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Richard Prebble: State of the Nation 2004

State of the Nation 2004
Richard Prebble
Monday 2 Feb 2004
Speeches - Other

Richard Prebble's "State of the Nation" Address. Ballroom, Crowne Plaza Hotel, 128 Albert Street, Auckland.

In 2004 the US election will dominate world politics and its outcome will have a significant impact on New Zealand. I visited America in November. Then Howard Dean had such a lead in the opinion polls he looked unstoppable to be the Democrat party’s candidate.

His fall is a dramatic demonstration that public opinion polls, and commentators do not determine elections. It is votes in the ballot boxes. Senator John Kerry will be a much stronger candidate than Dean.

It is the economy that is always the issue.

The Republican tax cuts have worked. The US economy is growing and, while he is not unbeatable, economic performance will re-elect George Bush.He will be a strong President because the Republicans will hold the House of Representatives and increase their majority in the Senate.

Waiting for a Democrat president and a Democrat congress to resolve our nuclear dispute, which seems to be Clark’s strategy, is not going to work.

Having a dispute with the world’s only superpower is an act of folly for a small trading nation. It’s a dispute that has cost us dearly, dramatically illustrated by New Zealand being the only member of the Cairns group of free trading nations not to have either a free trade agreement or its prospect with the US.

The question of whether the Doha round can be revived is the second most important international issue for New Zealand.

All of the Labour government’s trading initiatives have failed: rejected by the US, unable to interest Chile, Thailand or China in a free trade agreement. Even Australia with its restrictions on New Zealanders’ right of access has refused to review CER.

The Labour government’s only hope was Doha and again it failed.
I do not believe that the DOHA round timetable will be reached. Agreement may be years away.

In the last financial year, somewhat to the surprise I think of every one – Dr Cullen included – New Zealand grew faster than any other OECD nation and actually went up one place in the OECD – 22 to 21.
It certainly was not the result of any policy of Labour. The OECD in its report before Christmas put the economy’s growth down to the reforms that Roger Douglas and I are associated with, and those of Ruth Richardson, a member of ACT.

Last year New Zealand for the first time in a century did not support our traditional allies, Australia, Britain and the US, in a war. A decision that will have long-term consequences.

Our Prime Minister is a Europhile. From the age of 18 she has travelled each year to Europe to meet with fellow democratic socialists. She was there again this summer in Scandinavia. It is said, if you want to understand someone, ask who they regard as their peers. Whose good opinions do they most value? You cannot understand our Prime Minister until you realise that she seeks the good opinion of European Social Democrats, the delegates to democratic socialist conferences that Helen so loves to attend.

Where once New Zealand aligned itself with the values of the Anglo-American nations, the great alliance that first defeated fascism and then communism and is now at war with global terrorism. New Zealand under Helen Clark is now aligned with the EU, the anti-Americanism of France and the views of European Social Democrats.
I have, in my State of the Nation speeches, opposed Labour foreign policy as being not in New Zealand’s interest.

New Zealand has never been more isolated.

There is a development in 2004 that may see our country more isolated.

In 2004 the Eastern European nations are joining the EU. The former Eastern bloc countries that have experienced communism are pro-American. EU foreign policy is bound to change and New Zealand will be even more on our own.

New Zealand’s foreign policy, defence and trade are in a shambles because our government is run by ministers whose life experience is student politics. There is nothing like mortgaging your home to start a business to enable you to think clearly about what is important.
Successive governments, both left and right, have said our nation’s interests are with our traditional allies.

Helen Clark says, “No, our interests are with the EU”. When has the EU defended this nation or supported our right to trade?

Perhaps it is too hard to blame Labour for the failure of the Doha round but that round failed because there was no nation able to bridge the gap between the agriculture exporting third world and the manufacturing exporters of the first. As the only first world agriculturally exporting nation, that is a role we are uniquely able to fill. If Mike Moore, or Lockwood Smith, was our trade minister, I believe New Zealand could have played such a role. I recall participating in an OECD finance ministers’ meeting in Paris where New Zealand played a key role in having agriculture, for the first time, included in a trade round.

