Smith Nick: Questions for Oral Answer — Questions to Ministers 
Text is incorporated into the Bound Volume 
Smith Nick: Questions for Oral Answer — Questions to Ministers 
[Sitting date: 15 May 2008. Volume:647;Page:16015. Text is incorporated into the Bound Volume.] 
10.  
Hon Dr NICK SMITH (National—Nelson) 
 to the  
Minister responsible for Climate Change Issues 
: What is his response to this week’s  
Wall 
Street 
Journal 
 editorial “Kiwi Climatology” which refers to estimates by the New Zealand Institute of Economic Research that the emissions trading scheme will result in a $4.6 billion annual loss in GDP or a $3000 cut in household annual spending by 2012 and that the Government disputes this conclusion because it assumes “… New Zealanders will be willing to take lower wages.”? 
Hon DAVID PARKER (Minister responsible for Climate Change Issues) 
: 
 My response is firstly that the writer in the  
Wall Street Journal  
has not even managed to quote the New Zealand Institute of Economic Research report correctly— 
Hon Dr Nick Smith 
: Oh it’s the  
Wall Street Journal  
that’s wrong. 
Hon DAVID PARKER 
: —it is on this occasion—as the figures quoted for 2012 are clearly supposed to be for 2025 so I suspect that he or she had not even read the New Zealand Institute of Economic Research report. But more important I would note that this is the first time that the New Zealand Institute of Economic Research model has been used in New Zealand and it is increasingly clear that there are problems with it. I have been advised and the New Zealand Institute of Economic Research now confirms that the model predicts as a general proposition that if subsidies were provided to agriculture then New Zealand’s overall GDP would increase. This flies in the face of general economic theory internationally and in the face of New Zealand’s economic history and settled economic theory for New Zealand but it probably explains why the New Zealand Institute of Economic Research model came up with a answer that was not only counter-intuitive but also diametrically opposed to the modelling done by and for Treasury using models that had been tried and tested in New Zealand for many years. 
Hon Dr Nick Smith 
: Thank you Madam Speaker— 
Hon Members 
: That’s you Nick. 
Hon Dr Nick Smith 
: It is normal practice to take a question from the member opposite; that is why I was mistaken. Does—[ 
Interruption 
] I am sorry Trevor? 
Madam SPEAKER 
: Would the member please ask the question. It is his turn. He asks the first supplementary question. 
Hon Dr Nick Smith 
: I notice that they all complain about my interjections but they interject on me continuously. 
Madam SPEAKER 
: Would the member just ask his question. 
Hon Dr Nick Smith 
: Do Labour’s affiliated unions share his view that the reason the New Zealand Institute of Economic Research analysis of the employment and GDP projections is wrong is that “… New Zealanders will be willing to take lower wages.”? 
Hon DAVID PARKER 
: I do not know where that quote comes from but I certainly do not agree with it. 
Hon Bill English 
: Why did you say it? 
Hon DAVID PARKER 
: I did not. It is not a quote from me. Dr Smith has not even said that it was from me I tell Mr English so the member should listen. Further the New Zealand Institute of Economic Research model did come up with a conclusion that was counter-intuitive and everyone was scratching their heads as to why. It is actually pretty clear now that there is a fundamental flaw in it. 
Su’a William Sio 
: What has the Parliamentary Commissioner for the Environment said about the Government’s emissions trading scheme? 
Hon DAVID PARKER 
: The Parliamentary Commissioner for the Environment—whom the member opposite Dr Nick Smith has himself extensively quoted on other matters recently—has said: “The Emissions Trading Scheme must proceed as it is an essential system for New Zealand to adjust to a carbon-constrained future and live up to our clean green image”. 
Hon Dr Nick Smith 
: Is the fundamental problem here not that the Government wants the international accolades for its carbon-neutral world-leading climate change policies when it is not prepared to be honest with New Zealand households and businesses as to how much they will pay for New Zealand to be world leading? 
Hon DAVID PARKER 
: No it is not true at all even if the member does not understand the fundamental flaw in the New Zealand Institute of Economic Research study which has now been exposed as being the assumption that subsidies increase overall net welfare for our country. That is not just in respect of carbon policy but generally in respect of all economic policy. It is a point that I am sure Mr English well understands. That is the problem in the study. 
Hon Dr Nick Smith 
: Does the Minister stand by his statement about the Government’s emissions trading scheme quoted on national radio: “The effect on the economy is minuscule.” and does he really think that New Zealanders believe that we can be world leaders on carbon neutrality and on climate change with the effect on the economy being “minuscule”? 
Hon DAVID PARKER 
: Yes. I think that any adverse effect on the New Zealand economy would be minuscule and I think that is abundantly clear. Indeed most of the commentators now get the point—Dr Smith clearly does not—that the emissions trading scheme does not create any cost for the economy. It minimises the cost of New Zealand meeting its obligations under the Kyoto Protocol.