Huo Raymond: Debate on Prime Minister’s Statement 
Huo Raymond: Debate on Prime Minister’s Statement 
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RAYMOND HUO (Labour) 
: 
 This afternoon almost immediately after the Prime Minister delivered his speech to Parliament the  
New Zealand Herald 
 website published three opinion articles by three influential commentators. Mr John Armstrong started by stating: “John Key’s promised quick march towards economic nirvana still looks like progressing at little more than a crawl.” Note the word “still”. Brian Fallow went a little further: “Tax the prime minister proclaims is a powerful lever for the Government to boost the economy’s performance. It’s a pity then that instead of grasping that lever he is proposing to just crook his little finger around it. He endorses the tax working group’s analysis of the problems: … But he then goes on to rule out most of the options the working group put up for addressing these shortcomings…”. Bernard Hickey’s comment said it all: “John Key has just sent Generations X and Y a clear message: Leave the country now.” 
Paul Quinn 
: What do you think? 
RAYMOND HUO 
: That member is louder than the Prime Minister. Like the Leader of the Opposition the Hon Phil Goff said this afternoon in his reply to the Prime Minister’s statement once again we have heard the rhetoric but there is no substance. The statement has proved Dr Alan Bollard right: John Key’s promise to catch up with Australia is a hollow one. There is nothing in his statement that represents a step change. But the problem is—and let me quote Bernard Hickey again—the Prime Minister “did worse than nothing. He shut down the debate.” 
When his Government needed to do something he picked up an option that would hit the most vulnerable the hardest. Why do I say that? Because raising GST for instance would hurt most those who have to spend all their income to make ends meet particularly those with children or elderly people to look after. Culturally speaking Asians take responsibility for looking after their parents when they become less independent. It is very kind for the Prime Minister to say that he is acutely aware of the effect that raising GST could have on lower-income families. Therefore he said should an increase occur it would have to be accompanied by across-the-board reductions in personal taxes as well as upfront increases in benefits New Zealand superannuation and Working for Families payments. 
Let us do some simple maths. According to Treasury of the $2.15 billion tax take generated from raising GST only $200 million more in revenue would be left after people were compensated for the rise in GST. That is $200 million out of $2.15 billion. What is the point? Mr John Key while Leader of the Opposition was quoted in the  
New Zealand Herald 
 in October 2008 as saying that if National was elected and it did a half-decent job of growing the economy then increasing GST and the top tax rate would not be necessary. That sounds like an admission that National has failed on the economy. Even the Tax Working Group acknowledged that in terms of current income a higher GST tends to be slightly regressive. It added that there were mixed views within the group as to whether the efficiency benefits from increasing GST would be sufficient to outweigh possible equity effects. 
As we discussed on the Labour MPs’ blog Red Alert this afternoon focusing on the bottom 50 percent of taxpayers not the top 5 percent seems to be more sensible. I borrowed the idea from my friend Keith Ng whose research shows that New Zealand’s tax system is less progressive than Australia’s. Higher-income earners in Australia pay more tax both proportionally and in absolute terms. In New Zealand the total income earned by the bottom 50 percent of taxpayers is about 17 percent proportionally and the total tax they pay is 12 percent while in Australia the bottom 50 percent of taxpayers pay the same proportion of tax of 12 percent but the total income earned is 25 percent. That is to say Australia’s bottom 50 percent of taxpayers have a bigger share of the total income which means that income is more equitably distributed in Australia before tax is taken into account. If the National Government is serious about catching up with Australia focusing on the bottom 50 percent not only the top 5 seems to be the starting point. It also helps to understand why New Zealand incomes have fallen behind those of other countries we like to compare ourselves with including Australia. Between 1990 and 1999 the gap between wages in Australia and wages in New Zealand increased from 18.9 percent to 28.4 percent. 
David Shearer 
: How much? 
RAYMOND HUO 
: It was 28.4 percent. Since 1999 it has barely moved. Under the last National Government over its long 9 years average weekly earnings increased by only $1.31. In sharp contrast under 8 years of the Labour-led Government the rate of increase was 30 times that level. However over the past year under National we have fallen further behind Australia. 
Paul Quinn 
: Is this in the Public Service? 
RAYMOND HUO 
: While that member is talking we have fallen further behind Australia. New Zealand has gone backwards not forwards. The National-led Government has widened the gap not narrowed it. 
The only thing that has increased steadily however is the unemployment rate. New Zealand’s unemployment rate always lower than Australia’s is now 30 percent higher than it was at the start of 2008. Where is the plan today to get 168000 unemployed Kiwis back to work? 
Earlier this afternoon we had the pleasure to hear the speech made by the Minister for Ethnic Affairs the Hon Pansy Wong. We are pleased to learn that the Minister is going to do something about unemployment in terms of her portfolio and that she is organising an ethnic forum. I sincerely hope that the proposed forum will not be just another example of hot air or a diminished version of the talkfest of the Job Summit last year. The Asian unemployment rate hit 9.2 percent last week. My colleague Dr Rajen Prasad and I urged the Minister to take immediate action to advocate within Government to help jobless Asian people. The number of Asian unemployed in New Zealand is now higher than the national average. We need a real plan not empty rhetoric. 
Finally I totally agree with the Prime Minister’s statement that New Zealand’s future economic performance depends to a large extent on generating and using new ideas. Weta Digital Icebreaker Zespri and Fonterra which he cited are all good examples. Research and innovation are important. The research and development tax credits the Fast Forward scheme and tertiary scholarships in various forms are good policies and good investment. The New Zealand Manufacturers and Exporters Association Chief Executive John Walley said this afternoon: “jobs follow investment as night follows day”. Sadly for New Zealanders tomorrow is just another day. The Prime Minister’s statement to Parliament this afternoon offered no bold plan or any plan at all. Thank you.