Norman Russel: Appropriation (2010/11 Estimates) Bill — Third Reading Imprest Supply Debate 
Text is incorporated into the Bound Volume 
Norman Russel: Appropriation (2010/11 Estimates) Bill — Third Reading Imprest Supply Debate 
[Sitting date: 03 August 2010. Volume:665;Page:12903. Text is incorporated into the Bound Volume.] 
Dr RUSSEL NORMAN (Co-Leader—Green) 
: 
 I stand to speak in the appropriations debate. I wish to particularly address the Government’s economic strategy. The Government speakers in between attacking the Labour Party have outlined an economic strategy with six different elements. I think it is important that we actually address the Government’s strategy. 
One of the key elements that the Government has addressed is the issue of changing the taxation system. There in particular Government members have talked about the changes they are making to the income tax rates. It is worth noting that the changes overall to the taxation system are fiscally negative—that is the Government will have to borrow around a billion dollars in order to pay for its tax changes. It seems to me that when the Government is already running a deficit borrowing in order to fund more tax cuts is fiscally irresponsible. I am genuinely surprised that the Minister of Finance who quite rightly makes quite a big deal of the fact that he tries to be fiscally responsible put forward a Budget this year that involved the borrowing of very large amounts of money in order to fund tax cuts. 
The second part of the tax cuts is that they tend to go towards the wealthy. New Zealand already has dramatic inequality. We are one of the most unequal countries within the OECD and that has enormous costs. The fact that we are so unequal is closely linked to the facts that we have one of the highest imprisonment rates that we have very high crime rates and that we have real problems with health and education. Those are linked to the fact that we have a highly unequal society. The changes that the Government is making in terms of the income tax rates and in terms of hiking the rate of GST will result in a more unequal New Zealand and that will have all of those downstream effects. 
It is also notable that the other change that the Government introduced was to lower the company tax rate. That was done on the basis of the mistaken belief that Australia would lower its company tax rate further and that New Zealand had to follow it. As it turned out Australia did not. But putting that to one side it is interesting to look at the Inland Revenue Department advice on lowering the company tax rate because the Inland Revenue Department said the major beneficiaries from the lower company tax rate will be foreign companies and that foreign companies operating in New Zealand have a much higher rate of return on equity than New Zealand companies. The reason that the Inland Revenue Department gave for the differential between the return on equity of New Zealand companies and of overseas companies is that overseas investors in New Zealand tend to target monopolies or oligopolies where they can maximise their profit rates. Those sectors of the economy where there is very little competition such as the banking sector where there is very little competition aside from Kiwibank are targeted by foreign investors in order to have higher rates of profit. 
So by cutting the company tax rate we are rewarding the foreign companies that are involved in the New Zealand economy not to export overseas. Most of the foreign companies involved in New Zealand are not export companies—that is what the Inland Revenue Department advice said. Those companies are in fact largely rentiers that simply receive an above-average rate of return. They are receiving an economic rent from their investment in New Zealand with very little benefit for New Zealand. The big investment in the telecommunications sector is another example of overseas investors seeking just an economic rent but producing very little for New Zealand. 
The changes that the Government is introducing to the taxation system will not only make New Zealand more unequal and will not only result in a higher debt for the New Zealand Government—around an extra billion dollars—but will also reward foreign companies against the best advice of the Inland Revenue Department. It is hard to see how the tax changes that the Government is making are part of any kind of coherent strategy. 
The second part of the Government’s strategy that I will talk about is infrastructure investment which Government members talked about. I think some parts of the Government’s infrastructure investment make sense. I think the grid upgrade makes a lot of sense. If we are to have a number of sources of renewable energy throughout the grid we need to have the grid in good shape. I also think that making sure that people have high-speed Internet access is very important particularly in a world where energy prices and particularly transport energy prices are very likely to be high. For people to be able to work from home by having high-speed Internet access is a good idea. I think we can question whether having wires rather than having other forms of delivering the Internet is the best way of doing it but none the less getting high-speed Internet access is a good idea. Likewise the buildings for schools is a good idea as is home insulation. Normally that would not be thought of as a piece of infrastructure but in a way it is infrastructure that is incredibly valuable to New Zealand in terms of reducing health costs making sure that kids go to school more often and making people warmer and drier. 
