Copeland Gordon: Estimates Debate —  
Copeland Gordon: Estimates Debate —  
[Volume:610;Page:7162] 
GORDON COPELAND (United Future) 
: 
 The balance sheet of the nation is in great shape. Gross and net debit debt levels are better than target and the international rating agencies have continued to award the New Zealand Crown a triple A rating equivalent to that of the USA Japan and Germany. However the same cannot be said of the nation’s balance sheet. New Zealand is already the most indebted country in the OECD and the Budget projections forecast a deteriorating current account deficit over the next 4 years totalling a whopping $26 billion. Media commentators and others have asked me whether we should be concerned about those trends. I believe we should. 
It is as simple as asking oneself whether one is better off with or without a large mortgage on one’s house. We all know that freehold property is a desirable objective because we are then freed from the ongoing cost of servicing the interest and principal repayments on the mortgage. The same is true for New Zealand as a nation. According to the OECD report of 2001 servicing charges paid to overseas investors in New Zealand during that year totalled around $9 billion. That absorbed some 21 percent of our export income. As our debt level rises that percentage will also rise so that more and more of the funds that we earn by exporting will go into debt servicing. 
Further increasing debt means that New Zealand will face higher interest rates than other OECD countries in the future. We already have the highest rates now and that trend is likely to continue. In the short term that will appreciate our foreign exchange rate but in the longer term it is bound to depreciate it. Simply stated debt is not the route to wealth or sustained economic growth unless it is wisely invested to achieve a rate of return to our economy over and above the cost of the funds borrowed. 
If we are to turn that situation around and move on to a path of sustained economic growth for the New Zealand economy I believe we need to address a number of issues. Firstly greater encouragement needs to be given to private savings. The New Zealand Superannuation Fund supported by United Future makes a contribution to national savings but I believe that in addition greater encouragement needs to be given to private savings. Secondly I believe that personal income tax brackets need to be adjusted at the very least to reflect inflation. That would move the present bands from $9500 $38000 and $60000 to about $10500 $42000 and $65000. I believe that the Government has erred in not making those adjustments which would have meant tax reductions for all taxpayers. As a result New Zealanders are now over-taxed. 
For a similar reason we should immediately reduce the company tax rate to 30c. Since interest rates are higher in New Zealand than in Australia we cannot in my view afford to continue to run a higher tax rate. Companies are the engine of the New Zealand economy so we need to depress the accelerator a little and speed that engine up. 
I strongly believe that New Zealand’s economic interests would have been better served by the Government had it chosen to adopt United Future’s policy of indexing the tax brackets and cutting the company tax rate to 30c in the new Budget year. [ 
Interruption 
] I note that the ACT party apparently is in opposition to those two commonsense measures and I will remind them of that at the next election. 
This would have provided fiscal stimulus to the New Zealand economy at the very point at which it was most needed. Budget projections clearly indicate that we are looking at a halving of the growth rate—from 4.4 percent in 2002-03 to 2.2 percent in 2003-04. Surely in those circumstances and given the size of the surplus—which incidentally continues to run ahead of forecasts—we have a perfect opportunity to use fiscal policy to cushion the downturn minimise its duration and establish a pathway back to strong growth later this year. In the absence of fiscal stimulus we are now entirely reliant on monetary policy—a much more indirect route.  
I note that in interpreting these economic trends a number of economic commentators have suggested that the Minister of Finance act sooner rather than later to stimulate the economy through tax cuts or equivalent—perhaps as part of a Christmas package. Should he choose to do that he would certainly have United Future’s support. I am also deeply concerned that New Zealand has saddled itself with an unbalanced process in relation to the conservation estate.