Key John: Debate on Budget Policy Statement 
Key John: Debate on Budget Policy Statement 
[Volume:629;Page:1590] 
JOHN KEY (National—Helensville) 
: 
 In case anyone is confused we are actually here to talk about the economy and the Budget Policy Statement. That was a classic speech by the honourable member for Waimakariri. It is no wonder that Mr Cosgrove did not say anything about the economy because he does not know anything about the economy. He is just sent down here to act like the loveable bulldog that he is. Poor old Clayton— 
The ASSISTANT SPEAKER (H V Ross Robertson) 
: Order! 
JOHN KEY 
: Poor old Clayton Cosgrove has spent his life being desperate to get into Cabinet. He did everything he could to get into Cabinet. He bought himself a nice new tie to take to Cabinet. Now that he is in Cabinet he has worked out that the benchmark is David Benson-Pope. That is what it takes in order to get into the Labour Cabinet. Well I have news for Labour members: they will all have a chance to get into that category. It is no wonder that Labour chose to put Mr Cosgrove down to debate the economy—he knows nothing about it. He should go back to worrying about noisy cars and leave the economy to some people on the Opposition side of the House who know exactly what they are talking about in that regard. 
It will be interesting when the Budget does roll around—the Minister of Finance told the Finance and Expenditure Committee today that 18 May is the Budget date. What will surprise most New Zealanders will not be what is actually in the Budget because we know that the Government was in free fall when it decided it was a great idea to write off the interest on student loans for all New Zealanders. The Government’s only problem was that it had a document from Treasury that told it that the policy would have a colossal effect on borrowing in New Zealand. It had a document from Treasury that told it that the policy would cost billions of dollars a year to run. The Government had not actually worked out that that policy would cost us $1.5 billion—that is the write-off from that policy alone on the balance sheet—and that that is what will flow through the Government accounts through into the Budget Policy Statement and ultimately through into the Budget when the Minister gets up to read it on 18 May. So New Zealanders will not be surprised to see that cost in there. 
New Zealanders also will not be surprised to see the Government’s “Welfare for Families” package in the Budget. But they may be surprised to learn that New Zealanders who earn $142000 a year will be eligible for Working for Families. That is above the level where even the top personal tax rate cuts in in Australia; that rate is set at around $125000 a year for the moment. New Zealanders will not really be surprised to see KiwiSaver in the Budget either even though the Minister of Finance knows it is very unlikely to be successful. So New Zealanders will not be surprised to see those things there and they will not be surprised to see the little trinkets that came about from the various coalition and support arrangements that the Minister of Finance and the Prime Minister had to sign up to as they cobbled together one of the poorer Governments we have seen in New Zealand’s history. All of those things will come as no surprise to New Zealanders when they see the Budget on 18 May. 
What may surprise New Zealanders slightly in fact is not what is in the Budget but what is not in it. They will see one of the largest surpluses in New Zealand’s history and they will be surprised that no tax cuts are in there at all—not even a hint of a tax cut to encourage New Zealanders. What is very interesting about Michael Cullen is that he gets up in the House and tells New Zealanders that they will respond to incentives when it comes to saving. KiwiSaver is such an incentive and New Zealanders will be given $1000 if they put money into KiwiSaver. So New Zealanders apparently respond really well to incentives according to Michael Cullen when it comes to savings but when comes to— 
Dr the Hon Lockwood Smith 
: What about tax? 
JOHN KEY 
: When it comes to tax he does not want a bar of incentives. We should know who to look to when we look for personal tax cuts as my good friend Dr the Hon Lockwood Smith will know. Lo and behold today when Dr Smith asked the Minister of Finance about the contradictory statements made by the Minister of Revenue Mr Dunne and Michael Cullen and asked who should be believed Dr Michael Cullen in a very sincere way looked across at the microphone and said Dr Smith should believe the buck stops with Dr Cullen. He said members should not worry about Peter Dunne even though he signed the coalition arrangement. Michael Cullen said the buck stops with him and if he says there are no tax cuts then there will be no tax cuts. 