The part of the Government’s infrastructure programme that I think is particularly absurd—there is really no other way to think of it—is the motorway investments. Those are the same waste-of-money programmes that the previous Government followed through. Labour and National share a kind of obsession or fetish with building motorways. This is in a world where quite recently Lloyd’s of London produced a report that talked about rising oil prices and said Governments around the world needed to look at alternatives to relying on oil and becoming dependent on oil. We have now had more than a decade of Governments—and no doubt more are planned—that want to increase the New Zealand economy’s dependence on imported oil. This is in a world where we are somewhere near to the peak rate of oil production where the price of oil will become only more expensive with time and where we have to constrain our greenhouse emissions—or we certainly will have to constrain our greenhouse emissions. Yet we are building infrastructure that will result in an increased dependence on oil and we are building infrastructure that will result in more greenhouse emissions. Not only is that the case but we have to borrow money in order to do it and we are wasting vast amounts of our taxes on these white elephants. I think the Minister of Finance talked about the $10.7 billion over the next decade that he plans to waste on new motorway projects. 
The ridiculous thing about the Minister of Finance’s contribution on infrastructure was that he talked about how the Government wants to upgrade the decision-making process before it makes infrastructure investment decisions. We know from the papers that we forced out of the Government that the benefit-cost ratio on for example Steven Joyce’s “Holiday Highway” north of Auckland is actually less than 1—that is for every dollar that the Government spends on it it will get less than $1 in return using the most generous pro-roading assumptions to generate the benefit-cost ratio. So we know that the decision making around these major infrastructure projects is actually very very poor. The roads of national significance have been selected by a political decision-making process and now the Government wants to say it has upgraded the decision-making process for infrastructure investment. In fact its own studies show that the investments it is making in motorways are actually of very poor quality and are a waste of large amounts of money. Of course this issue is actually about Steven Joyce running in the Rodney electorate at the next election: getting Mr Lockwood Smith on to the National Party list so that Steven Joyce can win the Rodney seat by building the “Holiday Highway”. That is the actual decision-making process behind how we have ended up spending billions of dollars on the “Holiday Highway”. 
The third part of the Government’s programme is the so-called regulatory reform programme. I say to those who are unaware of this that the last time that National got its hands on regulatory reform it implemented the Building Act a laissez-faire regulatory reform that resulted in leaky houses. It will cost the New Zealand economy around $20 billion according to reasonably conservative estimates to fix the problems created by the Building Act of 1991 which was the last time that National interfered with the legislation. That Act was a laissez-faire piece of regulation that said the Government did not really care and people could put up whatever they liked to build. That has resulted in a massive cost. So although it is very attractive in the short term for the Government to say it is saving money the long-term costs are enormous. Likewise when the Government weakens the laws around irrigation and the protection of rivers for example that has a dramatic impact on our clean and green reputation further down the track. 
The other part of the programme that I will touch on is the Government’s approach to innovation. The Government strategy is what I would call an extractive strategy—it is very much focused on mining minerals oil and also water—and an innovative strategy really seems to be missing. We need to have a clean technology strategy for the New Zealand economy: a strategy that says we want to make the most of the international market for clean technologies which is only increasing over time. But the Government seems to pay no attention to the green economy and seems to have no understanding that the future opportunities around the globe for a country like New Zealand lie in the green economy—an economy where cleantech greentech high-tech products and services will be very much in demand. New Zealand would be in a position to supply those. 
So when we look at a number of the Government’s strategies we see that they do not seem to address some of the big issues that face us. How we move our economy towards a much more sustainable basis how we reduce our carbon emissions and how we reduce our dependence on oil are all serious issues that seem to be completely missing from the Government’s economic strategy. For that reason the Green Party does not support that economic strategy.