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Budget 2005 - Rod Donald MP, Green Party Co-Leader

Budget 2005
Rod Donald MP, Green Party Co-Leader
Parliament, 19th May 2005

That was a farewell speech from Rodney Hide if ever I’ve heard one. Why doesn’t ACT just accept that no one in their right mind would vote for a party that has such blind faith in unfettered free markets? Kiwis know all too well the pain ACT's “dog eat dog policies” would cause.

Ask anyone on the average wage trying to save to buy their first home. That Kiwi dream has become a nightmare because successive governments have allowed the market to rule our society rather than ensuring society directs the economy.

Finally, after six years in government, Labour is facing up to the fact that good hard working Kiwi families are not getting a fair go when it comes to home ownership.

The Green Party has been highlighting this issue for years because home is not just where the heart is. A secure family home also provides a better environment for bringing up children and there are many other benefits to both individuals and society that flow from a high level of home ownership.

But ownership rates have declined from 74% in 1989 to 65% in 2004. Those figures only tell half the story. Obviously a much higher percentage of young adults and those on low incomes are forced to rent because they can’t bridge the deposit gap.

That gap has widened enormously in the 25 years since I started saving to buy my first home. In 1981 the average house price in New Zealand was $41,000 and the average wage was $12,600. When Labour took office in 1999 the average house price had increased more than fourfold to $187,000 while the average wage had increased to $33,400. In the six years of this Labour Government house prices have rocketed to over $260,000 while wages have only grown to $39,000.

Even relatively well-paid people in Auckland can’t afford their own home. It is estimated that only 14% of Auckland households in the $44,000 to $55,000 income bracket can afford to service a 95% mortgage on an entry level home. As rents tend to follow house prices they have also risen, making it even harder to save a deposit.

So how does today’s home ownership deposit subsidy measure up? It is definitely a big step in the right direction and we congratulate the Government for that. But it is a 20th century solution to a 21st century problem. In many respects the subsidy is no different from what my generation could access in the 1980s. Why National axed that scheme and Labour took so long to replace it is something they will have to explain. But for now the good news is that more people will be able to join the so-called ownership society, although not enough people on low incomes and benefits.

However we applaud the additional $131 million for another 1300 state houses over the next 4 years, but we also note that over $400 million is being spent on capital funding for Defence. – perhaps those who cannot afford homes can join the army.

But the really bad news is that, for all its merits, the home ownership scheme does not tackle the root causes of the increasing unaffordability of the family home. Only 25 years ago the average wage represented 31% of the price of the average house. Today the average wage accounts for only 15% of that house. Doubling wages is not the solution. Instead Labour must face up to the impact foreign investment is having on the residential housing market and the increasing speculation in that market because of New Zealand’s tax structure.

Until the Government shuts the door on foreign investors pumping capital into the residential housing market, inflating property prices as a result, and investigates a capital gains tax, on all but the family home, to steer investment away from property and into productive activities, the cost of buying that first home will slip even further out of reach for struggling Kiwi families.

Speaking of homes, I would like to offer my condolences on behalf of the Green Party to all those people who have lost their homes or have had to leave them because of the torrential rain in the Bay of Plenty and Coromandel. We would all like to hope that this is a one in a 150 year event but such states of emergency are becoming increasingly common.

While the incidences of unusual floods, storms, droughts and heat waves cannot be proven to be directly attributed to global warming they have all increased and the pattern is consistent with that predicted by climate change models. Even the Insurance Council of New Zealand have acknowledged the impact global warming is having on extreme weather events.

Unfortunately some other parties in this House either refuse to accept the incontrovertible evidence or aren’t prepared to take the necessary steps to reduce our green house gas emissions or don’t believe we should act until everyone else does. I’m talking about ACT, National and NZ First. Along with United Future they all voted against the Climate Change Response Bill. The Government only passed that bill and 15 others with Green support.

The Government’s policy on carbon credits has got windpower – the best new source of clean renewable electricity – off the ground. There are several windfarms up and running and many more being built. Although there is much we disagree with in the Government’s energy policy we congratulate it strongly on its efforts to support renewable energy. But we challenge it to go much further, especially with solar water heating, energy efficiency and conservation. We must all change the transport and energy habits of a lifetime if we are to survive this century

The Greens want to see the carbon tax brought forward to 1 April 2006, and an excise tax on diesel as the start of a comprehensive process of ecological tax reform, and as a key part of the transition to sustainable energy future.

The Government is failing to apply the foresight it has on climate change to the closely related issue of Peak Oil. While on the one hand the Government realises that global warming is a problem on the other hand it remains wedded to a fossil fuel dependent economy. What’s more, it is investing our taxes in drill-and-hope searches for oil and gas, and praying that world oil prices will drop instead of developing a plan that will enable us to reduce our dependence on oil.

