Don Brash MP
National Party Leader

19 May 2006

Post-Budget Address

Speech to National Party Tamaki Electorate Luncheon, Ellerslie Convention Centre, Ellerslie Racecourse.

Yesterday, Michael Cullen delivered his seventh Budget.

And the news is that 290,000 Kiwis just got a tax cut. In Australia.

As I said in the House yesterday, this Budget is the Bondi Budget! The Budget was not only incredibly boring, as Michael Cullen had promised, but also profoundly disappointing. It was almost certainly Michael Cullen’s last Budget – and would certainly be his last if there was anybody else in the Labour caucus who could do better. But Judith Tizard’s not quite ready yet, and John Tamihere’s gone.

Last year’s Budget was rightly dubbed the chewing gum Budget – I think by the man who said he’d never accept the baubles of office. Well, that man is not a man whose opinion I would normally take seriously, and the people of Tauranga clearly came to that conclusion last year also. But in calling last year’s effort “the chewing gum Budget” he was right: 67 miserable cents a week in tax relief, in three years’ time.

This year we have the Brain-Drain Budget, the Bondi Budget.

Helen Clark and Michael Cullen want your grandchildren to be cheering for the Wallabies! There are two questions which should be asked about any Budget: what does it do, and what does it say? First, what does yesterday’s Budget do? On the tax side of the ledger, of course, the Budget does absolutely nothing! Nothing for hard-working Kiwis; nothing for New Zealand businesses.

No recognition that Labour’s tax revenues have grown by 50% since 2000, twice as fast as the inflation rate over that period.

No recognition that operating surpluses have totalled $28 billion over that period, and are projected to total $14 billion over the next three years.

No recognition that almost all Australians – certainly all those earning less than $182,000 a year – now pay less tax in Australia than they would if they were paying tax in New Zealand.

No recognition that, added to the higher pre-tax incomes in Australia, the ongoing tax reductions in Australia and the total failure of this Government to cut taxes in New Zealand, the Budget will still further increase the incentive for New Zealanders to head across the Tasman.

No recognition that the net outflow of Kiwis to Australia has doubled in the last two years – from 10,000 in the year to January ’04, to 16,000 in the year to January ’05, to 21,000 in the year to January ’06.

Over the last seven years, Michael Cullen has happily raised any number of taxes – personal taxes, petrol taxes, cigarette taxes, road user charges - you name it, he’ll tax it! Only vigorous public opposition, led by the National Party, prevented him from imposing a health tax, a methane tax, and a carbon tax. He’s still thinking about a payroll tax.

And which taxes has he lowered? Not one. Not a single one.

Michael Cullen has made it clear by words and actions he doesn’t believe that New Zealand will ever be in a position to lower taxes, and thus provide better incentives for working Kiwis. The Budget surplus will never be huge enough for him to even consider letting hard-working New Zealanders keep a little more of the money they earn.

Six years ago, our company tax was the same as it is today, 33%. Six years ago, that was below the average company tax in the 30 countries of the OECD, at 35%.

Now, the average company tax rate in the OECD is 30% and it’s continuing to fall.

Now we are above that average.

And it is very clear that Michael Cullen has no intention of reducing either the company tax rate or personal tax rates.

Australia embraces tax cuts – NZ$45 billion of tax cuts in their Budget last week – and they are endorsed by the Australian Labour Party, with Kim Beazley describing the tax cuts announced by Peter Costello as “modest and overdue”.

Michael Cullen rules out any tax cuts.

He simply does not understand that if New Zealand is to provide the high quality healthcare we all deserve, the high quality education we all want for our children, the high quality infrastructure we need for our economy to grow and prosper, New Zealanders themselves must have the incentive to get ahead under their own steam – which means removing the punitive tax rates and the heavy-handed rules and regulations which are the mark of this Labour Government.

Michael Cullen talks as if reducing taxes would be gifting money to taxpayers, as if tax revenue is first and foremost the property of the government. The reality is the reverse. Hard-working Kiwis earn income, and that belongs first to those who earn it.

Government should take no more than is strictly necessary to fuel the ship of state.

Reducing taxes is not a sign of government generosity! Had National won the election last year, we would have had an early Budget to ensure that tax rates and thresholds were adjusted from 1 April this year.

By the end of this Parliamentary term, 85% of all taxpayers would have faced a top tax rate of 19%, and we would not have had police officers and experienced teachers facing the top tax rate of 39%. As it is, under Labour people earning less than one and a half times the average wage are faced with the top tax rate.

What does the Budget do on the spending side of the ledger? Well, government spending goes on and on, much of it to minimal effect.

We all know about the twilight golf and radio-sing-along courses – the incredible waste in the tertiary education sector when Steve Maharey was in charge.

We all know that government spending on health has increased strongly. But we also know that that vast increase in spending has bought almost nothing – the number of operations performed has barely changed over the last six years; many tens of thousands of people, sick, in pain, and often very frightened, are on waiting lists, even after thousands have been callously culled from those lists on Pete Hodgson’s instruction; and the Treasury says there’s so little information on the sector that it’s impossible to tell whether money’s being sensibly spent or not. This is a monumental scandal.

We all know that spending on new prisons has blown totally out of control. Yes, we need more prisons and National does not accept Damien O’Connor’s proposed solution of simply letting 30% of the prison muster go home. But it’s a national disgrace that the budget for building four new prisons should’ve been exceeded by $490 million, with huge amounts being spent on consultants and consultations, and an extraordinary $11 million on landscaping the new prisons.

And we all know that scattered throughout the government is a huge amount of spending which is not only of limited value, it’s actually of negative value – it’s counter-productive.