It is going to take a change of government to enable this country to have success in trade talks, to have real defense security or a foreign policy that promotes our nation’s real interests.

International events will impact on the economy. The soaring Kiwi is largely the falling US dollar but on a trade weighted basis the Kiwi is also climbing.

The question is, how far will the Kiwi climb?

If I knew, I would not be in politics.

I do point out, my track record of predictions is very good. I am the only politician to predict the Kiwi would be above 65 cents at Christmas.
I predict the Kiwi is going to climb strongly in value. Until the US Fed started increasing interest rates most analysts predicted August. I think it could be even much earlier.

Investors will at that point re-examine holding the Kiwi. They will see the growing trade deficit. I think the Kiwi will then, as they say, fall out of bed. A fall that will continue right through election year.
It is one of those paradoxes. A weak Kiwi helps exports and growth but is electorally unpopular as the price of cars, consumer goods, and overseas travel, rises.

The present high dollar is one of the reasons for the nation’s feel good factor and record consumer spending.

If my analysis is right, in election year, it will be turned on its head.
Dr Cullen claimed last year that the government had options to lower the value of the Kiwi. He likes to make boasts of this sort. Well, now is the time for Dr Cullen to tell us what those options are.

The truth is that any such options would do more harm than good. Dr Cullen will not admit this because to do so is to concede that ACT is right and the only way to assist the export sector is to lower costs and government charges.

In 2004 Labour intends to significantly increase compliance costs. The more we have studied the Employment Relations Reform bill the more concerned we have become. The bill is very complex to disguise its true purpose – to take us back to the days of trade union power in the 1980s.

The Prime Minister and media commentators say that I made similar statements when Labour introduced the Employment Relations Act. The law in practice has not proved as bad as we feared.

What they ignore is that ACT led a huge campaign against the Employment Relations Bill and we were able to get many clauses deleted. It is those clauses, such as being forced into union multi-employer agreements, which are in the new bill.

Fighting this bill is ACT’s priority and for that reason I have again put myself on the select committee so I can lead the parliamentary opposition to the bill.

The Labour leadership is economically illiterate. Margaret Wilson thinks the present growth will continue no matter what costs are imposed. The present growth cycle is the longest in my adult life. While it’s foundations are a fundamental shift in competitiveness, nevertheless we remain a small economy vulnerable to overseas shocks.

No one predicted that the Asian crisis would deliver a recession to our economy. The next shock could be just as unpredictable and sudden.

In fairness to Dr Cullen, he, like every finance minister, is fully aware of the threat. Dr Cullen says, “Don’t worry; government has a surplus to enable us to ride out a crisis”.

I have two concerns with his strategy.

Experience here and overseas shows that a predicted government surplus can turn very quickly into a deficit. But secondly the government is not the economy. Governments create no wealth.

The question is, can the private sector ride out a real shock? While our economy is more flexible and business has conservative debt, the New Zealand household has never been more in debt.

Household debt levels are alarming. In relation to GDP, New Zealanders have far higher debt than Americans, and we have the most indebted households in the OECD.

Three factors have caused New Zealanders to go into debt.

First, low interest rates make mortgages affordable. An interest rate rise, that I think is coming, will have a huge impact on households. I wrote this paragraph ten days ago. The Reserve Bank has already made the first rise. (I thought I would leave it in. Why should my secretary be the only one impressed by my predictions?)

Second, the government’s increase in its share of GDP, raised by stealth taxes like the fuel taxes, has wiped out real income rises, causing households to take on debt to maintain living standards.

Third, the property bubble – and it is a bubble – has created a wealth effect and the extra asset wealth has enabled households to increase the mortgage.

It should not be left to me, an opposition MP, to warn the public about taking on debt. What is really needed are policies by the government to enable families to reduce debt.

Which brings us to one of the issues of 2004 – what to do with the six billion dollar surplus of taxpayers’ money?

