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Peters Address To Plimmerton Rotary Club


26 June 2008
Plimmerton Rotary Club
Plimmerton Rotary Club Building,
Paremata Road (SH58)
7.45 pm

There Is An Alternative

Thank you for the invitation to speak to you tonight.

As you are well aware 2008 is election year.

And nothing sharpens the mind like the prospect of a contest.

But this election will occur against a backdrop of economic and social uncertainty – the like of which we have not experienced for some time.

We are beginning to experience the unfettered impact of this so-called globalization, which we had foisted on us by unthinking ideologues since 1984.

That is not to say that New Zealand should not be part of the global community – we should.

But from 1984 onwards we tried to go further and faster in opening ourselves up than any other developed nation – and we did not put the necessary safeguards in place to protect our own self interest.

Those who promoted this economic and social experimentation were guilty of economic vandalism and we are dealing with the effects of that now.

We have the highest interest rates in the developed world and the most volatile dollar.

Finance companies are falling like dominos with thousands of people losing their savings, food and household prices are soaring and the list goes on.

Every time we face a crisis those promoting these extreme neo-liberal policies trot out the same tired mantra.

They call it the TINA principle – There Is No Alternative.

They wait until there is a crisis then inflict even more extreme right wing ideology on an unsuspecting population desperate for any solution that sounds reasonable.

Well we are here tonight to say there is an alternative – one which makes both economic sense and offers real hope for ordinary New Zealanders.

And let me tell you why we need an alternative more than ever.

In the June Monetary Policy Statement the Reserve Bank’s economic analysis on page 26 highlighted that 95,000 New Zealanders have to lose their jobs over the next three years if we are to meet inflation targets through using interest rates.

You heard me right – 95, 000 jobs must go so the Governor of the Reserve Bank can keep his job.

And it is actually worse than that – we must have a period of low growth 1 -1.5% for the next three years.

This is why blind ideology – which the Reserve Bank Act is born out of – is so dangerous.

It takes no account of other economic priorities or the human factors involved.

Many of those 95, 000 people have families to support – which means the impact of this policy actually hits hundreds of thousands of New Zealanders – all because rigid ideology says there is no alternative.

This is the economic vandalism we spoke about earlier.

The sad thing is that we have been through this before and the results were the same then as they will be now.

Remember the early 1990s – when the dark queen of the far right was in full cry with her “mother of all budgets”.

Do you remember what unemployment climbed to then because there was no alternative?

Well at its worst in March of 1992 it was 11.1% - the type of unemployment we would expect to see in the third world.

What is even more disturbing about this is that there is no public outcry because the two old parties operate a conspiracy of silence over the Reserve Bank Act.

The media have been complicit in this.

It has gone over everybody’s head – and yet it is there in black and white in the Reserve Bank documents – 95, 000 jobs must go.

This is an outrage and we will be ensuring that every New Zealander knows the reason that hundreds of thousands of them face the prospect of losing their incomes is the blind commitment to a failed economic plan imported from offshore.

You see the US economy exports around 8% of its GDP – we export close to 38%.

So when our dollar fluctuates as it does because of high interest rates more than a third of our economy suffers.

Such movements in the US affect less than 10% of that economy.

This means we need a better mechanism to avoid a widely fluctuating dollar.

We need a better mechanism to avoid a massive increase in unemployment.

We need a better mechanism to ensure hundreds of thousands of families are not consigned to greater poverty.

Tonight we will outline the TAFANZ plan – The Alternative For All New Zealanders.

This is the only true alternative to the two old parties.

