Parker David: Budget Debate 
Parker David: Budget Debate 
[Volume:626;Page:20861] 
DAVID PARKER (Labour—Otago) 
: 
 Labour will not fund tax cuts from borrowings. Since this Budget has been delivered we have already seen United Future’s tax policy. United Future promises tax cuts that are probably more modest than the bribe the National Party will offer yet already it acknowledges that to fund its proposed tax cuts it will have to sell up to 40 percent of State-owned enterprises. In other words United Future cannot fund the tax cuts it proposes other than by borrowing cutting services or selling State-owned enterprises. 
Labour will not fund tax cuts from borrowing unlike National under Mr Muldoon which just about bankrupted this country. That Government had New Zealand at its knees having borrowed to fund the affairs of this country. It left the economy in tatters. New Zealand’s Government debt equalled 70 percent of GDP and $1 in every $5 of tax collected was spent on interest. When this Government took over debt had gone down to 35 percent of GDP. We have reduced it further to 23 percent of GDP. We cannot reduce Government debt if we are not running a surplus—that is basic economics. If we fund tax cuts from borrowings debt will go up. 
The other underlying premise in this tax debate at the moment is some suggestion that New Zealand is overtaxed. New Zealand’s rate of taxation as a percentage of GDP went down between 2002 and 2003—the last date for which there are comparable figures with the rest of the OECD. The tax rate did not increase—it went down. 
Where do we sit in relation to other OECD countries when we consider taxation? 
Hon David Carter 
: Compare us with Australia! 
DAVID PARKER 
: I tell Mr Carter to listen—he will probably learn something. New Zealand’s taxation rate in the year ended 2003 was 34.8 percent of GDP. 
Hon David Carter 
: Too high! 
DAVID PARKER 
: They were high were they? What was Canada’s rate? Canada is a wealthier country than New Zealand. Their rate was 33.9 percent. That is pretty much the same as us. 
Hon David Carter 
: What about Australia? 
DAVID PARKER 
: I will come to Australia if Mr Carter will just hold his horses. Austria’s rate of taxation was 43 percent of GDP compared with our 34.8 percent—let us call ours a round 35 percent. Belgium’s rate was 45 percent—it is another wealthier country—Denmark 49 percent France 44 percent and Germany 36 percent. Canada’s rate as I have already said was 34 percent. The taxation rates of Norway and the other Scandinavian countries were between 43 and 50 percent and the United Kingdom was at 35 percent. 
Hon David Carter 
: What about the United States? 
DAVID PARKER 
: The United States rate is quite significantly different. Australia was not significantly different. Its rate was 31.5 percent compared with our 34 percent. The big difference is the United States. 
Hon David Carter 
: That’s a big difference. 
DAVID PARKER 
: I agree. The United States’ rate was only 25 percent of GDP but it has no universal public health-care. The level of public provision of health care for most people is low. There is no superannuation such as we have. The United States’ situation is completely incomparable to that of New Zealand. If we look at the OECD group of wealthy countries we see that New Zealand’s rate of taxation is in the lower part of the range for OECD countries. It is not in the higher part. When Bill Clinton was famously asked by journalists what the most important issue facing the USA was he did not say that it was taxation. He said to those journalists what was obvious. He said: “It’s the economy stupid.” It is not taxation; it is the economy. The same is true in New Zealand. 
In recent years New Zealand has had one of the highest growth rates in the OECD—higher than that of Australia. Our unemployment rate is the second-lowest in the developed world. It is not the tenth-lowest and it is not the third-lowest—though that would be impressive enough. It is the second-lowest in the developed world. We in Labour are immensely proud of that. “It’s the economy stupid.” It is not about taxation rates. We are within the band of reasonable taxation rates around the world. Taxation cuts cannot be afforded unless we increase borrowings decrease savings or flog off State-owned enterprises as United Future is proposing to do. 
The unemployment rate is good in New Zealand but the drop in Maori unemployment has been even more impressive. In 1999 unemployment stood at 15 percent for Maori overall and 32 percent for young Maori. Under National an appalling 32 percent of young Maori were unemployed. Overall under Labour that has dropped to 8.7 percent. That must bode well not just for Maori but for the social cohesion and prosperity of the nation as a whole. There are 250000 more people in jobs than when Labour took office and the vast majority of those are in full-time jobs. 
We can say “250000 extra jobs” quickly but let us reflect on that. That figure is more than the combined populations of Cromwell Alexandra Dunedin Queenstown Oamaru Balclutha Gore and Invercargill. In fact it equates to about the same number of people as the total population—not just people of working age but including children and superannuitants—of the lower half of the South Island. As many extra jobs in this country have been created under this Labour-led Government as there are people south of the Waitaki River. “It’s the economy stupid.” 
The number of people on domestic purposes benefits and unemployment benefits is down. There has been a moderate increase in sickness and invalids beneficiaries. The largest cause of that is our ageing population. People get more illnesses as they age but we have introduced programmes to do what we can to get people who are able to work back to work. Overall including sickness and invalids beneficiaries 100000 fewer people are on benefits than when Labour took office. What has happened to the wages and salaries earned by New Zealanders in the same period? Well they have increased from $45 billion in 1999 to $59 billion in 2004. We often hear meaningless statistics quoted by the National Party that show that the average wage has not grown as much. That is true. But when we take the people who are least employable—because they are the last people to get jobs—and put them into employment they generally move into low-paid jobs not high-paid jobs. So the more meaningful statistic is not the average wage but the total wages and salaries paid to New Zealanders. That amount has increased by a phenomenal 32 percent from 1999 to 2004. In just 5 years the wages and salaries earned by New Zealanders have increased by 32 percent. 
Now I will look at what we have done in terms of taxation. It is important to record why our focus on tax and income relief has been for low to middle income earners and their children. Put simply after restoring the baseline for superannuation health and education services our view was that need was greatest amongst low to middle income families with dependent children. They were the ones on whom we wanted to focus our tax relief. Why? We know that raising children is the most important job any parent undertakes. How well we do this determines not just the prosperity of our own family but also the collective prosperity of our nation. That is why this Government has directed a substantial proportion of its spending through tax cuts and subsidies to families with dependent children. 
It is not true to say that this Government has not introduced tax cuts. It is true that we have directed those tax cuts to families with dependent children. We have done that because they are the ones who suffered in the 1990s when the gap between rich and poor households increased hugely. Between 1988 and 1998 the gap between the rich and the poor increased hugely. The gains from New Zealand’s increased economic output fell into the pockets of the top 20 percent of families. Indeed it was really the top 10 percent of families that benefited most. The bottom 20 to 30 percent went backwards the middle 50 percent of families stayed static and the top 10 percent charged ahead. That is why our tax relief is for low to middle income families not disproportionately for richer people.