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New millennium, new government, new hope

New millennium, new government, new hope

Monday 10th Jan 2000
Richard Prebble
Speech -- Other

Welcome to the first state of the nation address for the new millennium.

We have just witnessed the first global party. It seemed the whole world was celebrating, and we were first. There is a strong feeling that now is the time to make a new start.

The New Zealand celebrations were a public outpouring of the affection we hold for our country and our strong desire to have a strong supportive community. To see this paralleled in country after country reminds us that it is a global village and of our common humanity. I think the Governor General in his address touched a real chord when he said that there is a strong desire to bring together the different communities that make up our country, especially our different races. The challenge to our political leaders is to honour this hope.

The new Government has been given a chance in a thousand. The Labour/Alliance Government has received a stronger mandate from the millennium to make us a new start than it did on election day. Helen Clark who has always wanted to articulate a vision for New Zealand, has been given one, by the public on New Year's day - to strengthen our communities and to make us one country. I share the spirit of optimism and I hope the Government is bold enough to embrace the millennium mandate.

If Helen Clark in her New Year address was pledging some urgency into Treaty claim negotiations then she would be reading the mood of the nation. There is a strong desire to settle all outstanding grievances quickly, generously and finally, so we can make a new start as one country.

If I can continue in this spirit of optimism, the economic indicators are excellent for the year 2000.

You will have noticed that it has been an excellent Christmas for retail. I predict that the Boxing day and New Year sales that for some stores are now as big as Christmas sales, will prove to be at record levels. The rain drove us into the shopping malls. We had the extra dollars in our pockets that the Y2K advertisements told us to take out of the bank. Figures will show we spent the money rather than bank it again.

But this is not a consumption-led recovery. For over six months exports have been rising strongly. Farming has seen the best spring for 30 years and while New Year rain was bad for camping and the beach, it has set the farmers up.

Commodity prices are up and receipts will rise strongly. It's good news across the country. Log prices are up and so are exports. Tourism had a good year, and those beautiful TV pictures of Gisborne's dawn are worth gold. The deficit figures are hiding a strong export-led recovery that is sustainable. The latest unemployment figures, too late to save National, showed that unemployment is falling in every region of New Zealand, something we have not seen for years.

Anecdotal evidence is that more students got summer jobs and when they return to university, the demand for labour will be so strong that the unskilled long-term unemployed will get jobs. Manufacturing exports are growing strongly. You have to go back to the Kirk Government to find a new government with such favourable indicators. So I predict the year 2000 is going to be a very good year for the economy.

This is my third state of the nation speech. Commentators get out my old speeches and look at the accuracy of my predictions. So far, on the economy, I have a 100% record for predicting economic developments. I predicted the devastating effects of the Asian meltdown when the Treasury was still issuing optimistic forecasts. I predicted the economic recovery last year earlier than any private or public commentator. I am very confident in my economic optimism.

Of course there are risks. The willingness to let the market sort out problems has led many in business to assume the government is no longer a dominant influence. While it is true that it is difficult for a government to kick-start the engine of the economy, it is easy for a government to either overheat or stall the economy.

The first threat to the economy is rising interest rates. Some increase is inevitable and is just a sign of the strength of the recovery. Provided the new government does not go on a Winston Peters-like spending spree, interest rate rises should not stall the recovery.

Judging from the statements from Ministers, holding the line on spending will be challenging. If Michael Cullen is not resolute in holding to the fiscal parameters Labour pledged in the election, the Government could blow its surplus.

An interest rate rise caused by a downgrade of our country's credit rating would be significant bad news. The international credit agencies are right now reviewing New Zealand's credit rating. The Finance Minister Michael Cullen seems convinced that a credit rating downgrade is inevitable. He is already attributing the blame to National.

A credit downgrade is not inevitable. While the country does have a troubling trade deficit, there is some very good economic news. The fundamentals of the New Zealand economy are strong. The new Government has inherited a balanced budget, no government overseas debt, a growing economy, and exports are rising strongly.

Michael Cullen needs to switch out of negative Opposition-type thinking. Michael Cullen must start thinking and acting like a Finance Minister. Dr Cullen should follow the example of Ruth Richardson in January 1991. Ruth Richardson was in exactly the same situation. She was a new Finance Minister and the credit agencies advised of a possible downgrade. Only in Ruth Richardson's case, she inherited a budget that was in deficit, huge overseas debt, the economy was stalled and the Government had to bail out the country's largest bank. A downgrade in our credit rating seemed a certainty.

