Don Brash MP
National Party Leader

19 May 2005

Budget ’05: Opportunity Lost For All NZers

Speech Notes by National Party Leader Don Brash on Budget 2005, 19 May 2005.

Madam Speaker, this is a Budget about lost opportunity.

I move that all the words after "that" be omitted and the following inserted:
This House has no confidence in this Labour-led Government, which lacks the vision to lead New Zealand to a high growth, high income future, which will cause growing numbers of our children and grandchildren to seek better opportunities abroad, and which, having overtaxed hardworking New Zealanders for five long years, insults their intelligence with election-year fiddling while our future burns.

Over the last 10 years, the New Zealand economy has grown at an average rate of 3.7% annually - substantially better growth than in the previous two decades.

The astonishing thing is that in the second half of that period, coinciding with this Government’s period in office - when there was no drought, no Asian crisis, when the exchange rate reached its lowest level in history, when world interest rates reached the lowest point in decades (thus provoking a world-wide boom in property prices), when we enjoyed the best prices for meat and dairy exports in a generation, when we enjoyed a boom in the construction industry caused by people flooding in after September 11 - despite all those positive influences, growth was no faster in the second five years than in the first five years.

Worse, despite that good growth, there was NO increase in average after-tax after-inflation household income over the last five years.

Yes, average household incomes went up before tax, but after income tax they went up by slightly less than prices went up over the same period.

So, NO increase in average household incomes after tax and after inflation over the last five years.

No wonder we have industrial stoppages breaking out all over the country.

No wonder ordinary hard-working New Zealanders feel that this Government simply does not care about them.

No wonder we have 600 people a week leaving for Australia.

Average after-tax wages in New Zealand were $5,000 a year behind average after-tax wages in Australia in 1999. By 2004, the gap had widened to almost $9,000 a year.

That’s the background. What has today’s Budget done to reverse the dismal legacy of the last five years?

ALMOST nothing.

Trivial changes in the tax thresholds to leave a little more in the hands of taxpayers and then not until 2008. We wait for six years to have the Government accept the need for a change in the thresholds - and then wait another three years before the changes take effect.

Before the Budget, and following Peter Costello’s Budget in Australia, all New Zealanders earning less than $100,000 paid more income tax than Australians on the same income, and today’s Budget will make little difference to that.

Before today’s Budget, thousands of Kiwi families on middle incomes faced the loss of 64 cents in each additional dollar earned - in some cases 90 cents in each dollar earned - leaving them with little incentive to become more qualified, work harder, take a business risk. And this Budget barely changes that appalling situation.

Hard-working New Zealanders are still paying too much in tax, and only a National Government will change that.

Yes, the Minister makes a few minor changes to depreciation rates - but for the most part these are not tax concessions as he suggests, but simply a reflection of economic reality.

Yes, the Minister has made a few other tax reductions, but these only offset the additional burden imposed by the carbon tax which his Government announced a few days ago.

The Budget proposes a continued big increase in government spending - an increase made at the expense of providing meaningful tax relief to hard-working New Zealanders.

But surely, the Government’s supporters will say, doesn’t the proposal to encourage more savings do something to encourage growth?

Well, actually no. There is no evidence that higher savings would, by themselves, encourage growth or deliver higher living standards. Some of the countries with the highest rates of personal savings - such as Japan and Switzerland - have the lowest rates of economic growth at the moment, while some of the countries with a poor savings record - like Australia and the United States - have much better growth rates.

Yes, it would be a good thing if New Zealanders saved a bit more. That would make us a bit less dependent on the savings of other countries.

But there is no evidence that schemes like the one proposed will make any material difference to our savings behaviour, and that is well illustrated by the failure of a similar scheme in the UK to generate any appreciable increase in savings.

What we need to do to encourage more savings is to enable New Zealanders to earn higher incomes.

And this Budget does nothing to achieve that.

Nothing to drive improvements in future growth, nothing to narrow the gap in living standards with Australia.

Growth in productivity here is assumed to average just 1.5% a year. In Australia it has recently been about 2.5% a year, but even using the lower figure of 1.75% a year currently assumed by the Australian Treasury, New Zealand living standards will NEVER catch those in Australia unless we up our game.

Indeed, we might not even average 1.5%. Last year productivity growth per hour worked looks to have fallen, to have been negative, with output up by less than the increase in hours worked.

Well, the Budget is an opportunity lost in terms of encouraging growth in future living standards.

But of course Budgets are also about allocating resources in the here and now to deal with current problems.

How well does the Budget measure up in these terms?

One of the most fundamental responsibilities of government is the protection of our community from internal and external threats.

This Government has failed lamentably in this responsibility:

· report on 111 calling system
· mayors crying out for more police
· police preoccupied with revenue gathering rather than crime fighting
· upgrading of the Orions deferred for six years
· upgrading of the Hercules deferred for six years
· failure to act on the 2002 reports on the need to improve our defences against biosecurity risks

And looking forward? Spending on the police is projected to grow very slightly faster than the economy, but spending on the defence forces, and on biosecurity, is projected to continue growing more slowly than the economy.

But, the Government will protest, look how much extra spending is going into health. Yes, and we MUST have a well-funded health system meeting the needs of our people.

