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Rodney Hide Speech - ACT on growth

ACT on growth

Thursday 7 Apr 2005 Rodney Hide Speeches -- Economy

Rodney Hide, Leader - ACT New Zealand, Speech to Parties for Growth Forum, Thorndon Club, 4 Katherine Avenue, Wellington; 6.00pm, Thursday 7 April 2005

We're told the Prime Minister could call an early election. Commentators say the economic indicators are set to get worse. Helen Clark could go early to avoid New Zealanders waking up to the cold hard realities of Labour's socialist policies.

Economic growth has been weaker than expected. The Reserve Bank and economists had predicted much more than 0.4 percent of growth that was last week reported for the December quarter.

Over the past year the pace of growth has been declining steadily. Also falling is business confidence and household spending. The real estate sector has definitely come off the boil.

Treasury is forecasting growth over the next four years at 2.7 percent - one point less than what we have averaged over the last 12 years - and well below Michael Cullen's stated goal of four percent a year.

The just released Business and Economy 2005 survey, focusing on Auckland, concluded "Economic prospects for the 2006 carry risk. By later 2005 and into the new year, the full impact of tighter monetary policy, high exchange rates and receding housing market activity will be leaning against the economy. Furthermore, the 175 basis points of interest rate increases delivered by the Reserve Bank have yet to be fully felt."

So we have troubled times ahead with the unions starting to flex their muscle and vent their frustration.

Stop-work rallies and pickets are back on the agenda. The likes of Colgate Palmolive employers and Stagecoach bus drivers are waking up to the fact that this so-called Labour Government is doing nothing to improve the lot of working New Zealanders.

It's no wonder Helen Clark is keen to go to the polls. She wants the election before her policy chickens come home to roost.

Late last year Dr Cullen confirmed in parliament that the average New Zealand household is no better off since Labour came to power six years ago. Labour's tax hikes and inflation have wiped out any pay rises. That's why Kiwis are feeling squeezed at a time when we're supposed to be enjoying economic prosperity.

The leaders of the Engineering, Printing and Manufacturing Union have got it wrong. If they want a five percent wage rise they should direct their energy to the real "fat cats" in New Zealand - and believe me the real fat cats are not this country's employers. The real fat cats are the greedy Labour Government, sitting aloft an obscene $7 billion surplus

The anger of the striking workers is misplaced. The single most effective way that workers can get a decent pay-rise is not through industrial action and screaming at their bosses. Rather, workers need to turn their energy to the high-tax Labour Party. They are the ones robbing workers' pay-packets each week.

Workers wouldn't be feeling so squeezed if Labour dialled back its unnecessary high-tax regime which sees hard-working taxpayers not enjoying any of Labour's record-high surplus.

Unions could get their members the equivalent of a seven percent pay-rise for the average worker under Labour's current tax regime if they did one thing - rally against Labour.

The surplus should be returned to hardworking New Zealanders. ACT is proposing to drop the top personal and corporate tax rate to 25 cents in the dollar and extend the 15-cent rate up to $38,000. For a worker on the average wage of $40,700 that would mean a tax cut of almost $2,000 or about $72 a fortnight. And that's not a handout. That's working people just keeping more of what they earn.

And if there's anyone who thinks the National Party would deliver tax cuts forget it. National's tax policy is slowly but surely. ACT's is no compromise, no ifs, no buts, no maybes.

National is chasing Helen's votes and in the process has turned its back on hard working Kiwis. Everything that ACT stands for represents the hopes and dreams and aspirations of people who once voted National.

On tax, National is as bad as Labour. They now support Helen Clark's top tax rate of 39 cents in the dollar and staggeringly they're less enthusiastic than Jim Anderton on dropping our corporate tax rate. They're not going to reverse the 1 April five-cent petrol tax. ACT would.

Back in 2002 National at least was planning to drop all tax rates to 25%, although it would take 10 years. But now National is not even promising that. Cutting Helen Clark's 39-cent envy tax is not even a priority.

Increasingly it's looking more like Tweedle Dumb and Tweedle Dumber. National's strategy this election is to try to look more like Labour. How bankrupt. How disappointing.

In 1997 the average corporate tax rate in the OECD was 37 percent. New Zealand was four percent below this. The average OECD corporate rate has been reducing every year, and is now 29 percent, with New Zealand now four percent above this.

By staying static on our corporate tax rate, we are becoming progressively less competitive. Four percent doesn't sound a lot but New Zealand needs every comparative advantage it can get. However we are now off officially off the radar for foreign investment.