Ruth Richardson took decisive action. She flew to New York and made strong presentations to the credit agencies. So impressive was Ruth Richardson that for much of the 1990s, New Zealand has had a credit rating higher than Australia.

Dr Michael Cullen needs to set out the case against a credit downgrade. As Finance Minister he must assure the credit agencies that the Government will balance the books, will not borrow overseas and that he intends following moderate policies. Michael Cullen has been giving these assurances in private to our business leaders, so why not also to the international financial community?

A credit downgrade is a very significant setback that can take years to overcome. A downgrade of our nation's credit rating not only affects the rate at which the government can borrow. It also affects the rate that a major corporate such as Fletcher Challenge can borrow, and the rate at which New Zealand financial institutions can borrow to on-lend. It will affect the producer boards and all exporters.

No-one will escape. A downgrade affects all borrowers, even the homeowner's house mortgage and the beneficiary's hire purchase. As a credit downgrade makes the country less competitive, it will affect growth and jobs.

I have written to the Minister of Finance urging him to go to New York. I have told him that as the leader of a party in Parliament, I am prepared to give him a letter setting out my party's support for a balanced budget, for an independent Reserve Bank, and for the Fiscal Responsibility Act. I believe Dr Cullen could get a similar letter from Jenny Shipley and Winston Peters.

Such letters would lower international concern that Labour is dependent on the Alliance and the Greens. Perhaps Dr Cullen could get letters from those parties also. If Dr Cullen went with such a presentation, he could avert a credit downgrade.

Michael Cullen needs to go and fight for our country. I call on Dr Cullen to go at once, this month to New York, to call on the credit agencies Moodys and Standard and Poors.

There are other risks. As a trading nation in a global economy, New Zealand is very exposed to external shocks. Such shocks are inevitable.

The most likely is a major stock market correction on Wall Street. In February the USA will have been in the longest economic boom in recorded history.

Don't believe those optimists who say the boom will continue for ever. At some point the Federal Reserve will raise interest rates and shares will fall. The shares in companies yet to earn a profit will not keep rising.

A significant fall on Wall Street will affect New Zealand. But New Zealand is in a better position to ride out a Wall Street crash than we were in 1987. In 1987 the New Zealand share market was overpriced; today it is underpriced.

The Asian economic crisis only slowed the New Zealand economy for a year and but for the double whammy of a drought, the New Zealand economy would have escaped a recession.

The biggest risks are internal.

In this speech I have assumed that the undertakings that I have seen Dr Cullen give to business audiences are reliable.

It could be that New Zealand has elected not only the most left wing government in the OECD but perhaps the most left wing government in our history. The media has pointed out that over half the Cabinet are teachers with no practical business experience. There are now in Parliament five MPs who in their adult life have been members of communist parties dedicated to the overthrow of our democratic society. Hopefully, like the East Europeans, they have changed. When a Minister like Laila Harre goes on record to say that Stalin achieved in 20 years what took the West 200 years, there are grounds for concern.

It's by the new Government's actions we must judge them.

Perhaps they are harmless chardonnay socialists. The only request I have received from the new Government was for ACT to agree for Parliament to adjourn its first sitting so we could all have a free lunch on the taxpayer.

Of course I had to go. Every former Labour MP had been invited, together with what is the country's political elite.

But we found that there is no such thing as a free lunch. Before we could eat the Prime Minister took the microphone and told us she was sure we would all enjoy some New Zealand culture.

Helen Clark then proceeded to MC the most politically correct 40 minutes I have ever stood through. It culminated with what the Prime Minister breathlessly described as "an exciting New Zealand composition inspired by a Hindu sect who wander the countryside naked covered in mud".

After listening to this music it was abundantly clear why the minstrels could not afford clothes. If my constituents are subjected to many more repeat performances, my re-election prospects seem assured. As the head of one government department remarked to me, "Perhaps this would be better appreciated at another time and place."

"How could it sound better?" I said.

"If it was at a time when I was at a different place," he replied.

Helen Clark certainly enjoyed being MC. I sometimes think the only reason David Lange wanted to be Prime Minister was because that as the only way he could get to drive racing cars. The only way Helen could get that audience to stand through that performance was because she is Prime Minister.

If politically correct culture is the Government's programme, it won't do us any harm - might do us some good - and there is no need to be alarmed. But I couldn't help feeling if this is what they mean by having an arts policy, let's be grateful that ACT hasn't got one.

