Debate on Budget Policy Statement 
Debate on Budget Policy Statement 
[Volume:670;Page:17068] 
Debate on Budget Policy Statement 
Debate resumed. 
LOUISE UPSTON (National—Taupo) 
: 
 Two weeks ago Christchurch was dealt a cruel blow with another vicious earthquake. The shocks reverberated around New Zealand and in fact across the globe. One of the things that has been particularly moving is the response not just from my own community but from those across New Zealand in Christchurch’s time of need. I thank all of those who have volunteered in the efforts to rescue and recover those who perished in the Christchurch earthquake. I also take this opportunity to thank those who are working in a less visible way—people like those who work at GNS at Wairakei for the vital monitoring work they continue to do around the clock. 
This is the debate on the Budget Policy Statement and this Government is providing significant assistance. Budget 2011 will have two main areas of focus one of which very clearly will be Christchurch. The Budget this year will ensure that the Government provides adequate resources to support the people of Christchurch and to help rebuild their city. But the Budget will also ensure that the Government plays its part in improving New Zealand’s savings by controlling spending increases and setting a very credible path back to Budget surplus. This is a Government that is rolling with the punches and Christchurch was a particularly hard body blow. It is the Government’s job to provide strong leadership and that is exactly what we have had with Prime Minister John Key. 
Sound fiscal policy was the priority for the Prime Minister when he gave a statement to Parliament earlier in February and sound fiscal policy is still the priority: promoting economic growth getting our books in order and controlling spending. These challenges are the same as businesses up and down New Zealand. Community organisations and families have to control what they are spending and reduce their debts. The previous speaker Mr Parker said that the contest is on on 26 November. Absolutely it is on. The biggest gap that is emerging is in the economic policies between this side of the House and that side. Members opposite want more tax and more spending. I can tell members that when I talk to my constituents they know that when they work hard every day they want to keep a little more of what they earn. 
I want to focus for a few minutes on the Christchurch earthquake before coming back to the other planks of our economic policy. As we have heard today Christchurch is an important part of where the Government’s priority will be. It will have a significant impact on our books not only in terms of increased spending but also in the loss in tax collected. We will take a responsible balanced approach to that increasing debt in the short term but also taking a closer look at our spending priorities. I think it is fair to say that the response to the immediate needs of the people in Christchurch in terms of rescue recovery and welfare has been outstanding. The focus now though is on restoring and rebuilding the city. 
National says that we are building the foundations for a stronger economy because we know that that is the only way we will provide New Zealanders with a better future. It is the only way that families will have more income through better jobs and therefore improved living standards. That was the Prime Minister’s priority before the earthquake and it will continue to be the priority. This is a Government that is focused on building a stronger future. We will continue to rebalance the economy away from debt-fuelled consumption focusing the Government’s spending towards savings investment and exports. 
I am not sure whether the Opposition has been listening to what the National Government has been saying in terms of priorities. Continuing to build world-class infrastructure helps businesses compete. In my own electorate the geothermal developments are a massive part of what is going on in Taupo. It is exciting to see continued projects such as Contact Energy’s Te Mihi project. Those will continue to create jobs in my electorate. More importantly we must help exporters to sell more of their goods to the world at better prices. Again the jobs in my electorate are coming from farming and forestry so we have to make sure that our export sector is growing not shrinking as it did in the last 5 years of the previous Government. As my able colleague Mr Bennett said we cannot spend money that we are not earning so I am not quite sure why members opposite think that money grows on trees and that they can increase their spending commitments as they already have—$5 billion and counting. 
We have to focus on reducing our reliance on foreign debt and on building up our own pot of savings and investment here in New Zealand. In order to see the importance of why we need to lift our national savings we need to look back at the state of the economy that we inherited from the party opposite. The economic growth we had in the latter part of the 2000s was fuelled by consumption and debt which ultimately was unsustainable; it does not take much to figure that out. In the 3 years leading to the global financial crisis our average annual GDP growth was less than 1 percent and on a per capita basis it was negative. That meant we went into recession at the start of 2008 9 months ahead of the global financial crisis. 
We need our export sector to be strong healthy and growing. As I said earlier the vast majority of jobs in my electorate come from farming and forestry. In the last few weeks it has been exciting to hear from our Crown research institutes and to find out just exactly how much value they are adding and will continue to add over the years ahead to our export sector whether that is in forestry agriculture or in exciting industries such as mining. A company in Tokoroa is expanding its export base because of work it is doing with Crown research institutes which means more jobs in Tokoroa and more export dollars for the country. 