ACT is the only party in parliament which is standing steadfast against this high-tax government. ACT is the only party promoting alternative policies that will ensure New Zealand's future prosperity. ACT is the only one shoving it to Labour day in day out.

While the two old parties National and Labour argue over who should be spending your money, ACT is different. We say you should be spending your own money yourself. We say decent tax cuts across the board would not only substantially boast workers' pay packets but what a shot in the arm it would deliver to our slowing and stifled economy!

ACT has asked the Finance Minister questions for Treasury about what ACT's tax policy would do for economic growth. Dr Cullen wouldn't tell us what Treasury found so we asked under the Official Information Act. Treasury reports confirmed that ACT's tax policy would boost annual growth by at least one percent. That's 4% instead of 3%. Add to that employment law reform, slashing red-tap and business compliance costs, major reform of the Resource Management Act and our welfare system and 5% average growth is well within our grasp as a nation. The evidence is clear and the choices are simple.

Helen Clark rejects tax cuts outright. She thinks boosting benefits and putting more middle-class families on welfare, via Labour's Working for the Families package, is the way to go. ACT opposes this age old socialism. It is nothing more than the drive for egalitarianism, which drags higher incomes down through tax and lower incomes up through benefits.

This socialist government is removing the incentive to work and get ahead.

For example, under Working for Families a family with one income earning around $50,000 will keep just 11 cents of every extra dollar they earn. The Government takes 89 cents, 33 cents tax, 30 cents loss of family support, 25 cents loss of accommodation supplement, and 1.2% ACC levies.

What sort of incentive is it when the Government takes nine dollars out of every extra 10 earned?

Imagine this: A family earning $35,000 a year works hard and increases its income by $20,000. They get to keep only $2,500 of the extra $20,000 they earn. Why would anyone bother?

Again, National and Labour this coming election will be fighting over one single theme: Who would spend your money better. Neither of them will be promoting a serious growth strategy.

Labour seems to think talking about growth is some sort of substitute to delivering the goods. Helen Clark can talk about `innovation' or `knowledge economy' until the cows come home, but the reality is virtually all of Labour's policies contribute to locking in a lower growth path and add nothing to the country's GDP.

Upon coming to office Helen Clark declared that her goal was to get New Zealand into the top half of the OECD in 10 years. Knowing Labour's policies would never propel us up the OECD ladder, she has dropped any ambition to improve our comparative living standards.

The Prime Minister does her best to paint a rosy picture but there are two points we must not lose sight of this coming election campaign: The economy is growing but Kiwis aren't seeing the benefit; and Labour has failed to boost growth one bit despite the best economic conditions in my lifetime.

We should be doing so much better but ladies and gentlemen it's not just Labour's fault. Lets not forget that National pulled out of the reforms of the 1980s and early 90s and from 1993 to 1999 did little to improve the country's growth prospects. It was enough for them that they were in power.

National committed endless follies and became increasingly interventionist. Labour has not only carried on with National's lackluster legacy but has taken us further down the government-knows-best road.

The key to succeeding in the future is greater growth. The key to achieving greater growth is greater freedom.

It doesn't matter what the problem is, better growth helps us deal with it. Averaging five percent growth a year instead of two would make us four times richer in 50 years. Being four times richer would make us better able to care for our elderly, look after young, have a better health and education system, even have a better rugby team!

Helen Clark pats herself on the back for our current economic growth but it has been nothing to do with her. As Treasury has said, it was the reforms of the 1980s and early 1990s that boosted New Zealand's growth rate.

Helen Clark doesn't believe that. She thinks that it's government in partnership with business that generates wealth. She hands out millions of dollars to the favoured few including $283,000 to successful cereal company, Hubbard Foods, to do what they were going to do anyway.

This government sees its role as one of redistribution and intervention - it's in the pockets and on the backs of everyone, particularly business.

ACT believes that hardworking Kiwis should keep more of the money they earn. We believe that they should have more choice and freedom. We believe that government should be much, much smaller. ACT believes in limited government with government focused on its core functions like keeping us safe in the streets, providing national security and ensuring basic infrastructure such as roading.

What we have now is a government spend more of our money than ever before but completely ignoring the basics.

ACT is the only party saying the role of government should not be all about writing out cheques to lock in political support. What really promotes growth is the provision of sound institutions and policies, secure property rights, economic freedom, and a government limited to its proper functions, such as keeping citizens safe from thugs and bullies. Those countries doing the best at the moment are the ones who are thriving on a smaller government framework.