But the new Government's other actions in Parliament's first week were very alarming. The new Government's legislative priorities, the changes that the new Government pushed through under urgency in Parliament prior to Christmas, were very scary.

New Zealand has no written constitution. The only check on the unbridled power of the executive is Parliament. To seek under urgency to make a constitutional change to prevent MPs from voting against the executive is an attack on our Westminster system of democracy.

I don't want to overstate the case. The proposed law is just a PR exercise. A Claytons Bill. An MP will not be expelled for voting with his or her conscience or even changing parties but only if he or she writes to inform the Speaker. But the Bill could be easily amended, turning Parliament into a rubber stamp. It is an attack on our constitution.

The Government's second measure was to push through a tax increase despite advice from Inland Revenue that the measure will damage the economy. Again, I won't overstate the case. Labour does have a mandate for a tax increase - but only for the top 5% of taxpayers. Wage rises mean that a tax increase starting at $60,000 will affect not 5% but 7% of the population, and the fringe benefit increase will affect another 25,000 taxpayers.

A government intending to keep its promise would have lifted the top threshold to $66,000, and Rodney Hide moved amendments to allow that to happen. That Government did not accept the amendments raises a concern that Labour's plans to reduce inequality are not intended to lift the poor, but to make everyone else poorer.

But the measure that will produce the greatest concern, both here and overseas, was the Bill rushed in to nationalise without compensation the personal accident business of insurance companies.

No government in the history of New Zealand including fighting two world wars and a great depression has ever nationalised without compensation. Nationalising without compensation is contrary to international law.

Maybe technically what the Government is doing is legal, but there is no doubt that it is morally repugnant for Government to confiscate private property without adequate compensation.

The insurance industry, much of it overseas owned, say they will lose $100 million. The insurance industry have been significant investors in New Zealand for over 150 years. They will not forget or forgive the confiscation of $100 million of their business.

New Zealand today has a reputation of being a country governed by the rule of law, where it is safe to invest. It has taken over 150 years to build our nation's good name and no government has the right to destroy our nation's reputation. Just as your own reputation is of great value, so too is it with countries.

When this country was as the result of the failure of the Think Big projects, heavily in debt to overseas banks - at a World Bank annual meeting I met with the director of German bank which held hundreds of million dollars of our government's debt.

Such meetings are always scheduled to be 20 minutes. After pleasantries, I informed him of our Government's intention to repay the debt. He offered to roll it over.

I replied that the Government intended to repay. So he offered more money. Just like your own bank will only offer you a loan when you don't need it, so it is with international banks.

The German banker was insistent. He said prior to our meeting the board had reviewed its New Zealand portfolios and its loan history going back to Holyoake. The banker told me that he had personally met every New Zealand Finance Minister since Harry Lake.

"The Board concluded that we are overexposed to New Zealand debt but your country is so reliable that we are prepared to lend more," he said. I thanked him but said we too had done a review and we were overexposed to the German mark and we must repay.

We then had 10 minutes to kill so we started to chat about the world and the fall of the Berlin Wall and prospects for Russia. The banker told me the bank was making huge investments in East Germany.

"Will you be lending money into Russia?" I asked.

"No," he replied. "We have a loan at the moment that is in default. We never lend until a default is resolved."

After more discussion I realised he was referring to a Czarist railway bond. A loan taken out before my father was born, but to the banker it was current.

To nationalise without compensation will do irreparable damage to New Zealand.

I believe that the ACC nationalisation Bill may not be passed by Parliament. ACC nationalisation was not one of Labour's credit card promises. The Alliance has said it's not a priority. The Greens certainly did not campaign on it.

The ACC reforms are working well. Business, including small business, is saving over $300 million a year. Employees are getting better service and better compensation. Accidents also appear to be down. Nationalising ACC is socialist ideology. There is no public support for it.

The new Government's lack of respect for private property is matched by their lack of respect for the sanctity of contract. The new Government has already broken logging contracts on the West Coast, has said it wants to break a government contract with America to purchase F16s, and has announced it will cause an upheaval in our schools by cancelling bulk funding commitments. As the new American ambassador put it, "A promise is a promise".

Making ACC nationalisation the Government's first priority raises a concern that this Government lacks political skills. Labour is a minority government dependent on two parties. Great political skill is required. The fact that the Labour/Alliance coalition is a minority government is solely the result of political bad judgement by Helen Clark.

