Cunliffe David: Supplementary Estimates — Imprest Supply Debate 
Cunliffe David: Supplementary Estimates — Imprest Supply Debate 
[Volume:673;Page:19519] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I move  
That the words after “That” be omitted and the following substituted: “this House has no confidence in the Government because of the current Government’s failure to create jobs its lack of a credible plan for economic growth the wildly diverging revenue forecasts the unspecified and unmandated Budget cuts and the broken promises on privatising State assets.”  
As the Minister has said he has been running around the country talking to people about the Budget. So have I and what is clear from that dialogue with New Zealand is that this Budget will not and cannot achieve the objectives that the Government has set for it. Several of the issues that Mr English mentioned in his preceding remarks cannot go without response. The first is that he has lauded the so-called tax switch as the most important reform that a National Government has undertaken in the last 20 years. The only thing we can conclude from that is that National has not done much in 20 years because the tax switch has been an abject failure for four reasons.  
Firstly the tax switch was not fiscally neutral. It results in another $1 billion of overseas borrowing in the first 4 years according to the Budget document’s own numbers. Secondly it was not stimulatory to the economy because it took money out of the pockets of hard-working people who spend every cent they earn and put it in the pockets of wealthy New Zealanders who could afford to salt some of it away and take it out of circulation. The net impact of that was further contraction in the economy not expansion. Thirdly it was inequitable: two-thirds of the money went to the top third of income earners and about 40 percent went to the top 10 percent. I ask whether it is any wonder that the rest of New Zealand is feeling the pinch in the face of rising rising prices and wages that are growing much less quickly than the rate of inflation meaning a real-terms cut. The fourth reason that the tax package was a failure was that it did not close loopholes. That would be a bit like the Pope saying sin did not exist and therefore there were no sinners. It simply removed the top personal tax rate of 39c in the dollar so that everything over 33c in the dollar by definition was avoidance free. It is a circular argument and it cuts no ice with ordinary Kiwis.  
The second comment I wish to make relates to the Minister’s remarks about headwinds and the high New Zealand dollar. Finally he has admitted that the dollar is too high. I know it is not appropriate for either him or me to talk about what the exchange rate should be in dollar terms but let us say we have a consensus in this House that a high New Zealand dollar is giving us the so-called Dutch disease. Every exporter apart from those exporting a few select commodities is being withered on the vine by the fact that our exports are less and less competitive and that cannot continue. So why does the Minister almost in isolation pretend that we have the best monetary policy in the world? When everybody from the Reserve Bank to the Bank for International Settlements to the IMF to the OECD is moving on things like macro-prudential regulation and counter-cyclical policies that support and supplement the official cash rate why will the Minister’s Government not review the Reserve Bank of New Zealand Act which is the purest one would say most conservative construction in the entire Western World? The Minister said the exchange rate is overvalued so why will he not guide the Reserve Bank to do something about it? New Zealand exporters are deeply deeply worried about the situation that they face.  
There is one thing that the Labour Opposition will not disagree with. It is the idea that New Zealand carries too much debt. We agree with that idea. But of course 90 percent of that debt is private debt and only 10 percent is public debt. Therefore it beggars belief to think that any credible Government strategy could aim to solve the international debt problem by nibbling around the edges at the 10 percent that is public while cutting back on the programmes that reduce the 90 percent that is private. Two things stand out. The first is the reduction to KiwiSaver. A blind man in a darkened room could say we have to get the savings rate up. Why would the Government’s centrepiece in its Budget be a reduction to the incentives for New Zealanders to save in KiwiSaver? There are shades of Muldoon doing away with Mr Kirk’s savings scheme. If we had that scheme now we would be much better off relative to Australia. We might have a chance of closing the gap mentioned in Mr Boscawen’s question in question time that the Minister danced on the head of a pin about to avoid answering because he knows the gap is getting wider month by month year by year. His policies are not working.  
Second at 40 percent of GDP gross Government debt is too high. Labour when elected this November will work strenuously to reduce it. But we will do so as part and parcel of an economic growth strategy that increases the number of people in jobs; increases the revenue flows to the Crown which means we do not rack up debt; and increases the amount of economic growth benefiting the private sector and lifting all boats in the economy. It is not just in New Zealand that cost cutting in the middle of a recession is likely to make recessionary conditions deeper. Cost cutting is likely to contract revenue flows and must be balanced by offsetting investments that will get growth up in a prudent and responsible way. That is what a Labour Government will do.  
If a doctor was taking the pulse of this economy he or she would be worried because the vital signs of the New Zealand economy are deeply troubling. I see Michael Woodhouse has perked his head up—yes a ghost of medical times past. Take the blood pressure the pulse rate or the temperature of the economy and what would we find? We can look at the unemployment rate which is up from 3.4 percent to 6.5 percent. Economic growth is down from 4 percent to 5 percent under Labour to scrapping along at close to zero under National with its rosy-glow forecasts and a “she’ll be right next year” approach which was said last year and the year before and the year before. In question time today I was able to recite the very same line from the Minister of Finance that he has given in response to little blips in the confidence numbers every year for the last 3 years. Nothing changes because there is no strategy to achieve change. An economic doctor would look at the vital signs of unemployment see 270000 people looking for work and say that is not healthy. Much of it will last for generations.  
An economic doctor would also look at prices rising faster than wages year on year to May with 4.5 percent price increases 7.1 percent food price increases and a 1.9 percent increase in wages. The reason that New Zealanders are feeling worse off is that the vast majority are worse off. Mr English counters that by saying that real disposable average incomes have risen. Ah well let us strip down those numbers. How would one get to that result? Firstly one would include the tax cuts brought in by the Labour Government in 2008. Secondly one would manipulate the time series of the data to go from the low to the peak. Thirdly one would look at an after-tax average that has been lifted by tax cuts to fat cats and ignore the fact that more than 70 percent of New Zealanders have slipped backwards and that their real earnings now are less than they were—less than they were—under the Labour Government.  
This Budget on which the estimates we are debating are based is not credible. Treasury and the Reserve Bank are nearly $4 billion apart in their revenue forecasts. There is $1 billion of unspecified cuts that no responsible Minister of Finance should have signed off on without knowing where they are coming from. The capital account is propped up by $5 billion to $7 billion of unmandated asset sales—privatisation which the Government said it would not book without a mandate. But it has written them into the forecasts and hired the consultants to carry them out. That is to happen from as early as July this year notwithstanding the fact that November is the date of the election. The Budget has no plan for jobs and growth. The vital signs of the economy are ailing. The Budget breaks election promises. The proof of the pudding is this: no matter what this week’s or last week’s little indicators might say the rating agencies have retained the New Zealand economy on negative watch.