Parker David: Supplementary Estimates — Imprest Supply DebateText is incorporated into the Bound VolumeParker David: Supplementary Estimates — Imprest Supply Debate[Sitting date: 26 June 2013. Volume:691;Page:11298. Text is incorporated into the Bound Volume.]Supplementary EstimatesHon DAVID PARKER (Labour):What we did not hear from the Acting Minister of Finance Steven Joyce in his contribution was how the Government is going in respect of its promises at the last election. One of the Government’s promises was 170000 more jobs. It has fallen off that target. It is already clear that it is not going to make that promise that it made at the last election happen or anything like it and as a consequence the Minister did not address it. We have not heard anything of thatpromise. One of the shiny promises National used at the election was “Wave Goodbye to Higher Taxes. Not Your Loved Ones.” Since then 200000 New Zealanders have left permanently for Australia—200000. That is much more than the combined population of Dunedin and Invercargill much more than the population of Hamilton and much more than the entire population of Napier and Hastings combined. We did not hear anything of that.We did hear reference to growth rates. He made reference to the growth rate. He ignored the fact that our two largest trading partners Australia and China have had a higher growth rate than New Zealand. He ignored the fact that the latest OECD report made for salutary reading. The OECD survey records that New Zealand’s imbalances remain high. It lists some of them in the report and the Budget that the Minister has just referred to does not fix them. For a start it said that New Zealand has high levels of external liabilities and it records—it does not put it in these terms—that the imbalances in the New Zealand economy where we do not meet the cost of our imports and interest from the value of our exports are already bad. It shows up in New Zealand’s net international liabilities which are just about all on the private ledger and are amongst the highest in the developed world. Every year to the end of the forecast period whether it is the OECD or the IMF recording them they remain amongst the highest if not the highest in the developed world. The IMF says our external deficit is the highest in the developed world. The OECD says it is the second-highest after Turkey.The OECD also says that the consequences of the underperformance of the New Zealand economy in our two-speed economy are not visited upon New Zealand evenly. It records that we have become an unequal country and that under this Government that has got worse. We should not be surprised by that because 40 percent of the income tax cuts that the National Government brought forward after coming into office went to the top 10 percent of the population. The OECD report that I have got in front of me which is a June report—it is this very month’s—isOECD Economic Surveys: New Zealand 2013 . It records that New Zealand’s tax system is in the lower half of tax systems in terms of its redistributive effect so it is less redistributive than other tax systems overall. The report says that in particular in respect of capital income—and it is income in an economic sense but in terms of a tax definition it is capital income—it is one of the least redistributive tax systems in the world or in the OECD certainly.I am going to repeat something it says here. It says tax changes meriting consideration are those that are more conducive to both growth and equity and then it lists some. I quote from page 31 of the report: “New Zealand belongs to a group of five OECD countries with particularly high pre-tax capital-income inequality ... As much of this income especially at the top levels takes the form of capital gains the lack of a capital gains tax in New Zealand exacerbates inequality (by reducing the redistributive power of taxation). It also reinforces a bias toward speculative housing investments and undermines housing affordability”. So the OECD is saying we are unequal we are becoming more unequal in respect of this gaping hole in our tax system we are amongst the most unequal in all of the developed OECD countries and we have this strange tax system that does not tax economic income. It taxes a subset of it which is taxable income for the purposes of the Income Tax Act and it excludes capital income. The OECD is saying that not only would New Zealand be a fairer place but our economy would be stronger if we removed that imbalance.Why would that be the case? Well if we remove that imbalance we then get New Zealanders investing their precious investment capital on the basis of the productivity of the investment or the profitability of the business that is being invested into rather than on the basis of the tax bias that currently favours speculative housing. The ANZ in the last week has said in respect of the latest data that New Zealand has externalimbalances which are worrisome and are not fixed. It is effectively saying—again it does not use these words but it is effectively saying—that another promise of the incoming National Government which was to rebalance the economy towards exports and export-related jobs has not happened because its policies will not achieve it and that as a consequence it should be getting a fail on that.The second recommendation of the OECD was that we should have a tax system that uses environmental taxes to “help enhance the quality of growth”. That phrase “help enhance the quality of growth” is a quote from the OECD. It states that such taxes could include congestion charges or a tax on polluting activities or the removal of free permit allocation under the emissions trading scheme which it goes on to discuss. So it makes two very helpful suggestions. It says that if we want to have a stronger economy then we should be doing things that this Budget is not doing. Those are that we should be moving not to increase taxes overall but to change the mix of tax so that we remove some of the distortions in the economy. We would as a consequence if that happened be a wealthier nation with more jobs for our people and lower debt and we would be a wealthier country over time.The Labour Party says that we should have a capital gains tax excluding the family home. That would improve the economy it would improve the equity of society and it would take some of the heat out of Auckland house prices. The Reserve Bank data that the Acting Minister of Finance Mr Joyce today did not know about—and he admitted in question time that he did not know about it—shows that we have increased by billions of dollars the additional household debt that is owed by New Zealanders secured over their homes.The Acting Minister of Finance had a question on notice to him put down today that said: “What progress is the Government making to ensure future generations of New Zealanders are not saddled with excessive debt?”. So we in the Opposition party as is our right at question time asked him a supplementary question to that. We asked the Minister what the situation was in respect of the extra debt that was being taken on by the household sector in their mortgages because this was a question about New Zealanders being saddled with excessive debt. The Minister said that he did not know. He said that he did not know despite the fact that the Reserve Bank carries a data series that the Minister should have known about. I find it hard to believe that he did not know that it shows that with Auckland house prices increasing at the rate of 15 percent per annum at the moment we have got rampant house price inflation in this two-speed economy. The data series shows that already we have got over $180 billion of mortgage debt in New Zealand and that it is increasing at a very fast rate. The Acting Minister of Finance Mr Joyce denied knowing that today in the House.We have just heard a speech here in respect of this Budget and again he does not address this terrible misallocation of resource in New Zealand where we have got rising house prices and we have got an export performance outside of the primary produce sector that is woeful. The Minister again likes to dice his statistics and put ever more reliance on primary production and the related manufacturing and to deny the reality that we have had huge numbers—thousands—of job losses in manufacturing outside of the primary sector. We have had decreasing export receipts in real terms by 17 percent outside of that primary sector. The Government’s Budget will not do anything to fix that problem.