Take, for example, the $13 million allocated for a school programme designed by the Parliamentary Commissioner for the Environment to promote “Learning and Education on Sustainability”.

This programme actually advocates reducing GDP per capita, reducing living standards, and forsaking economic growth as a goal because otherwise we face “planetary collapse”.

National certainly cares about the environment – about clean air and clean water, and about protecting our native fauna and flora – but we don’t see reducing living standards as having any part in our policy programme.

More generally, we’d make sure the money taken from taxpayers to ensure that government services are provided where and when they are needed is spent with the same care with which taxpayers spend their own money.

What else does the Budget do? Let me talk very briefly about the unbundling of the local loop – prematurely announced as a result of the most serious leak of Budget material in the history of this country.

Every person who understands the extraordinary power of the internet wants New Zealanders to have faster, cheaper access to the internet. The National Party absolutely shares that desire.

For that reason, we will support the unbundling legislation at least as far as the select committee so that the proposal can be considered on its merits, and on the basis of hard evidence. We will be particularly interested to hear the views of the Government’s own Telecommunications Commissioner who, so far at least, has opposed unbundling. Perhaps he has changed his mind. We will certainly weigh all the evidence carefully.

Most of the rest of the Budget’s so-called initiatives are simply a reclassification of existing programmes.

So much for what the Bondi Budget does.

What does it say? First, it says that growth in the next year will be only 1%. By contrast, the Australian Budget expects Australia to be steaming ahead at over 3%.

Over the next three years, Michael Cullen forecasts the New Zealand economy to grow by less than 7% in total. Peter Costello expects Australia to grow by 10%.

A few weeks ago, the Government Statistician revealed that productivity in the twothirds of the economy where output can be measured reasonably accurately had picked up markedly since the late 1980s – but had slowed again quite sharply since 2000.

And we shouldn’t be surprised at that: this Government prides itself on doing a whole lot of things which, bit by bit, erode the potential to improve productivity.

What does all this mean? It means that the gap between average after-tax incomes in Australia and those in New Zealand – 20% in 1999, 33% last year – will keep on growing. It is not at all unrealistic to expect that gap to be 40% or more by the time this Parliamentary term is over.

The survey by the Swiss organisation IMD, published last week, tells a similar story: New Zealand dropping in one year from 16th place to 22nd in their survey of competitiveness, with Australia rising from 9th to 6th.

We all remember Helen Clark coming into office in 1999 with great fanfare and promising to lift New Zealand into the top half of the OECD within a decade. Well, now she no longer talks about achieving that objective within a decade. Indeed, she doesn’t put a deadline on the objective at all. It’s just something she aims to achieve “over time”! Which at least is more honest, because on current policies and current trends she has much more chance of becoming Secretary General of the United Nations than of getting New Zealand into the top half of the OECD within a decade – or three decades.

New Zealand has not moved up even one place in the OECD rankings since Labour came to office! The only hope of New Zealand’s getting into the top half of the OECD within a decade would be if the OECD widened its membership to include a lot of low income countries! The OECD already groups New Zealand as a low-middle income country, along with Hungary, South Korea, Portugal, Greece, Spain and the Czech Republic.

Well, it doesn’t have to be this way. With the right policies and the political will to implement them, New Zealand could move up the international league tables and once again be a country where our children choose to build their future.

The Budget yesterday confirmed that Labour has given up the fight.

Tragically for New Zealand, the Labour Government has coasted along on the back of strong export prices, low interest rates, and a strong inflow of people after September 11, redistributing incomes certainly but doing absolutely nothing constructive to increase incomes.

Indeed, the Labour Government doesn’t even understand how to increase incomes, and continues to send all the wrong signals to hard-working New Zealanders.

Want to get ahead under your own steam? If you’re a family bread-winner on the average wage, we’ll take more than half of every extra dollar you earn off you.

Think you should save up to send your kids to university? You’re nuts: we’ll give them interest-free money to encourage them to start life with a big slug of debt.

The tragic reality for New Zealand is that Helen Clark and Michael Cullen are interested only in their own political survival. They’re not interested in New Zealand’s future.

Last year, the Treasury provided them with a great set of recommendations to speed up our growth rate. Michael Cullen dismissed Treasury’s advice as “an ideological burp”.

Treasury advised Michael Cullen that KiwiSaver wouldn’t materially change the amount of saving New Zealanders do, and would do nothing to reduce the balance of payments deficit. The Institute of Economic Research told him that KiwiSaver would redistribute wealth but do nothing to create it. Again, Michael Cullen simply ignored their advice.

I haven’t seen what Treasury advised about Labour’s student loan bribe, and I don’t need to. No rational policy-maker would have argued for such a blatantly political bribe. I do know that Treasury estimated that the cost of that bribe was much greater than Helen Clark claimed before the election.

Yesterday’s Budget lacked urgency and it lacked vision.

Instead of boosting the country’s capacity to grow, it focused on redistributing what we currently have.

New Zealand’s economy needs to be more competitive and productive – and under a National-led Government that’s where the focus of the Budget would have been.

That means lower taxes that give people the incentive to get ahead under their own steam.

That means investing in the infrastructure this economy needs to grow.

That means ferreting out waste and low value programmes in the public sector to ensure that every one of the dollars taken from taxpayers provides good value for money.

That means fixing the Resource Management Act so that the investment needed to lift living standards can proceed quickly and efficiently, without damage to our environment.

It’s now blindingly obvious that it will take the election of a National Government to give Kiwis the future they truly deserve.

ENDS

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