Shearer David: Budget Debate 
Shearer David: Budget Debate 
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DAVID SHEARER (Labour—Mt Albert) 
: 
 That was an extraordinary speech by Phil Heatley who thinks that this Government has been responsible for bringing down interest rates as part of its policy. It probably has a little more to do with the world economic situation at the moment I say to Mr Heatley and the fact that interest rates in the United States are around 0.5 to 1 percent which is one of the reasons why our interest rates are so low not because of the policies of his Government. However his speech does show one thing. It underscores for me the degree of this Government’s understanding of the New Zealand economy and the way it is functioning at the moment. 
I remind people what was being said about this Budget in January or February of this year. This was touted as the innovation and savings Budget and Bill English has on record a number of speeches and comments which we can get off the web talking about exactly that. I listened to a number of different speeches by Wayne Mapp. He talked up Denmark as the great hope for New Zealand in the way it invested in research and development and the way it was progressing. Prime Minister John Key talked about the type of technology being developed in Taiwan. The only thing is that those examples have nothing to do with and no resemblance to the New Zealand economy. There is no resemblance no strategy and no plan that would allow us to think that the New Zealand economy is moving towards the sort of situation in places like Denmark Taiwan or Israel where Wayne Mapp is at the moment with the Prime Minister’s science advisor Peter Gluckman. 
National talked about boldness and step change. What have we seen in this Budget that allows us to talk about boldness and step change? I tell members what we have in the research and development sector. This is the front-page headline: “Reprioritising $36 million over 4 years”. Now that is bold! That will get us to where Denmark Taiwan Singapore and Israel are at the moment will it not! That is an overall drop in funding for research and development of $12 million so overall we are going backwards and that is exactly where this Government is going right now. 
We need a plan a strategy and a growth strategy to move our economy forward. We are not moving forward; we are going backwards. We have not seen any bold thinking. We have a $16 billion deficit. We were $5 billion in surplus just 3 years ago and we are going backwards. If we want to know what “bold” looks like let us take a look at some of the other countries around the world that we should be emulating and to which Dr Mapp looks to for inspiration although not much more than that. 
Let us look at Finland. In 1991 Finland had an inflation rate of 10 percent an unemployment rate of 20 percent and its sharemarket had halved. What did it do? It made some tough decisions but most importantly it increased its research and development spending by 70 percent putting it into the high-tech growth industries. Where is Finland today? Finland today is where we want to be and aspire to be but without a plan we will not get there. Finland also recognised that it needed to have a consensus on what was broken in the economy and its people understood that they needed to find the answers to their economic malaise and to promote economic growth. They also understood that their real resource was their brains and their smart innovative thinking. 
This is what they did: they increased their research and development spending by 70 percent and they charged ahead. We have gone backwards by $12 million in this Budget. We have gone backwards in the sense that our research and development spending as a proportion of GDP was 1.2 percent whereas Finland spends 3.5 percent and the model that Dr Wayne Mapp talks about Denmark spends more than 3.3 percent. This is where Finland Denmark and those other smart countries are going and where we should be going. 
So what is this Government planning to do? Last year it increased our research and development spending by $55 million a year. On the face of it that looks good but it spent it in the form of grants and vouchers. When we are an innovative company and we really want to expand and do more in the research and development sector we have to come along to a Government bureaucrat for more money so that we might be able to get a grant or a voucher. Do members know what happens? Sixty percent of companies that do that get turned down. They are not successful in getting those research and development grants and vouchers. They fail. So they go back and struggle along by themselves. What does that do to increase the amount of research and development by New Zealand businesses? We have a woeful spend within our businesses on research and development. What does it do? Well it actually does zero. Those companies are coming to the Government for money. They are not reorganising themselves and doing more research and development. They are asking for a handout from the Government. As a result in comparison with these other places we are going backwards not forwards. That is why straight after the delivery of the Budget 2 weeks ago the Labour Party announced its research and development tax policy for the coming election. It is 12.5 percent in terms of tax credits. Why did we do that? I will tell members why. It was because that increases the research and development spend amongst the companies that most need it. So instead of going for a handout they simply write it off the bottom line. It incentivises them to look at research and development within their company in a more strategic way. 
We know that research and development increases innovation and we know that innovation is the very thing that increases our economic wealth. Treasury itself says that every dollar spent through a tax credit will generate $1 extra in research and development spend by those companies. We are likely to see New Zealand starting to climb to the very place where we want to be where Dr Mapp would like us to be and where John Key says he would like to be as well. That is why it is Labour’s policy to increase our research and development. That is why two-thirds of OECD countries have tax credit policies. That is why Australia right now has almost the exact carbon copy of Labour’s research and development tax credit policy sitting in front of its Senate about to be passed into law. The Australians came over here and took our tax credit policy back to Australia and are about to put it into practice. 
We want an innovative clean green society where smart innovative thinking is the way to go promoting our economy and increasing our ability to grow rich. It is not a choice between agriculture and high-tech. It is not an “or”; it is an “and”. We need the agriculture but we need to develop this type of growth within New Zealand. This is $280000 per job and tax credits are a start on the path to that point. We have to look for a clean green clever and innovative society a place that Paul Callaghan calls the place where talent wants to come and live. That is what we aspire to— 
Mr DEPUTY SPEAKER 
: Give the speaker a fair go. There is too much noise with too many interjections. If members want to have conversations they should go to the lobbies. 
DAVID SHEARER 
: That is the sort of economy and the sort of society that I want to see here in New Zealand—a clean green clever smart and innovative country where people want to come and live. 
Can I just say in closing a special farewell to John Carter. We always have our differences but we have enjoyed having him in the House and I have learnt a lot from him.