In last year’s budget treasury took the trouble of providing a full page of advice on oil prices. They said Brent crude spot prices would remain around US$32 a barrel over the middle of 2004 before easing back towards their assumed equilibrium level of US$19. When we questioned officials on where they got their price predictions from they conceded that neither Treasury nor the Ministry of Energy had any capacity to predict future prices. Instead they admitted that they rely on consensus forecasts and in turn these forecasts are significantly influenced by the futures market. We asked if they had ever heard of peak oil and they revealed that they hadn’t.

Treasury devoted another page to oil prices in the December economic and fiscal update. By then their tune had changed. Their prediction was for a gradual decline in prices to US$43 a barrel by March just passed. Today Brent crude is selling for US$48.00 and today’s BEFU says spot prices of US$50 are expected to decline over the next five years to US$47. That’s a long way from $19.50!

Dr Cullen has claimed that the over riding theme of this year’s budget is the need to play the long game, to ensure that our economic fundamentals remain strong.

Great theme, but when it comes to transport and all the other economic activities that depend on oil, where is the plan to achieve it? Where is the announcement that the extra $100m allocated to land transport will all be spent on public transport, rail and other sustainable options?

It’s great that Labour bought back the rail track but much of it still needs to be fixed, beyond that Wellington’s commuter rail network should be expanded, for example by double tracking where it is needed and electrifying the route north of Paraparaumu. Auckland needs light rail service to the airport, linking to the south and the west as well as to the city and Christchurch needs passenger rail to service Rolleston and Rangiora.

The Government should also be investigating the electrification of the gaps in the North Island main trunk as another step to reduce our dependence on fossil fuels and meeting our emission reduction targets. The benefits go beyond being kind to the environment. If we can get more freight off juggernaut trucks and back on the rail where it belongs then our roads will become safer. If we can provide fast affordable public transport within and between our towns and cities we can reduce congestion on our roads, reduce frustration and road deaths and increase productivity.

Thanks to the Greens we have a land Transport Strategy and a new Act that makes possible a much more balanced transport system with funding across rail, road, public transport, Travel Demand Management, cycling and coastal shipping. But it is not reflected in this budget, which allocates even more hundreds of millions to accelerate road building and nothing to the low energy alternatives. It just shows the effect of Don Brash’s billboards in Auckland. It’s disappointing that Dr Cullen hasn’t got the spine to stand up to this sort of blatant populism.

Whether or not Peak Oil is upon us the end of the cheap oil era certainly is. The challenge of the next three years is to ensure that real change actually happens on the ground – so far the signs are mixed.

The framework is there to take us to a future where mobility is not the preserve of the rich, as Don Brash and Michael Cullen would have it. The difference between the good Doctors and the Greens is that they are looking back to a past that never existed while we are looking to a future that is only possible if we take big strides to achieve it.

That “it” I’m talking about is environmental sustainability Yet none of the environmental initiatives in this Budget tackle the problem of industry as both poacher and gamekeeper which have meant that non-binding measures such as the New Zealand Waste Strategy have failed to meet even their own very modest targets. Government must lead in this area.

New Zealand’s economy is built on our environment – our clean green image is vital to the success of our primary producers while our largest export industry – tourism – brands us 100% pure. Yet despite depending on the environment for economic success, as well as human survival, the Government constantly puts short-term economic growth ahead of long-term environmental sustainability.

Does the budget measure up on sustainability. Does it ensure that our environmental fundamentals are strong? Does it have a plan to ensure that we are living within resource limits and that demand doesn’t outstrip supply, whether its fossil fuel or freshwater or that we are reversing the decline in quality of our air, or drinking water and our rivers. Will Dr Cullen’s economy reduce or increase our ecological foot print?

Quite simply the budget doesn’t measure up on all these counts. It falls well short on sustainability and self-reliance. In fact, it will have a negative environmental impact and make New Zealand even more dependent on what Dr Cullen admits is a weak global economy.

Perhaps Dr Cullen is finally waking up to the need for our economy to be more self-reliant. His admission today that we have a chronic current account deficit and high overseas debt sound like the king has finally looked out of the window of his counting house to see that the peasants are struggling. While his self-proclaimed prudent fiscal management has lead to record surpluses our national economy has been going down the gurgler. When Dr Cullen took over as treasurer New Zealand had an annual trade deficit of $2,554m and rising. For the twelve months to March this year it had worsened to an all time record of $4,365m. The story’s the same for the current account deficit. It was $4,808m and rising when Dr Cullen became treasurer. For the 2004 calendar year it was a massive $9,385m and predicted to rise even higher.

That is why the Green Party opposes the Government’s free trade and foreign investment policies and supports import controls and a strong buy NZ made campaign. That is also why we will support the government’s work based savings scheme announced today. In fact, ever since we have been in parliament we have called on the government to provide working people with an incentive to save some extra for their own retirement on top of their NZ superannuation entitlement. Our view is that while the government should provide the bread and butter it is up to people to make their own jam, with the help of a little sweetener from the treasury coffers.