Labour intends to increase government spending on projects like financing the America’s Cup challenge, and Maori TV.

Dr Cullen talks of tax cuts for the low paid but I fear such cuts will inevitably go mainly to welfare beneficiaries.

I believe the government’s priorities are economically unsound, socially unfair and based on the “politics of envy”.

The fact is the 39-cent tax rate has never been needed. It is an envy tax. By not adjusting tax rates for inflation by the end of 2004, over 20 percent of all full-time workers will be paying the 39-cent tax rate that Labour said would only affect 5 percent of taxpayers.

The six billion dollar surplus belongs to the people whose money it is – taxpayers.

The government could now reduce the company and personal income tax rate to 20 percent and still balance its budget. Put another way, it is enough to give the average full-time worker an extra $100 a fortnight in their take home pay. Such a tax rate would increase middle class family incomes overnight, boost investment, growth, jobs and prosperity. ACT will campaign strongly for middle class tax cuts.

The debate will dominate this year’s budget and the next election.
The case for a tax cut right now is overwhelming; you must wonder why Cullen is so opposed.

It is partly ideological. Dr Cullen really believes in high taxes. Despite overwhelming evidence from overseas and in New Zealand, that tax cuts boost the economy and create a rising tide that lifts all ships, Cullen claims to believe tax increases have no effect on the economy.

Labour’s second reason is more cynical. It’s electoral mathematics. Over a third of all adults are on social welfare. Put another way, when you add together students, national superannuitants, or others not in the workforce, less than 30 percent of the population are paying around 90 percent of income taxes.

Labour is running a sophisticated modern version of Rome’s free bread and, with programmes like Maori TV, circuses.

It is a huge electoral challenge for the Centre-Right.

We can overcome it. Labour’s deal is really not attractive. A life of dependency.

ACT is offering a far more appealing option of personal independence.
Before I do my assessment of the parties and their prospects let me deal with the other issues of 2004.

The government’s foreshore proposals are political expediency and have no basis in principle.

Labour has instead created a new legal concept, the “public domain”, new governance rights for Maori, and is offering to transfer significant economic wealth to Maori in the form of marine development rights.
It’s a recipe for years of litigation and agitation.

Labour’s Treaty and Maori policies are driven by a desire to win votes, not to create a successful multi-racial society.

ACT all along has advocated a colour-blind New Zealand.
I have noticed that ACT’s views are gaining ground.

Last election both New Zealand First and National copied ACT’s Treaty policy, full fair and final settlement to a fixed timetable.

Last week Don Brash gave a thoughtful speech on Maori issues that read like the speeches ACT has been giving since Derek Quigley introduced his Treaty of Waitangi settlement bill that all parties, including New Zealand First, voted against. Where ACT leads the others follow.

There is a remarkable aspect to the strong reaction to Dr Brash’s speech. It is the “way” in which so many New Zealanders have responded, and why New Zealand is like this. I have read Dr Brash’s speech. There is not one personal attack in the speech, refreshingly different.

It is a speech that has clearly been researched and is carefully argued. I have read Labour’s reaction which is a concerted vicious personal attack. Successive Labour Ministers have set out to portray Dr Brash as being desperate and making a play for the so-called race card.
This is a deliberate Labour strategy to label anyone, no matter how well researched, who criticises their Maori policies, as a racist.

At the beginning of the new year the ACT party put out some careful rigorous research on the claim by Labour that Maori paid more in tax than they received in benefits. Our research shows Labour’s claim to be false. Maori pay some $2.3 billion in taxes each year but receive $7.3 billion in return.

When Labour made its outrageous claim no-one in the media accused Ministers of racism. But when we corrected it the abuse was heaped upon us. It’s clear from media commentators’ reaction to ACT’s research and now to Dr Brash’s speech that commentators are scared to state their support for what we are saying. Indeed the media are engaged in what is often the worst sort of censorship – self-imposed.
As a result most people don’t know that for the first time, under Labour, doctors’ subsidies are determined by race. Doctors are funded 20 percent more to see a Maori or a Pacific Island patient even if that patient is wealthier or healthier than others.