Interestingly enough I raised with Dr Cullen today what I thought what was a very simple question. In 2000 when Labour came into office Government revenue was 38 percent of GDP and today Government revenue is 45 percent of GDP—7 percent higher. That increased percentage equates to $10 billion. I said one would think that if a Government had $10 billion more annually than it had thought it would have it could afford to give New Zealanders a tax cut. 
 When the Government has $10 billion more in any 1 year can it afford a tax cut? Well the Minister of Finance 2 weeks ago told the Finance and Expenditure Committee that any New Zealander who thinks there should be a tax cut on the back of the massive surpluses should be quietly taken out and drowned. I hate to tell the Minister of Finance that he is obviously condemning many many New Zealanders—in fact the majority because the majority voted for parties that supported tax cuts at the election—to a watery grave at the hand of the State. I am sure that is probably not what he intended—but maybe it was after all. 
It is also very interesting that Treasury officials who call things the way they are today told the Finance and Expenditure Committee that growth would be much weaker than they had anticipated. Although they could not quantify what that weakness would mean we asked them about growth in the September quarter which we know was 0.2 percent. I asked the Secretary to the Treasury Mr Whitehead to tell us what he thought growth would be in the December quarter the report on which comes out at the end of March. He said he did not know. I asked him whether he thought it was possible that the growth number would be negative. He said he could not quite put it in those words but that if it was not negative it could be zero. 
For 6 months the New Zealand economy has not grown. 
Dr the Hon Lockwood Smith 
: Just stood still. 
JOHN KEY 
: Well it is wandering around in the wilderness while every other economy is becoming more competitive and more productive and is carving out a greater slice in the world. We are left with Michael Cullen and his ideology. I will give an indication of why we are wandering around in the wilderness while other countries are getting on with it. On Monday Peter Costello the Australian Treasurer made what I thought was a pretty interesting move: he appointed two very pro-business people to a committee to look at taxation. The Australian Treasurer said to those two pro-business people that he wants them to report back to him within 5 weeks with some positive things Australia can do to stimulate its economy and some productive things it can do around its taxation system. The Australian Treasurer wants to implement those things by May of this year. We have heard from Michael Cullen that he will look at the business tax review—and I will get on to that in a moment—but that we will not see anything from that until 2008. 
Well it will take until beyond 2008 to convince people that Michael Cullen’s latest and greatest idea—a payroll tax—is a very good idea. Dr Cullen is a very smart guy and I am sure he has thought it through that many of New Zealand’s export industries rely very heavily on staff and that it would be quite difficult for those industries were staff to go away. Labour which we are meant to believe is the party of the workers wants to put an impost on the employment of people. Its strategy is to roll out a payroll tax that will see a drop in the company tax rate. Some companies will pay less tax—I accept that—and a whole lot more of them will pay a payroll tax for every employee they have at a time when unemployment is rising in New Zealand and is likely to rise more. 
My leader Dr Brash talks quite a bit about this Government’s lack of ambition to get New Zealand into the top half of the OECD. I can assure the public of New Zealand that they will not need to read the Budget or hear it read to know that absolutely nothing in that document will raise New Zealand higher in the OECD rankings. In fact we know that it would take 10 years of double the per capita growth we have had to get there and that will not happen under this Budget. New Zealanders need to understand—in just the same way that Treasury tells our select committee what is going on—the facts. We are not in the first division of OECD countries nor in the second division of OECD countries. We are in the third division of OECD countries. When we look at countries that are not in the OECD and take a global perspective on the world we see that we are 40th on a per capita income basis. The Falkland Islands are 36th and the Faroe Islands are 42nd. Many many small nations are doing very much better than us. 
For 6 years we on the Opposition side of the House have sat back and waited for the Labour Government to do something. The previous National Government delivered to the Labour Government the strongest economy that any Government has inherited and in 6 years Michael Cullen has done one thing and one thing alone. He has ratcheted up spending claimed that he is a prudent manager of the economy and put more and more things into the economy that make us less competitive less productive and less likely to achieve the sorts of returns we need. Very soon Michael Cullen will read his seventh Budget and it will be just like the other six: a very very great disappointment to our country.