On the issue of spending in the last two Budgets we have identified $2 billion of spending and redirected it to higher-priority areas—front-line services whether that is in health education or as our Minister of Police is doing so well keeping our communities safe. We are expecting to continue that work in Budget 2011. It is about paying down debt and spending a little less to make sure we have a solid foundation for sustainable growth because we do not want to have growth that is not sustainable over the longer period of time. 
I will talk briefly about our assets and about the fact that this Government needs to look at the assets we own and the model of ownership we have. Some of the State-owned enterprises that are being looked at in terms of a change of ownership model such as Mighty River Power have a significant operation in my electorate. It is interesting to talk to people about whether they believe we should be looking at changes to the way those assets are owned. It is quite heartbreaking to listen to constituents who have lost massive amounts of money they have saved and saved over decades in the collapse of finance companies. Those people see the opportunity to invest in solid companies such as Mighty River Power as an opportunity presented to them that was not there before. 
Another significant group who are interested in those investment opportunities are iwi groups. Following some of the Treaty settlements that we are proceeding with at a rate far faster than the previous Government ever did all of sudden we will have communities that will have money they will want to invest. They will invest locally in areas that will create jobs in their communities. Budget 2011 is about getting our books in order controlling our spending and reducing our debt. 
Hon TREVOR MALLARD (Labour—Hutt South) 
: 
 I will make a very quick response to the last point made by the member who preceded me Louise Upston. I make it absolutely clear that not one extra job for Maori will be created by transferring a taxpayer asset to Maori in the way she promoted. Not one extra job for anyone will be created by transferring a State-owned enterprise or part of one to Maori. There will not be one extra job in Mighty River Power from the transfer of ownership to Maori as she has just advocated in the House. 
I say to that member that the assets that have been built up in my grandparents’ generation in my parents’ generation and in my generation and have been paid for by taxpayers and by the people who have paid for the power should not be hocked off whether it is to Maori or to John Key’s rich friends offshore. I think that is wrong. It does not matter whether the member is prioritising Maori for the sale or prioritising John Key’s mates at what used to be Merrill Lynch and is now the Bank of America. Those assets should stay in the hands of the Government because it is the custodian of those assets for the people of the future. 
What is more on average the group of assets that is being proposed for sale is returning 15 percent a year. The Minister of Finance told us at a select committee meeting—and this might have changed slightly since then—that he was borrowing on a short-term basis at about 3.5 percent per annum and on a 10-year basis at about 6 percent. I ask what sort of business person would sell an asset that is returning 2½ times the amount it is costing for that capital. Retiring debt at a loss seems to be one of the maddest approaches. 
The other interesting thing we heard from Bill English was that he was worried about the risk. He was worried about the risk profile of the electricity companies in New Zealand. I just ask him what the risk is in the current ownership model. I cannot think of a much better spread of portfolios and I cannot think of a much better utility than those assets. 
Labour will protect those assets. They have been built up by past generations and we want Kiwis to own the future. We do not want just wealthy Kiwis to buy the shares then sell them offshore as happened with Contact Energy. We do not want only the wealthy to buy them and flick them off—sometimes at a profit and to be fair to them sometimes at a loss—to overseas owners. 
I will make another point. There has been a lot of talk about New Zealand going forward under the National Government. But actually New Zealand has been going backwards. I will ask a question; I give credit again to Cameron Slater because he has put it there. I ask members to just name me people who are better off under National. 
Grant Robertson 
: John Key. 
Hon TREVOR MALLARD 
: John Key is better off under National. He is better off by $1000 a week as a result of the tax cuts and by $100000 a week as a result of the changes in his net worth. I am not surprised that he is a tad out of touch—a tad out of touch! Not many families in New Zealand after they have paid all their bills for the week are $100000 better off. Therefore I can understand how people feel that the Prime Minister is slightly out of touch. 
I should have started with Canterbury and I will now make a comment about it. I have not made a speech of this sort a more general speech in the time since the earthquake. Like all of us we are dismayed with the situation. Many of us are scared for the future of Christchurch both in the social and economic sense and also physically. I am one of those people who believe—and it might be an old-fashioned belief and a myth—that bad things often come in threes. I am very very anxious about that. As recently as last night there was a major earthquake which I understand was only 2 kilometres down under the centre of Christchurch. It was only 2.2 on the Richter scale but when it is only 2 kilometres down it must cause enormous anxiety for the people of Christchurch. 
Although I give a lot of credit to many of the people who have been involved—and people have been involved on a voluntary basis—I think there are some questions around the organisation. I think the head of civil defence has made it clear that they have missed some things as far as Christchurch east is concerned. It is not sorted. I say also that some people who live on the other side of town are still waiting to be properly treated from September and some of those people have been hit again. The Government needs to keep on looking to its own organisation post this earthquake to make sure the step goes quite a long way further than on the previous occasion. 
