Douglas Roger: Financial Review Debate — In Committee 
Douglas Roger: Financial Review Debate — In Committee 
[Volume:671;Page:17461] 
Hon Sir ROGER DOUGLAS (ACT) 
: 
 Where are we currently economically speaking and how did we get into our current position? In terms of income per person if New Zealand were considered a state in the Anglo world we would be 81st out of 82 such countries. We would be behind Prince Edward Island behind Tasmania and behind New Brunswick. Of these 82 countries the only country with a per capita income lower than ours is Wales. We have to ask how we got to that position. We need to remember that 100 years ago we were first and 50 years ago we were in fourth or fifth position. We might well ask what the heck has happened since. How did we get into the mess we are in? How have we managed to make ourselves so poor in relative terms? 
If we want to look at that we might look at where we were a few years ago compared with Singapore and where we are today. In 1960 New Zealand’s GDP was three times that of Singapore. By 2015—and probably earlier—Singapore’s GDP will be three times ours. Singapore has gone from having a level of GDP that was one-third of ours to having a GDP that is three times ours. We have to ask how that has happened. 
In a word it was productivity. In the end we get higher wages only through higher productivity. If we look at productivity per worker we find that in Singapore it is $182000; in New Zealand it is $93000. In the period between 1984 and 1996 our productivity grew quite rapidly. It has been in the years since 1996 that we have had problems. Why is it that we have gone down and Singapore has improved so rapidly? In a word I guess it is about policy. I will highlight some of the policy differences that have made the difference in terms of Singapore’s growth rate its improvement in productivity and therefore its increases in wages. 
First there is taxation. Singapore has a zero tax on incomes up to NZ$21000 then a tax of 2c on incomes from between $21000 and $35000. In other words Singaporeans pay virtually no tax until they earn beyond $35000. They reach the top rate of tax only when they earn $320000 and that rate is 20c in the dollar. We on the other hand reach our maximum rate at $70000 and that is a major difference between Singapore and New Zealand. It is one of the reasons they have shot ahead compared with New Zealand. 
The other area is expenditure. Government expenditure in Singapore is 17 percent of GDP. New Zealand’s expenditure by various measures could be as high as 50 percent according to one answer the Minister gave but the figure I would use is about 42 or 43 percent. The thing that has killed New Zealand more than anything else is the massive increase in expenditure that took place in this country after 1996 and more particularly from 2000 on. If one looks at the amount of Government spending per person one will see quite a big increase between 1970 and 1984. Government spending actually went down per person in real terms between 1984 and 1996 but then there was an absolutely massive increase in Government spending from 1996 to 2009. 
I think that was outlined in an article I wrote called “How the Labour Government Robbed You Blind”. It sure as heck did. It was responsible for a massive transfer of about $25 billion to $30 billion from the private sector to the public sector. The increase in Government expenditure that took place during that period of 12 years was $7567 per person. It had gone down by $320 in the 12 years before but then it went up by over $7500 per person over the 12 years from 1996. We saw essentially under a Labour Government an increase in expenditure of $30000 for a family of four. Members might well ask what this country got under a Labour Government when it increased expenditure by such a massive amount. It certainly went up quite dramatically under National between 1996 and 1999 but it went up primarily under Labour. I think a lot about what people could have done with that $30000 for a family of four. What did they actually get for that money? Most taxpayers are not really sure what they got for that increased size of Government. 
But it is not only in those areas. Certainly tax policy and expenditure are important but productivity has also hugely increased in areas such as health and education—it has hugely increased. In Singapore the Government spends only 3 percent of GDP on health. The private sector has a much larger role. In New Zealand we are looking at Government expenditure on health being 10 percent of GDP. It is 9 percent at the moment but it will soon be 10 percent. Under Labour we did not see an improvement in productivity in the health area over 6 or 7 years; in fact we saw the productivity of doctors in the health sector in New Zealand actually decline by 15 percent. We saw a decline in the productivity of nurses by 11 percent. Overall the decline in productivity in the health sector was I think 8 percent. One might ask how the rate for doctors can be 15 percent and for nurses can be 11 percent yet overall there is a decline of only 8 percent. The answer is that there were actually improvements in productivity in those areas that were largely covered by the private sector in public hospitals in New Zealand. 
I think we need to look at where we are going because unless we improve productivity we are going to fall further behind. In the public sector in areas like health and education we have the wrong focus. We are focused on the wrong things—for example we are focused on class size. I have asked probably 100 audiences around the country—and it is my request to members in this House—to hold up their hands according to whether they would want to put their sons and daughters in a class of 35 with a quality teacher or a class of 15 with a mug teacher. I have not had anyone hold up their hands for the poor teacher yet. We need to improve our productivity in all these areas and if we do not we are going nowhere.