Copeland Gordon: Debate on Budget Policy Statement 
Copeland Gordon: Debate on Budget Policy Statement 
[Volume:629;Page:1599] 
GORDON COPELAND (United Future) 
: 
 The debate on the Budget Policy Statement takes place at a critical time for New Zealand. Growth in the New Zealand economy has slowed appreciably. Business confidence is low and continues to decline. The merchandise trade deficit hit $7.1 billion for the year ended January 2006 which was the highest amount on record. That deficit represented 23 percent of the total value of all our exports which is the largest figure in 30 years. The people of New Zealand are more indebted than ever before with at least $158 billion now owed to overseas creditors. 
The only thing in all of that that is stronger than ever is the Government’s balance sheet. I must say that the Government has exercised a degree of prudence during the last 6 years of strong economic growth although I would argue that it has been somewhat tight rather than prudent. But it is certainly true that the Government’s coffers are now overflowing with riches and that its balance sheet is in tremendous shape. 
It is against that background that Treasury in its briefing to the incoming Government last year stated that although it believed that New Zealand is currently well placed in a fiscal sense the rate of spending increases in recent years will need to slow significantly to ensure long-term fiscal sustainability. But the Government’s Budget Policy Statement indicates that it intends to do just the opposite. Not only does it intend to ignore the recent advice of Treasury on that point but in fact it intends to go in the opposite direction. I will give some figures to back up the statement I have just made. 
For the year ended June 2001—the first full year after this Government took office—core Government expenditure was 31.3 percent of GDP. That figure reduced slightly to 30.6 percent of GDP for the year ended 30 June 2005 which is the date of the latest Government balance sheet that we have. However in spite of Treasury’s advice the Budget Policy Statement forecasts core expenditure to rise to 32.6 percent by 2008. That is 2 percent of GDP more than for last year. The total core Government expenditure in 2008 will be a whopping $55.4 billion. That is $9.2 billion or 20 percent higher than it was for last year. So in the next 3 years expenditure will increase as a percentage of GDP by 2 percent or in dollar terms by $9.2 billion. 
That is against the background whereby growth in the New Zealand economy has slowed from 4.7 percent per annum in 2003 to a forecast figure of less than 1.7 percent in 2007. So we have the contradictory situation that although the New Zealand economy is slowing—and slowing significantly—the Government is intent on going on a spending spree. Growth is down by 3 percent per annum but Government expenditure as a percentage of GDP is up by 2 percent per annum. So there we have it very simply: growth is slowing the New Zealand economy is struggling and the Government is intending to boost expenditure to that extent. 
I believe that that is fundamentally wrong. The Government must not imagine that it can spend the country to prosperity. That is an impossibility. It is like a man trying to swim to the surface with a great weight tied around both his hands and his legs. He will not make it and we will not make it either as a country if we go down the pretence pathway that somehow we can spend our way to prosperity. 
 It is also something that is fundamentally unfair and inequitable in terms of its impact on the New Zealand people. Whilst businesses have lost confidence and are retrenching and struggling to maintain profitability which has an effect in terms of their ability to pay increased wages and salaries or to take on extra people—we know we are now beginning to see lay-offs in many companies—those who happen to be paid from the public purse will be insulated from all that. They will be put into a privileged position where they are fine and dandy whilst those in the rest of the country which is actually the productive sector are struggling and struggling greatly. We want the productive sector of the New Zealand economy to grow—not the Government bureaucracy—and that message needs to be formally taken on board by the Government. It is better by far that businesses are allowed to swim than that the Government weigh them down. 
That is why the business tax review as part of the Government’s confidence and supply agreement with United Future—it is happening only because we asked and negotiated for it—coupled with a decrease in Government expenditure is so important. I put this proposition also to Dr Michael Cullen whose fingerprints of course are all over the Budget Policy Statement. I make the point that if he is prepared to spend $9.2 billion in extra money then he can alternatively use part of that for tax reductions for businesses. There is scope to do it and it would be a far better and more effective thing to do. The submissions to the Finance and Expenditure Committee from Federated Farmers Business New Zealand the Business Roundtable and many others all made this central point: it is time for the Government to rein in its bureaucracy and expenditure and to allow more of the hard-earned prosperity of this country stay in the pockets of businesses so that they can grow provide employment and increase the productivity rate and so that we can lift the living standards of all New Zealanders. 
I again say to the Government that it should be listening to that advice. There is actually no point in the Government having Treasury do the significant analysis that goes into the Budget Policy Statement if on such a central plank as that the Government continues to ignore Treasury. Dr Cullen told the Finance and Expenditure Committee today that in a sense he sees the boost in Government expenditure as stabilising the negative growth but I do not think it is the Government’s job to do that—that should be left to the businesses of this country. 
In addition as the Business Roundtable set out on its submissions on the Budget Policy Statement the Government should use its strong balance sheet to speed up investment in infrastructure. When I look at the statements of the Crown for the year ended 30 June 2005 and look down to net core Crown debt as a percentage of GDP do members know what I find? I find 0 percent. In net terms the Crown on its own balance sheet has no debt. I say to the House that if I were working as the chief executive of a large corporation and I had business opportunities for growth ahead of me but no debt on the balance sheet I would be sacked. That would be the reality because it is important that we go ahead and make investment in order to decongest transport in Auckland Wellington Tauranga and other places. It is extremely important that we upgrade the electricity grid so that we can get electricity to people at a reasonable cost. The Government should be using the strength of its balance sheet to get those sorts of things moving and moving fast. 
United Future favours borrowing for those projects with repayments spread over 30 years or so so that we can get ahead and do those kinds of things. Those are the sorts of investments that have the potential to grow the economy to grow our prosperity and to ensure that all New Zealanders are better off. That is not revenue spending; revenue spending is of dubious quality. It is actually good investment in the future of our country. It is the way in which we can boost productivity and support business and it is the path towards prosperity for our nation.