In last year's state of the nation address I accurately predicted that NZ First would not make the 5% threshold. Helen Clark, by refusing to accept that only Katherine O'Regan could defeat Mr Peters in Tauranga, enabled Mr Peters to win the Tauranga seat with 5,000 fewer votes than I got in Wellington Central. That lost Labour two MPs.

Helen Clark made a bigger mistake with the Greens. Last year I incorrectly predicted the Greens would get only 3%. And indeed I was confident that neither the Greens nor NZ First would be in the new millennium Parliament.

Three weeks out from election day my prediction was right on target. Jeanette Fitzsimons was a poor second in Coromandel when Helen Clark not once but repeatedly refused to endorse Labour's Coromandel candidate. That action of Helen Clark gave the Greens their breakthrough. The Greens 6% cost the Labour/Alliance at least four MPs - and their Parliamentary majority. It was the biggest mistake of the campaign.

You might say that Helen Clark could not have predicted the consequences of her actions.

I see that last year I not only predicted that the minority government would last the year, but on 13 January 1999 I accurately predicted the 27 November election date.

Helen Clark's political judgement will be surely tested on industrial relations and Waitangi settlement issues.

The only service that failed on New Year's Day was that cellphones were overloaded. The cellphone companies do not have enough band width because of the Waitangi claim over the electromagnetic spectrum. How Labour handles this claim will tell us whether Labour has the skill to settle Waitangi issues.

The next test will be the details of the new industrial legislation. Clark and Cullen have both assured business that the new legislation will not affect "good employers".

The tragic events at the port of Lyttleton show there are those in the trade union movement who believe that the election of a Labour/Alliance government is a mandate for illegal strikes, pickets and demarcation disputes.

If our new Minister of Labour who is also the Attorney General had spoken out against the waterside picket across a legal road, I do not believe the tragic event would have happened.

Margaret Wilson is a brand new MP and the most inexperienced Minister. The Prime Minister should have told her the Lyttleton picket was political. The unionists were testing the Government to see how far they could go. The new Government has failed its first industrial relations test. The Government needs to resolve not to fail the next test or the year 2000 will become the year of the picket line, the demarcation dispute and the strike.

Labour needs to remember that none of these things help close the gap between rich and poor.

Rodney Hide put it this way. The 203,000 New Zealanders who are now paying more tax under this Labour/Alliance minority government were already paying 37% of all tax. What's fair about having 7% of the population pay 40% of the tax?

The tax increase is worth just $2 a week extra to the rest of New Zealand. In contrast, just half a percent extra economic growth would make every single New Zealander better off.

The new Government must always remember that its first task is to uphold the rule of law. You can not ask others to obey the law when the government breaks legal contracts, pushes through changes to the constitution under urgency and disregards a flagrantly illegal picket by the trade union movement.

ACT's role is going to be to put forward positive alternatives and new ideas.

We need a welfare system that won't trap people into dependence but will give them a hand up.

ACT will continue to be the strong advocate of free enterprise, of private property and the rule of law - all of which are going to need a strong defence.

In the three days of this new Parliament, the ACT Parliamentary team demonstrated that ACT will be a very effective Opposition. ACT is now an experienced team with the addition of three quality new MPs.

ACT is not complacent that we are the only party to see our support rise in the last two elections and the only centre-right party to beat the swing. National, the Christians and NZ First between them lost 12%, but ACT went up.

ACT is instead doing a thorough review of the party. Ruth Richardson is chairing the review and leading businessman Craig Heatley is on the review team. The Board has given the review the widest terms of reference.

ACT's support increased in the campaign as it did in 1996, in the Taranaki-King Country by-election and again in 1999. As voters hear ACT's core policy of encouraging the values of hard work, thrift and personal responsibility, our support rises. During the campaign ACT's support reached double figures. I believe that is because ACT is articulating core Kiwi values.

Our ancestors, whether they crossed the Pacific in wakas or sailing ships, were courageous people. Pioneers. People who believed in themselves and that they could create a new and better nation.

Their achievements last century are among the most remarkable in human history.

It is our task to embrace their spirit and vision. They set out to be the best. They were never satisfied unless it was the highest possible standard - that wonderful Kiwi expression, "world class".

Long may it be that way. The ACT Party personifies that vision.

To be the best. That is the New Zealand way.

For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at act@parliament.govt.nz.


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