It is not well known that tertiary institutions get $140 to $150 more for Maori students or that the Special Housing Action Zone scheme providing grants and loans for house repairs is almost entirely for Maori. The media has reported Labour no longer has a “closing the gaps” programme but few realise only the name has changed and millions are now spent, mostly immeasurable in terms of outcomes, under the guise of initiatives such as “capacity building” for Maori.

This combined with legislation that not only requires greatly increased consultation with Maori but in many cases gives Maori an effective veto power, has made race at the heart of political decision-making.
Here is what I believe, and it is at the centre of ACT policy. In terms of access to health care and education and help through life, it is essential that the child of New Zealand Maori parents whose ancestors arrived 800 years ago, has no more rights than the child of the European New Zealander whose ancestors arrived 150 years ago. They in turn have no more rights than the child of Asian New Zealanders who arrived this century.

When Dr Brash made a similar comment I think he would have been wise not just to point out that Article Three of the Treaty gives the same citizenship rights to all, but also to point out that saying the government should treat citizens the same, regardless of race, is not saying we are all the same.

The desire by Maori to promote their culture and language is legitimate. I have no difficulty in publicly acknowledging that Maori culture has and will continue to play a vital role in defining us as a nation. The film, Whale Rider, is a New Zealand film in a way that Lord of the Rings never can be.

ACT’s fresh ideas on Maori policy are not just winning over other parties. There is a growing Maori middle class of professionals and business people who are successful and do not make their income from the grievance industry. They resent the implicit assumption in Labour’s race policies that Maori can not succeed without preference. In increasing numbers theses new professionals are voting for ACT. Labour is also losing votes from middle New Zealand from people supportive of Maori aspirations but who realise that Labour’s programmes are deliberate vote buying.

There is a further reason to change direction away from race-based policies. They do not work.

ACT’s policies, especially in education, are workable solutions.
The issue in 2004, which has much appeal to Maori, is the parents’ right to choice movement. The ending of the double taxing of parents who choose to send their children to independent schools.

Evidence from the US indicates that black pupils benefited most from vouchers and our polling shows growing support for parents being able to send their child to the school that most meets their needs.
ACT is going to capture the health issue in 2004.

Labour solved the problem of hospital waiting lists by simply abolishing the hospital waiting list. If the list is too long, you are taken off. Of course you are still sick but Labour has the gall to claim waiting lists are going down.

How many people have been referred back to GPs is a state secret.
Soon it won’t be. In 2004 ACT is commissioning the first ever nationwide survey to find out how many people are really waiting for hospital treatment.

I am confident we will discover that Labour’s health policies have failed and the real number of people waiting for hospital treatment has increased.

Our survey results will make health a key election issue.
Another issue in 2004 will be the steady increase in violent crime. Revolving door prisons do not work.

ACT’s polling shows most Labour voters prefer ACT’s Zero Tolerance to Crime approach. It is an issue that ACT now owns.

So at this near halfway point, what is the status of the parties and their electoral prospects?

First we should always remember this is a minority government. For every vote Labour must persuade either United or the Greens to support it.

On any issue the government could fall.

I do not expect this to happen in 2004 because its partners United and Greens are so weak.

Labour intends to implement its politically correct agenda, even though it has no electoral mandate. Labour’s willingness to repeal a part of our constitution, the right to appeal to the Privy Council on a bare parliamentary majority, shows their arrogance.

They have even passed a law to require Aunt Polly to microchip her poodle. Next year the Smokefree Act comes into effect, where return servicemen cannot smoke at their home – the RSA, but Maori can smoke on the Marae.

A Clean Slate bill will allow criminals to lie about their convictions.
A new politically correct Families Commission has redefined “the family” so widely that the Mongrel Mob is now legally a “family”. The one definition that is now politically incorrect is mum, dad and the children.