The National Party strongly agrees with that. But what has all the extra money actually bought?

The latest figures we have, for the year 2002/03, show that the number of taxpayer- funded surgical inpatient operations actually declined over the first three years of this Labour Government - from over 160,000 in their first full year to fewer than 158,000 in 2002/03.

We know that waiting lists for surgery have continued to be far too long, with thousands of people waiting in pain, and often in fear, for operations which they should be able to have.

We know that people have been removed from waiting lists by DHBs all over the country - 2,000 removed from the Counties Manukau DHB waiting list; almost 600 from the Tairawhiti DHB waiting list - all no doubt because the Minister wants to window-dress the numbers in advance of this year’s election.

We know that there has been a huge increase in spending on the health bureaucracy, with 21 DHBs and 78 PHOs and a huge expansion in the number of staff in the Ministry of Health.

We know that facilities for the very old, for those with dementia or Alzheimer’s, have been starved of resources to the point where many of them are now desperate, with 37 facilities closing in the last three years.

What seems clear is that there has been very little bought for the huge increase in government spending on health - an increase which even the Minister of Finance admits has been at a rate which simply can not be sustained into the future.

And the same is true in education: a vast increase in government spending on education and only a shambles to show for it. National supports a well-funded education system delivering high quality education to all our children and to older New Zealanders who need to improve their skills.

But what has this Government delivered? A totally dysfunctional NCEA system which pupils don’t understand, which parents don’t understand, and which employers certainly don’t understand. The chairman of NZQA is gone. The CEO of NZQA has gone. But where is the ministerial responsibility?

And what about tertiary education? The Government has showered it with money but the waste has been enormous. Think wananga. Think courses in homeopathy for pets. Think the Cool-IT course at Christchurch Polytech. Think courses in twilight golf. And Maori sing-along courses. Think the $40 million a year spent on the Tertiary Education Commission bureaucracy. Hundreds of millions of dollars a year squandered on courses where 70% of those who enrol don’t complete the course.

What has happened is that there has been a huge increase in government spending with little of value to show for it. There has been a complete collapse in productivity in the public sector. The Treasury itself has concluded that the core public sector has expanded in a way which is totally unsustainable. The number employed by the core public sector has gone up by some 28% in the last five years. And Treasury advises that “the available data suggests that the agencies that have experienced the most growth (in employment) are not necessarily those working in areas that closely align with the Government’s priorities” - which of course is bureaucratese for “employment growth is completely out of control and bears no resemblance to what the government should be doing.”

Opportunity lost. What a HUGE opportunity lost. The best economic conditions for a generation and nothing achieved in terms of faster growth or increased productivity. Nothing achieved to encourage more of the 600 Kiwis lining up to head for Australia every week to stay in New Zealand and devote their skills and their energies to building New Zealand’s future. A complacent Government riding a wave created by earlier governments and by international conditions for which they can take none of the credit.

Yes, they’ve increased government spending on health and education. Those are priorities for National also. But the way that Labour has spent the money has delivered very few benefits - a vast increase in bureaucracy, leading to a vast increase in compliance costs and a more intrusive state. But waiting lists which are far too long, with thousands of people waiting anxiously. No measurable improvement in the literacy or numeracy of our children. A totally shambolic secondary school qualification. Vast waste in the tertiary education sector. A completely dysfunctional 111 emergency call system leading to a serious loss of public confidence in the police.

This Budget, like all Dr Cullen’s previous Budgets, simply declines to compete with the rest of the world. This Budget embraces mediocrity.

This Budget says to all the parents and grandparents of New Zealand that your children and grandchildren will probably end up living overseas, and that’s OK.

Well, it’s NOT OK! We don’t have to accept mediocrity. We don’t have to put up with a Government that treats your income as their own - and then squanders it on more mindless bureaucracy leading to more mindless regulation and ever more burdensome compliance costs.

We don’t have to put up with the destruction of educational standards. We don’t have to put up with a health system that is generating inflation, not operations. We don’t have to put up with intergenerational welfare dependency at a time of strong international growth. We don’t have to put up with an ever-rising tax burden. We don’t have to put up with a Government that has no idea what the word accountability means. We don’t have to put up with a Government full of accident prone ministers and ex-ministers - a ministerial hall of shame which gets added to every few months.

We are having the lifeblood drained out of our country, yet all we get is more money thrown at problems. That money represents the high tax burden that middle income New Zealand has had to shoulder as they fund everybody else.

The steady outflow of New Zealanders shows one simple thing. Kiwis are choosing to sidestep that tax burden, and the rampant political correctness of a government whose values are wildly out of step with mainstream New Zealand.

Well, we don’t need to put up with this much longer. Within months, New Zealanders will have an opportunity to put an end to this nonsense, and elect a Government which will put the priorities of mainstream New Zealanders at the centre of their policies - providing tax relief to all hard-working New Zealanders, ensuring every child gets an education which is relevant and a qualification which is comprehensible, ending intergenerational welfare dependency, treating all New Zealanders as equal before the law, and protecting our families and communities from those who would endanger us.

New Zealanders will have an opportunity to elect a National Government.

ENDS

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