Hon Bill English MP

Deputy Leader of the National Party

4 August 2007

0930 Embargo

New Zealand At A Turning Point

Speech to National Party Annual Conference, Langham Hotel, Auckland.

What’s going on with this Government?

Have you noticed that when anyone in Labour talks about what they are doing and what their vision for New Zealand is, they spend all their time talking about National?

They are obsessed by us! And that’s great!

It’s like they are already in opposition, which is where they should be. And it’s where they will be after next year’s election.

Labour can’t talk about what they are going to do themselves because they are a lame duck government.

Labour now has six different agreements propping it up. They’ve got separate deals with New Zealand First, with United Future, with Jim Anderton, with the Greens, with Taito Phillip Field, and with Gordon Copeland.

They have passed only three significant bills in the past 12 months, and then only because National supported them. The power to pass major legislation has effectively passed to National.

Ladies and Gentlemen, we are reaching the end of an era in New Zealand politics.

That era began in 1984. It took in the economic reforms of the Lange and the first Bolger governments. It took in the reaction and reflection on those reforms that have continued since 1999 with this Labour Government.

Helen Clark and Michael Cullen are the final political figures in that era. They talk endlessly about the 1980s and 90s – what happened and what should have happened. They are always looking over their shoulders.

There is a difference between understanding history and constantly reliving it.

It’s the challenges of tomorrow that excite me and the National team, not the challenges of yesterday.

In John Key, the National Party has a leader driven by the challenges of tomorrow. He represents a generational change. John is a man for the future.

I have never met anyone so relentlessly optimistic – about everything, but especially about New Zealand. He has the ability to make what’s difficult seem possible. He brings out the best in the people he works with.

He has been successful in the global world of commerce. That, to me, is true experience, because it is experience of the real world and of the real challenges facing New Zealand.

Success for New Zealand in the global economy is the best way to look after our old, care for our young, and inspire our youth. And that is what John Key represents.

Helen Clark is altogether different. Her main job has been investigating her own ministers. That takes a while because she has to do everything three times.

First there’s the whitewash, then there’s the botched cover-up, and then there’s the wash-up, which concludes that no one is accountable for anything to anyone. Just think about the pledge card, the Field affair, prison scandals, and David Benson-Pope.

Then there’s Michael Cullen.

Inflation is high, interest rates are through the roof, and the dollar is crippling exporters. His suggestions are getting more and more bizarre, from putting an extra tax on your mortgage to running monetary policy from his own office in the Beehive.

Lately, he has been trying to talk the New Zealand dollar down, but everything he says results in the dollar going up.

When Winston Peters made some casual remark from the Philippines, the dollar dropped by a cent. Clearly, the financial markets see Mr Peters as having a lot more credibility than Michael Cullen.

Beyond Helen Clark and Michael Cullen there’s a whole line-up of struggling ministers.

One of the worst of the strugglers is Mark Burton. We will take his seat off him in Taupo after he’s been sacked from Cabinet.

He is in charge of Labour’s most important piece of legislation – the Electoral Finance Bill, which was introduced to Parliament a fortnight ago. This bill is designed to shut down Labour’s critics in election year. It is an attempt to limit the ability of New Zealanders to have their say on issues which concern them. I thought that was a basic democratic right in this country.

The definition of an election advertisement in this bill is hopelessly wide. It includes any form of advertisement, any handwritten sign, any video, any non-personal internet message, and any email – anything that talks about a party or a candidate or any issue on which a party or a candidate might have a view. How wide is that?

In an election year, if you want to have your say through any of these forms of communication, you are going to have to register with the Chief Electoral Officer. You will have to register in New Zealand to have a political opinion! That is a disgrace!

You will also have to reveal any donations over $500 that your organisation has received in that year – names, addresses, amounts, and dates.

And, because of the limits on spending, no group which wants to have a say will be able to run more than a couple of full page newspaper ads over the whole year.

Labour wants to stop people criticising the government. Meanwhile they can use unlimited amounts of government money to publicise all the things they are doing, right up to the election. This bill is an affront to democracy and National members will oppose it.

