Cullen Michael: Imprest Supply Debate 
Cullen Michael: Imprest Supply Debate 
[Volume:628;Page:449] 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I move  
That the Imprest Supply (Third for 2005/06) Bill be now read a second time 
. The Imprest Supply (Third for 2005/06) Bill will ensure that the Government will have sufficient supply to meet further policy decisions following the introduction of the 2005-06 estimates and the Imprest Supply (Second for 2005/06) Bill as well as meeting any increases in demand for revenue expenses and other risks or contingencies in excess of the amounts provided for in the previous bill. It seeks the authority to incur expenses of $4.8 billion and to incur a capital expenditure of $1.1 billion. 
The primary reasons behind this bill are to fulfil certain commitments made before the election and certain undertakings given after the election to various other parties—in particular to raise the level of New Zealand superannuation to 66 percent of the net average ordinary-time weekly earnings from 1 April 2006; to extend the Working for Families package particularly in terms of increasing the abatement threshold from $27500 to $35000 from 1 April 2006; to reduce the abatement rate from 30 percent to 20 percent from 1 April 2006; and to introduce an interest-free student loan policy from 1 April 2006. 
Those measures will have a large impact on a large number of New Zealanders. Clearly all superannuitants will gain from the change from 65 percent to 66 percent. I emphasise that this is not a change to the statutory rate; it is an administrative change to 66 percent. It does not affect the statutory rate of New Zealand superannuation. The Working for Families package will lift significantly the gains to some 100000 families who from 1 April next year already qualify for Working for Families and it will extend the tax relief support to some 60000 additional families. The result of that will be an enormous improvement in the level of family income for a very large proportion of low to middle income working New Zealand families. It does not affect the incomes of those on benefits but those in employment. It is much cheaper and much more targeted and effective than any attempt to deliver the same gains at the same cost across the board by means of tax rate changes would be. 
The student loan policy of course was clear Labour Party policy before the election. I emphasise again that the operating provisions of that policy impact are estimated now at some $202 million a year by 2008-09. There is of course some anticipated increase in the uptake of student loans but the cost of that is included within the ongoing operating provisions impact. We cannot double count those if we understand actual accruals accounting. There is actually an interest rate write-off which is included within the operating provisions impact. The reason why National Party members keep getting the number wrong is that they do not understand that the existing student loan scheme already has within it a significant element of interest rate write-off. That is because firstly people who are students already do not pay interest and secondly the current Government changed the provisions in such a way as to ensure that people are paying 50 percent of their repayments in terms of capital repayment. That requires a level of interest rate write-off at the present time. That is why Mr Key keeps getting his numbers wrong and it is why that kind of smiling adolescence will not get him very far in terms of politics in New Zealand—because he lacks depth and any understanding of these kinds of issues. 
Hon members 
: Ha! 
Hon Dr MICHAEL CULLEN 
: I notice that Opposition members on the back bench are all saying “Haw haw” because it is pretty clear that most of the new members support Mr Key as the leader of the National Party and do not support the old one down there in the front. They cannot actually disguise the fact that they are salivating at the prospect of sticking the knife into the back of the old bull and putting the new bull into the No. 1 position—and they will hear a lot more about this from the Labour Party over the coming few months because we have seen this kind of dance from the National Party so often over recent years. 
The background of course is one of an economy that has been moving very strongly over recent times and indeed over the last year it has been moving more strongly than either the Reserve Bank or the Government would have wished to see. We are now seeing significant pressures in terms of inflation—which is running at around 3.5 percent or so per annum—a very tight labour market and a very substantial current account deficit as a consequence of a long period of an inflated exchange rate within New Zealand. What is National’s answer to this? It is to have a tax cut. Now even if one is an extreme right-wing economist—lined up against the wall truth-or-dare kind of stuff—the notion that the answer to a current account deficit excessive consumption and over-inflation within the economy is a tax cut is about as dumb as one could get in terms of macroeconomic management. It says that if people are spending too much money the answer is to give them more money so that they can spend even more. 