I reiterate as I did today by way of a question to the Prime Minister that the Government will have to decide pretty soon whether it will put resources into reconnecting the sewer system and the water in the areas that as the Prime Minister has indicated are in effect going to be bulldozed and turned into parks. There are people in those areas. Some people know they are in those areas and unfortunately a lot of people think they are in those areas of Christchurch. When there are scarce resources and there are priorities to be set there needs to be some certainty as soon as possible. Clearly it would be foolish for those people to work on repairing their houses if in fact they will not get water back and the sewers will not work again. 
This Parliament is however back to some normal action. I think probably the decision of the Government to proceed with the seabed and foreshore legislation has taken us out of the happy families approach that had occurred before. 
I emphasise the importance that Labour puts on having a fair go and on young people having a fair go. I think all of us know of families that have invested their money have taken student loans have done everything right and have done what people have recommended to them. The kids have got their training and their degrees and if they are lucky they have got jobs at McDonald’s. 
I am concerned that well before this earthquake we were getting to the point where the skills of the country were not being used. Also very importantly a lot of the skills that were in demand had been run down by the current Government. Again I give the example of the building area where the trades training and the number of apprenticeships had been run down. The intake into those courses and the number of apprenticeships had been deliberately run down by the previous Government and the numbers going into pre-apprenticeship courses had dropped as well. We know that if we are not careful we will have to bring people from overseas to do the work that is necessary in Christchurch. 
My priority is for Kiwis to have a fair go to get the skills to get the jobs and to get ahead. The National Government has no plan. It has no long-term plan and it does not have even a decent short-term plan. It does not seem to have a plan beyond the plan for the next photo opportunity. We want New Zealand to get ahead. The National Government shows no sign of wanting that. 
CHRIS TREMAIN (National—Napier) 
: 
 It is my privilege to round up the Budget Policy Statement debate this evening and to remind people out there in New Zealand that the Budget Policy Statement is in fact a forward-looking document looking at the future of New Zealand. I will start by briefly looking at this forward-looking document and in particular at the fiscal strategy of New Zealand and what the document projects both in terms of revenue and the balance sheet. I think it is important that we do look forward. There has been a lot of time spent tonight looking back in hindsight at what happened in the early 2000s and recently but I think we need to focus particularly in light of the earthquake on a forward-looking vision for this country a go-forward intention. 
In terms of the fiscal strategy it is clear that we reached the lowest position in our operating deficit in the 2010-11 year with an $11.1 billion deficit. But from here on in the projections are good with the deficit reducing to the point where in 2015 we break even and by the early 2020s there will be significant surpluses for the country again. So let us be under no illusions: this is a good-looking Budget Policy Statement. In terms of our debt profile yes I acknowledge that we are incurring significant debt as we go through a difficult period during this recession as we get out of it as we fund education as we fund health and as we fund the earthquake recovery. But the reality is that this Budget Policy Statement projects that by 2015 we will peak with our debt at about 28.5 percent of GDP which will still be one of the lowest debt-to-GDP ratios in the OECD. From that point on as we make surpluses and are able to pay down that debt and as our economy grows relative to that debt our debt profile will reduce. So by the 2020s we will be back down to about 20 percent of debt to GDP. So we are looking forward in a great position. 
We have to remember that this Budget Policy Statement was written before the earthquake. We have to acknowledge that there will be an additional hit on the books as a result of the earthquake. I will make a few comments about that. I had the privilege of going down to Christchurch to help some of my colleagues and to help in some of the suburbs of Christchurch. The thing I want to say about it which a lot of people are not recognising—and it is a terrible tragedy—is that it was quite localised. Some suburbs have been terribly affected but suburbs close by have not been affected in nearly the same way. The reality is that a supermarket in an affected suburb is no longer open but the supermarket in the suburb next door is open and the same goes for petrol stations. So there will be some real winners and losers in that retail sector. Some supermarkets will really struggle but others will be in for a significant gain. The same goes for light manufacturing in Christchurch. As one drives around the back of the airport towards the A and P showgrounds where Federated Farmers are based one sees that all the light industry was up and running a couple of days after the earthquake had happened. That is good for Christchurch. Many of those light manufacturers and exporters are still operational. 