I want to talk about the economy now.

We have had eight years of good economic conditions. The gods have been kind to New Zealand. We haven’t had an Asian crisis, we haven’t had consecutive years of droughts, our trading partners have been growing, world commodity prices have held up.

But our growth has been mismanaged. Along the way, the capacity to keep the economy growing has been reduced. We are running out of resources.

It’s a measure of Labour’s mismanagement that record dairy prices are considered bad news because they will fuel inflation.

So eight years of steady but not spectacular growth have pushed this economy into a spiral of rising interest rates and record-high exchange rates. The economy has been running over capacity. And too much of the growth has been stoked by low-quality government spending and consumption funded by borrowing.

Labour’s spending and management of the economy has helped push up interest rates, and it’s not just National who says so. Treasury, the IMF, the OECD, and the Reserve Bank have all been telling the Government this.

Homeowners and exporters are paying the price for Labour’s profligate spending and for Labour’s failure to improve the productivity of our economy.

This productivity has actually been declining. A lot of people think productivity is about how hard we work. Well it’s not.

New Zealanders are already a hard-working lot. We have high rates of employment compared to other developed countries and we work long hours.

The average person aged 15 to 64 spends more time working each year than in any other OECD country except Iceland. Where we fall down, though, is in the value of what we produce at work. That’s what productivity is.

Productivity in New Zealand is low compared to most other OECD countries and has been slipping right away in recent years. We’ve had growth in recent years by increasing the number of people in the workforce, and by people working longer hours. But that can’t continue. Our future economic performance has got to be driven by improvements in our productivity.

That is one of the biggest challenges facing the New Zealand economy. The prospects for New Zealand are getting better all the time, if only we are in a position to take advantage of them.

Milk prices are up but so too are world prices for our other exports. Our terms of trade are rising, which means that a shipload of our exports can buy more imports now than at any time in the last 33 years.

But if we aren’t ready for it we’ll be like a cyclist on the downhill run who finds his tyres are flat and his chain is broken.

So it’s time for economic policy focused on production and competitiveness, not focused on consumption, government spending, and vote buying.

It’s a long-term task. That’s why next year’s election is so important. Next year’s election is going to set the direction for the next 20 years, not just the next three years.

National has a five-point plan that will create a more prosperous society and builds on New Zealanders’ confidence in themselves and in their country.

1. A programme of ongoing tax cuts.
2.
3. Disciplined government spending.
4.
5. Effective investment in infrastructure.
6.
7. Cutting red tape.
8.
9. Keeping interest rates lower
10.
11.
12.
First of all tax cuts.

National will pursue a credible programme of lowering taxes. We believe every New Zealander deserves reward for work and for striving to get ahead. We believe every New Zealander deserves a dividend from a growing economy.

Don’t be sucked in by Michael Cullen’s arguments against tax cuts. When the outlook for the economy is not so good he says the country can’t afford them. When the outlook for the economy is rosy he says tax cuts would be inflationary.

The fact is that no time is right for Dr Cullen. He grudgingly promised chewing gum tax cuts in 2005 because it was an election year, and then he cancelled them. He says he’ll have tax cuts in next year’s Budget – because it’s an election year again. Don’t trust him.

Secondly, government spending.

This year, Labour will spend $1 billion a week of taxpayers’ money. That spending is rising all the time. It has gone up 50% since 1999.

Think of it like this – in the next five years the government will spend more than $300 billion in total. If we can spend this money just 1% more wisely then that is $3 billion more of public services for New Zealand.

Governments have a responsibility to spend money wisely because it’s not their money in the first place. Governments should budget and spend taxpayers’ money as carefully as hardworking families do every week.

If you apply Dr Cullen’s spurious arguments against tax cuts to his own budgets, then his recent changes to business tax should have cost the country wards full of nurses and stations full of police. It didn’t.

We are going to bring some discipline to government spending and restrain its growth. It’s nonsense to say this is cutting spending. It is spending wisely. It is treating taxpayers with respect.