Our reasons for supporting a work based savings scheme is not just because it is good for the individual saver. It is also clearly good for the whole economy and we are pleased to see that Dr Cullen has finally grasped the benefits of increased savings as a way to reduce our growing dependence on foreign capital. An additional benefit from this scheme is that by encouraging saving it automatically reduces consumption and therefore pressure on scarce resources.

We can’t say the same about the Government’s flawed plan to get parents to start saving for their kids tertiary education. It is a blatant quadruple whammy. The current generation of young working people are not only paying for their parents superannuation but through the Cullen fund they are also paying for part of their own superannuation. Add to that they have been paying for their own tertiary education. That alone is intergenerational theft on a grand scale but now the Government wants to cap it off by making working people pay for their kids tertiary education too.

It’s a no brainer, which is why it’s not in the budget but has instead been announced as a discussion document. As even the Dominion Post suggested last week, why doesn’t the Government simply reduce tertiary fees and cut the size of student debt, which would give graduates the double benefit of having less debt going into work and therefore better prospects of buying their own home.

We would go even further. We believe full-time tertiary students should be paid a living allowance equivalent to the unemployment benefit. We also support the write-off of existing student debt where graduates stay in New Zealand and contribute to our economy and society. If the government is serious about having a world class education system and making New Zealand a place where skilled people want to live then it needs to send those people a very strong signal that they are valued. Right now they get exactly the opposite message. The government has addressed some of the minor problems in the current scheme such as – increasing the income threshold for students working and introducing an abatement regime. However, the government has failed to tackle the real issue of providing a living allowance for all students.

We live in hope that Dr Cullen will make his goals consistent with his policies. After all he is finally doing something about work based savings. But perhaps one reason why he refuses to tackle the student debt burden is because the net debt targets in the crown accounts are being achieved on the back of young New Zealanders. Student loans appear on the Government’s books as an asset. In reality the burden of student debt is a massive liability for our society but in the Crown accounts the current debt of $7b helps the Government achieve its net debt target. On current projections student debt will have blown out to $10b by 2010. If this “asset” was removed the government’s net debt would be back to 1999 levels.

Dr Cullen’s budget surplus is also built on the backs of children growing up in poverty. Yes, working for families is helping and will help to reduce child poverty in NZ but as we have said time and time again it does not go far enough fast enough. The fact that a coalition of Barnardos, UNICEF, Save the Children and Plunket have launched the “Every Child Counts” initiative to make children the centre of attention during the election campaign confirms that the Government is not doing enough to ensure every child gets the decent start in life they deserve. Children should be at the heart of the election policy debate because they are literally our future. It is morally indefensible that there are children growing up in poverty in our wealthy country.

It is also short sighted economically. When a child gets a bad start in life they are more likely to get into trouble and they won’t contribute as much to society as they should. We can’t afford that, because we depend on the current generation of children to produce the goods and services we want when we retire and to create the wealth to pay for the superannuation and health costs of our generation. In other words we have a vested interest to ensure every child grows up to be a healthy, productive citizen, because that’s the best security we could have in our old age.

And that’s another good reason why the Greens continue to oppose the Cullen superannuation fund. We believe that money would be better invested in the health, housing and education of our young people and in the public infrastructure that I talked about at the beginning of my speech. It’s time to future proof our economy, strengthen our society and protect our environment rather than invest our taxes in the economies of our competitors.

We also have a responsibility to be good international citizens. It pains me that New Zealanders in the bottom half of the OECD when it comes to our contribution to overseas development assistance. My passion for politics developed when Norman Kirk was prime minister. He made me proud to be a Kiwi, not just because he sent a frigate to Mururoa, but also because he lifted our contribution for aid and development to over 0.5% of GDP. Today it is half that level, despite successive governments’ signing binding commitments internationally. As my colleague Keith Locke has pointed out, if the recently announced defence package had instead been invested in development assistance New Zealand would have regained its international reputation by almost reach the 0.7% target. I do not know how the government can be so proud of maintaining our aid at 0.27% of GNI with a gigantic lift to 0.28 in 2007/08. While there of course there is a place for a defence force, especially in peace keeping, fisheries protection and disaster relief roles, real peace comes from development not out of the barrel of a gun.

Three years ago the Green MPs voted for the budget despite Labour passing legislation to lift the moratorium on genetic engineering earlier in that same week. Because we had a confidence and supply agreement with that government. In this term the Government does not have our confidence because it has refused to countenance the protection we believe New Zealand deserves from genetically engineered crops and animals. Fortunately our strong public stance against GE means we can still claim victory in that New Zealand is still GE free. Bearing that in mind, and the fact that there are many measures in the budget that we support, I will not be moving a no confidence amendment in the government. We will also vote against the no confidence amendments of other parties, as we have always done, and, for the first time since the last election, we will abstain on the budget itself.

That is both a signal that we are willing to work with Labour and a belief that the budget still doesn’t measure up where it counts. We look forward to ensuring that next year’s budget gives Kiwis – both the feathered and human species – the futures they deserve.


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