Alarmingly, Labour doesn't think big government harms growth. ACT vigorously disagrees, saying New Zealand will not achieve consistent 4% plus growth until it addresses the current total government spending at 40% of GDP.

National has no real ambition to bring down government spending. It has always been a big spending party and there are no signs it would limit its tax take and spending. No wonder Dr Cullen is taunting them to produce an alternative budget! He knows it won't add up! National's latest plan to cut the number of public servants is nothing more fiddling while Rome burns. It would not have any fiscal impact whatsoever.

As I've said, Labour is ideologically opposed to tax cuts for any hard working New Zealanders. It commissioned the McLeod report but ignored its recommendations of a lower, flatter tax scale. It's not interested in advice.

Labour is also ideologically opposed to any privatisation. Despite all the global evidence that in general private ownership is more effective and efficient, Labour continues to nationalise. Despite the potential gains of privatisation in New Zealand being estimated at adding an additional $1billion of GDP, National is afraid to argue for it. ACT is the only party that believes the New Zealand public would be better served with less state ownership and more competition.

On employment law Labour has taken New Zealand back to collective bargaining, unionisation, employment protection laws, and expect more if Labour's re-elected. National plans to retain Employment Relations Act of 2000. ACT is the only party this election standing against the ERA.

On superannuation, Labour likes Kiwis to think it has found the silver bullet, all while refusing to grapple with the real issues that would boost our country's future and better enable working New Zealanders to save and make more of a provision for their retirement independent of the state.

The Cullen Fund sucks up $2 billion a year - money that would be far better in working people's pockets. $2 billion a year is another $1,400 a year on top of what's already being squeezed out of the average household budget. The Cullen Fund does nothing to boost New Zealand's growth potential or our ability to pay for pensions.

Sir Robert Muldoon wrecked Labour in 1975 over its nationalised savings plan. Now the National Party is agreeing with it! Sadly, National hasn't signed up to the fund because they think it's a good idea. It has done so solely for political expedience.

Also for purely political expedience, National will continue with Jim Anderton's crazy Kiwibank and has flip-flopped on Labour's policy of four-weeks annual leave.

So where does this leave us? It leaves voters with a stark choice come Election 2005, but the contrast is not between the two old parties. The stark contrast will be found pitting ACT against the Labour and National parties.

Our country deserves a credible alternative to Labour. National is not taking the lead, is not a contrast, is not a real alternative. Instead, National has repackaged itself as `Blue Labour'.

National is running scared of the real issues. Engaged more in trivial pursuit, its focus seems to be on establishing more camping grounds, fiddling with fringe benefit tax, and sacking a few civil servants. That's not going to boost New Zealand's growth chances. National is afraid to stand up for its own philosophy. It's afraid to argue the case for tax cuts, free enterprise and less government.

That job has been left to ACT.

While National accepts at face value what Labour has done, ACT does not. We believe the status quo will not make New Zealand internationally competitive. It will only see use slide further.

Our enterprising country can do much better. In the 21^st century our size and remoteness is no barrier to growth nor are there any great mysteries to achieving growth. We just need to get real. We just need to drop the socialism.

The likes of Hong Kong, Singapore, and Ireland demonstrate the benefits of smaller, better government. The Progressive Democrats in Ireland are the equivalent to ACT and have been a big influence on Ireland's economic liberalisation and transformation. ACT in government would be a big influence in liberalising and transforming our economy.

Labour returned to government would offer more business welfare, selective tax measures, more union-driven employment law, more centralisation of health and education, and more Kyoto-style measures - all resulting in our growth prospects receding even further.

This socialist Labour Party is anti-worker and is not delivering to those who put it into office - those bus drivers and factory workers.

Now National is talking the language of Labour voters, compromising everything that they once stood for. The time has come to recognise that ACT is the party for all thinking Nats. The alternative is to vote for Labour policies wrapped in a blue blanket. That's not a choice.

ACT is the only party now for people who once voted National given their own party has turned its back on them.

There's only one party that stands up for those who work and produce. There's only one party shoving it to Labour. There's only one party that's truly interested in changing the direction of this country, and growing the pie for all workers, and there's only party that wants all taxes cut - not increased.

ACT's return to parliament is vital if New Zealand is to boost its growth chances to benefit all. Party Vote ACT will get us there.

Thank you.


For more information visit ACT online at or contact the ACT Parliamentary Office at

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