There are plenty of examples around of poor-quality government spending. Like Labour spending $200 million on benefit administration for the single core benefit, only to abandon the whole idea. Like Labour spending $400 million on tertiary education reform. That should also be abandoned because it completely misunderstands how students actually make choices about what they study.

The number of head office bureaucrats in the public services has gone up exponentially and they are getting paid more and more. In the year 2000, 500 people in the public service were paid over $100,000 per year, now it’s 3,000.

The third part of our plan is about investing in infrastructure.

Right now, what the government spends on infrastructure is funded out of the spare cash available from year to year. Long-term commitments are financed out of short-term cash-flows.

That is not a sensible way to approach long-term investments.

What family buys a house out of the cash from its weekly income or from its overdraft? What business buys a factory that will last 30 years, using the money sitting round in its till?

National will be an unashamed investor in New Zealand’s future potential. We will match long-term investment with long-term financing. As a result, we will get better investment, better planning, better financing and improving productivity.

Another step to better infrastructure investment is cutting red tape, and that is the fourth part of our plan.

A cocktail of delay and distraction slows down every project in the country and drives up costs for everything from houses to motorways. This is the combined effect of the current Land Transport Bill, the Local Government Act, the Building Act, the Housing Act, and the Resource Management Act.

Consultant-itis and lawyer-itis have become a disease, clogging the blood stream of this economy. Simple cleaner rules will reduce the cost and time of making decisions.

Finally, National is going to keep interest rates lower.

Not only are you now paying for the extravagance of the last election, you are prepaying for the next one. One reason interest rates are high is because of expectations that Labour will loosen the purse strings in the run-up to the next election when the economy is already running at full capacity.

Dr Cullen said he wouldn’t. He said to his Cabinet colleagues that too much government spending would result in higher interest rates for longer. Then in May, he turned around and added an extra $1 billion of spending each year to the Budget. That was the biggest spending Budget New Zealand has ever seen – and it’s not election year yet.

So if you want to know why your mortgage rate is now over 10%, you should talk to Michael Cullen.

National is going to keep interest rates lower through growing the productive capacity of the economy and through keeping a lid on Government spending.

These five points make up National’s plan for the economy.

What is Labour’s plan for the economy? Here is Labour’s economic strategy, as described by Helen Clark last week.

She was asked if there was anything the Government wanted to do that it hasn’t done yet. She said: “It has taken time to work up the kitty for Working for Families. It has taken time to work up the kitty for interest-free loans and early childhood programme. So undoubtedly there will be areas we will build on for next time which will be new.”

So there it is – the economy is for Labour the way they build up the kitty for sweeteners, for giveaways in election years, using your money to buy your votes. Your money – they’ll be spending it.

Thank goodness this era is almost behind us.

Whether New Zealand can move ahead then is in our hands, and we have 15 months to make the case. It will take much hard work, and a National Party totally focused on discipline unity and organisation.

The next 15 months will not only determine whether we get elected, but whether we set the basis for a long-term government that is prepared to seize New Zealand’s potential. The last two times National came to government we won well and then almost lost the following election.

Every pledge we make must be credible, every promise must be fulfilled. And you know what a challenge that will be in MMP. A National-led government will almost certainly need the support of other parties who do not share our views on some issues.

John Key is building relationships with other parties, and our MPs are increasingly working with other parties as they invest in future influence with National.

But you, the National Party, will always be the compass for future National-led governments.

Without your values and your steadfast principles we in the caucus would not be in any position to advance New Zealand’s interests and, in part, help smaller parties to advance their own.

Ladies and gentlemen, New Zealand is at a turning point.

Under Labour, New Zealand will continue to look in the rear vision mirror because it’s run by people still thinking about the 1980s and 90s.

Under National and John Key, we’ll be looking ahead, confident we can seize the economic opportunities offered by a changing world.

We trust you – you the people of New Zealand. We believe you will make the best decisions about spending, saving, and investing your money.

Every time we make an economic decision, it will be measured against how far it realises opportunity for the people of New Zealand, not the government.

We will judge economic policy on how it helps people get ahead, how it rewards work and saving, how it shifts resources to the most productive part of the economy

New Zealand is ready for a change – let’s go and make the case.

Ends

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