The central business district clearly is in a significant situation and is a terrible disaster area but many of the businesses provide services. Although businesses like PricewaterhouseCoopers and other businesses that provide accounting and financial services will take an immediate hit—there is no doubt about that—I think we will be surprised at how quickly they are able to re-establish themselves in other premises and get under way. I believe in these people. The entrepreneurial spirit of Christchurch people—the innovators out there—will lead them to find ways to get on with their businesses as quickly as possible. Television One interviewed a hairdresser who had moved out of town and had brought his clients with him. He was operating in the front part of a clothes store. Those businesses will get up and running quicker than we think. Although they will take a hit and certainly our Budget Policy Statement projections will be hurt I am confident we will get through this and I have confidence in the people of Christchurch. I am very proud of what they are doing. 
The other thing that excites me about going forward and looking forward is what is happening in the provinces in places like my own province of Hawke’s Bay and Napier. Today rather than dwell on the past I will focus on what the business people there are talking about and how they are looking forward in the environment and part of the structure that the Government is providing for them. I will start with farming. I rang a couple of guys up in Hawke’s Bay like Jeremy Absolom. He is on the board of Silver Fern Farms and runs Rissington Breedline. He is extremely excited about the future of the lamb and beef industry in the country. Silver Fern Farms has been the beneficiary of the Primary Growth Partnership. The Opposition talks about cuts to investment in research and development but there has been massive investment in research and development through the Primary Growth Partnership with the likes of Silver Fern Farms benefiting from it—and it is very excited. 
On Sunday I had the privilege of going to Napier’s Great Long Lunch where I met Gary Collins. He has a farm on the Waipatiki-Napier road. Mr Collins said: “For the first time in a long time I have nothing to grizzle about.” That is a comment from a farmer in New Zealand. He said: “For the first time in a long time I have nothing to grizzle about. I have had good grass growth through the January and February period. My lamb prices are $148 to $150. Wool prices are 50 percent higher than they were. I am actually going to make money for the first time in a long time. And while I use up my tax losses eventually I will have to start spending or paying tax again.” That is exciting news. 
Our apple orchardists have been in a difficult position for many years. I do not think we really appreciate how good the announcement by Julia Gillard is for the New Zealand apple and horticultural industry. It is huge. It will mean that apples end up in Australia years and years before they would have got in otherwise even though the World Trade Organization’s decision was pretty straightforward. Apollo Pac which is owned by a guy called Ross Beaton has a thousand employees in Hawke’s Bay. He is really excited about the opportunity to use the cool store to deliver containers out of the Port of Napier into the eastern ports of Australia 52 weeks of the year. It is exciting news. He is really excited about his business. 
Just 2 weeks ago we were at the McCain Foods factory with the Prime Minister to announce a $20 million investment in a new pea and corn line at the plant. It will bring new growth new jobs and new opportunities for farmers. Businesses create the jobs that create the growth. I am really excited about the future in that regard. 
Another example is Pan Pac Forest Products up in Hawke’s Bay which is one of the bigger employers up there. It produces pulp and paper and is also a big sawmill. It is investing tens of millions of dollars in the sawmill bringing on another shift of workers—not minimum wage employees or those on $15 an hour; they are earning $30 or $35 an hour. Another 40 to 45 jobs are being brought in through the extra shift. These industries see a big future in this country. It is absolutely fantastic. 
Another exciting example is the light manufacturing industry. I was interested to hear David Parker going on about how important these industries were. Well it is happening now. The light manufacturing industry has a very exciting future ahead of it. I spoke today to Hamish Whyte from Furnware a furniture manufacturer. Domestically it has been pretty tough but in respect of exports his company is going from strength to strength. Furnware will double its exports to Australia next year based on a low dollar. 
David Shearer 
: Going backwards. 
CHRIS TREMAIN 
: How is it going backwards when it is doubling its exports? 
David Shearer 
: You can’t talk it up. 
CHRIS TREMAIN 
: Hardly! These guys are very excited about their future. It is all good. [ 
Interruption 
] Labour members do not like it when they hear the positive stuff. They do not like it at all. They do not want to hear about businesses that are getting out there creating jobs creating income and being excited about the future because it does not go along with Labour’s story. 
Our story is that we are very excited about the future of this country. This Budget Policy Statement is putting together a framework. We have an excellent plan for the economy and many many businesses are getting on with the job and doing a fantastic job for this country. Thank you. 
A party vote was called for on the question  
That the House take note of the report of the Finance and Expenditure Committee on the Budget Policy Statement 2011. 
Ayes 67 
New Zealand National 57; ACT New Zealand 5; Maori Party 4; United Future 1. 
Noes 52 
New Zealand Labour 41; Green Party 9; Progressive 1; Independent: Carter C. 
Motion agreed to.