders are moving to Australia fundamentally because our productivity growth rate has slowed down. 
We have heard from various speakers today the continued plea for higher minimum wages. Minimum wages address—and this is arguable—an equity issue. They will actually do nothing in the long term to address the real issue facing this country which is the need for higher real wages. The only route to higher real wages is through higher sustained productivity. The big news in the last month—admittedly it might be to a minority taste but again people will work out for themselves what it means when they see their wage packets 10 years from now—is the slow-down in productivity growth. 
During question time I thought Dr Cullen was very ill-advised to correct our questioner who made the point that labour productivity of growth rates were the slowest since statistics were first recorded in 1988. Dr Cullen said: “The figure the member cites is labour productivity not total factor productivity”. Some people use the term “total factor productivity growth”. The answer there is even worse. The position in respect of labour productivity slow-down—to 0.4 percent in the latest statistics that are available—was accompanied by an increase in capital per worker. The consequence I say to Dr Cullen is that the really important measure of multifactor productivity—and I agree that this finally is the really important measure—actually declined from memory by somewhat over 1 percent compared with a long-term positive increase in multifactor productivity of around 1.5 percent. This is not some fine academic point. In the long run our ability to sustain higher productivity growth will be the difference between New Zealand moving forward and its becoming a backwater.