Helen Clark wants an anti-smacking bill. The list goes on and on. At some point middle New Zealand is going to say “enough is enough”.
Labour’s strategy of taking working families for granted and diverting the surplus to social welfare beneficiaries is also risky. Our polling shows, especially in Auckland, that working people are sick of being ignored.
Labour went into the last election at 52 percent and ended up on 42 percent, no higher than its 1999 victory. Labour ended 2003 on 42 percent and a similar campaign swing would see Labour on 34 percent!

Labour is really relying on National to save it.Even National agrees that they fought a terrible campaign last election and then had an awful year in 2003. National has a new Leader and a new chance.Don Brash was telling the truth when he said he was not seeking to replace Bill English. He realises that with just 18 months of Parliamentary experience, he has a lot to learn.

It is too early to judge Brash, but he has made a good start to 2004. If Brash’s next promised major speeches are as good as last week’s then National will, for the first time, offer real opposition to this government. He has some great assets. As a distinguished Reserve Bank governor he has great economic credibility. If the economy hits any road bumps, his are a safe pair of hands.

National’s success will depend on the whole team.Put bluntly, there are National MPs and National Party officials who are too complacent and just expect to be in government.Under the electoral cycle of first past the post, eventually they would be. Not so with MMP. The voters have many choices and parties have to earn their votes.National has not done so.

If that sounds hard from a potential coalition ally, it is because it’s not ACT’s job to prop up National, we are there to keep them all honest.
And I guess that is Mr Peters’ problem. It is an old political maxim, if you are going to make a career in exposing scandals, then you must observe the highest standards.There is no such thing as a free lunch and Mr Peters is going to pay a very high price for his habit of dining without paying.

United has a problem. How can a pro-family values party justify supporting the godless, anti-family Labour party?

The Greens’ dilemma is just as serious. Apart from the GE issue, what issue do the Greens have? All parties have responsible environmental policies. The Greens’ distinguishing stance is extreme left positions. Positions that the old communist party used to promote. New Zealanders do not support extreme left policies and despite strong support from media commentators it is hard to see the Greens making the 5 percent threshold next election. So Labour, having lost the Alliance in the last election, look like doing the same to both United and the Greens in the next.

A Centre-Right win in the next election is a very real prospect.
So what is the state of the ACT Party? ACT is the party that is providing fresh new ideas and real leadership.

ACT had its best polling support in any post-election year. ACT experienced a fall in support after an election but much less than in previous elections. Despite being subjected to two media beat-up attacks, ACT remained over the critical threshold.

ACT had also a real issue, what to do with MP Donna Awatere Huata.
I make no apology for initiating first her suspension and now her expulsion from parliament. Regardless of whether Ms Huata is convicted, she has not met the values ACT stands for. Today as a list MP she has no right to sit in Parliament claiming to represent a party that she has left. I am confident that ACT will win the court case and Ms Huata’s injunction will be lifted and she will be expelled from Parliament. Kenneth Wang, No.10 on ACT’s list, will be sworn in as an MP – a good way to start 2004.

Let me say ACT is not throwing away Ms Huata’s real commitment to lifting literacy. The level of illiteracy, especially among young Maori, is a national disgrace and the importance of every child learning to read remains a core ACT policy.

The media critics, when they reviewed 2003, were forced to conclude that the ACT team was the most effective. Having the quality team gives ACT a significant advantage.

ACT will in 2004 keep them all honest and be the effective opposition.
But we want to do more than that and provide an alternative vision to Labour’s increasingly dependent nation.

On every index, not just increasing welfare numbers, our dependency is increasing. Once we led the world in home-ownership. Now home-ownership, especially in Auckland, is to many working families an impossible dream. Once, most working families had health insurance. Large numbers belonged to superannuation schemes saving for retirement or had annuity life policies.

New Zealand was a property-owning democracy.

ACT has a vision of an ownership society. A nation where the average family does own their own home, has health insurance and is saving in a superannuation scheme for their retirement. ACT has the practical positive policies to achieve what is still the Kiwi dream – an ownership society.

I think that is the real issue of 2004.

And that is the state of the nation.

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