We look forward to the National Party trying to explain that extraordinary policy over the remainder of this evening and tomorrow afternoon because the essential difference in this election campaign apart from things like homophobia—and apart from things like scratching various little issues the word for which I am not allowed to use within this Parliament—was that National said that the surplus was so big we could give some of it away and have tax cuts as a consequence. So those members said: “It’s about time you got your dividend out of your sacrifices over the last few years.” In other words they said it was about time people got their dividend out of the Labour Government’s success in lowering unemployment and sustaining the rate of growth at around 4 percent or so per annum which the last National Government was completely unable to do for 9 years. It actually had a growth rate of 3.1 percent per annum on average over its 9 years in Government. 
Of course the fallacy in all of that is when the economy is running so strongly and we have those imbalances that we do not feed extra demand in by way of making large tax cuts and reducing the surpluses. [ 
Interruption 
] Who says so? Well actually if those members bother to read it— 
Hon Member 
: Treasury. 
Hon Dr MICHAEL CULLEN 
: Yes Treasury said that. Last week Treasury said that the Government should maintain the current level of surpluses and savings and the much-vaunted tax cuts would have been paid for dribble by dribble over the next 3 years out of cutting back the growth and spending—and I will come back to that in a minute. Yesterday the Reserve Bank said very clearly that the Government should not engage in any further fiscal easing. Now I have to explain to the members opposite that fiscal easing is not just spending more money; fiscal easing also includes cutting revenue. Fiscal easing is the gap between revenue and expenditure. 
The problem with the National Party is that it has convinced itself that revenue does not matter in that respect and we can cut it as much as we like. Of course the National Party is up to its old tricks already. I think it is amazing how quickly members of the National Party get house-trained. Goodness me if they were puppies within a day they would be asking to go outside—they are so good at being house-trained. Or perhaps in the National Party they never learn to go outside—I am not quite sure what the difference may be. Look what we have seen even with their maiden speeches. We have seen National speaker after National speaker call for more spending. They went around the country saying that the Government was spending too much—except of course in each member’s electorate where the Government should spend more. It is the old National Party trick of telling two stories depending on where a member is. So Paula Bennett wants to spend a lot more money helping people on the domestic purposes benefit to get a job. Mr Blumsky wants us to build Transmission Gully straight away; so does Mr Guy. Mr Clarkson who has temporarily popped in from God’s waiting room for the next 3 years and then will pop out again at the end of that particular period of time said that our roads are totally underfunded. He wants billions more to be spent on the roads each year and he wants the Government to spend billions more on building 6000 new houses every year. 
Bob Clarkson 
: Rubbish! 
Hon Dr MICHAEL CULLEN 
: In his maiden speech Mr Clarkson said that he saw that 6000 affordable houses a year are being built and sold by State housing. I ask Mr Clarkson where the money is coming from. It is coming from borrowing of course. Mr Clarkson has yet to work his way around little simple issues about arithmetic like that. It is not like running his business in the past. 
What about that member’s front-bench colleagues? Mr Ryall who has everything both ways in life—we know that only too well—said that we have to spend more money on drug rehabilitation services. Then Mr Ryall said we have to spend more money on aged care. Dr Brash putting aside all private and personal care said that yes we have to spend more money on aged care. Mrs Rich said we should spend more money on breast cancer drugs right now. Mr Power said we should spend more money on the police. Ms Goudie said we should put more money into subsidising passports and so it goes on and on and on. I predict that in the next 3 years we will see Mr Key get up and say that the Government is spending too much—ha ha laugh laugh as he does for 5 minutes—and we have to cut back Government spending—ha ha laugh laugh for 5 minutes—and every other National Party spokesperson will say that the Government is not spending enough in his or her area. It sounds just like the briefings to incoming Ministers.