New Zealand First is committed to a strong economy that reflects the wealth of our country and the enterprise of our people

We are not content to sit back and see our country slipping ever further down the slope towards Third World status

The economic challenges facing New Zealand are serious and need bold and purposeful action

But before we cover those steps a number of things need to be said in relation to tax cuts and putting tax cuts into perspective

Both Labour and National are talking tax cuts as the centrepiece of their economic policy

They have made more hullaballoo about tax cuts than any other area of economic policy

This is a diversion

In reality, we think there is actually very widespread agreement among New Zealanders on three fundamental points:

• Tax is important

• Tax cuts are long overdue

• Tax cuts must be responsible

Based on these fundamentals New Zealand First has put forward a credible and straightforward package for tax cuts.
New Zealand First wants to see a tax free threshold of $5,200 introduced.
This is a tax cut that everybody benefits from.
But most importantly it makes eminent sense in terms of both practicality and fairness for the most vulnerable in our society to have relief from tax on the first part of their earnings
New Zealand First also wants to see GST reduced to 10% across the board.
The reason is simple – a tax cut will increase your income, but only a reduction in GST will address the issue of affordability.
Consider this – interest rates rise to curb inflation. Inflation rises when prices rise for goods and services. Cutting GST actually reduces the cost of everything – at least in the short term – reversing pressures on inflation.
It simply makes sense.
So in contrast to the other parties we offer a tax policy that is clear, easily understood, practical and delivers immediate benefits in terms of extra income and a lower cost of living.

But we also have a fundamental difference with Labour and National on where tax cuts fit in terms of an overall economic policy.

We do not believe tax cuts should be the centrepiece – the main focus - of economic policy to the exclusion and detriment of other critical areas.

For this reason we will not be indulging National and Labour’s schoolyard game of “ours is better than yours” when it comes to tax cuts in this election.

In fact we ask why should tax – an important but in reality an open and shut issue – be allowed to dominate the economic agenda?

In truth, focusing on tax cuts is a convenient way of drawing people’s attention away from the deeper and more fundamental challenges facing the economy - that neither Labour nor National actually want to address.

So our message to New Zealanders is straightforward.

Certainly let us have tax cuts.

But let us not pretend that tax cuts are the magic bullet – the panacea that will transform our economy.

Our message to New Zealanders is this:

Look beyond tax cuts.

Look for what it is going to take to radically improve our economic prospects as a country.

Look at which party is offering a long term economic strategy to take New Zealand into the future.

First and foremost among the areas that need to be addressed is the role of the Reserve Bank.
As a matter of urgency, we must rewrite the Reserve Bank Act.
Now this is an obscure piece of legislation that very few New Zealanders understand and even fewer have actually read.
The job of the Reserve Bank should be to maintain stability in the economy in terms of employment and growth as well as keeping inflation under control – as it is for example in the UK and the US.
We have to break out of the straightjacket that requires the bank to take a single minded hard line on inflation, irrespective of the performance of the economy, and irrespective of the fact that much of New Zealand’s inflation results from rising import costs rather than inflation generated here.
Unless we have the courage to rewrite the Reserve Bank Act, high interest rates and an overvalued dollar will continue to cripple our economy.

As we have already noted – the dogma of the Reserve Bank means that 95,000 people must lose their jobs so the Governor can keep his.

The New Zealand based economic think tank BERL, which actually works on New Zealand based solutions not imported ones has tackled this matter and written an extremely good paper on it.

They have arrived at the same conclusions as New Zealand First – that the Reserve Bank Act needs to be rewritten.

In fact Mark Weldon – the head of the New Zealand Stock Exchange – has also expressed this view publicly.

So we have been joined by some pretty sound economic minds on this matter.

The BERL research offered four steps in rewriting the Reserve Bank Act which we want to raise tonight.

1 – To include the balance of payments and full employment (along with inflation) as equally important objectives for the Reserve Bank,

2 – To formally empower the Reserve Bank to manage the liquidity of the financial system,

3 – To facilitate open market operations involving long term, as well as short term securities, and;

4 – To facilitate a transparent “sterilised float” of the New Zealand Dollar.

These are all extremely well thought out and most importantly New Zealand driven ideas.

You see if the mandate to save those 95, 000 jobs were in place then the Reserve Bank would behave differently.

If export growth and addressing our outrageously large balance of payments deficit was a priority then the Reserve Bank would behave differently.

You see there really is an alternative – one which can be built around what is best for all New Zealanders.

In the 2008 election campaign New Zealand First will be saying to New Zealanders - do not be deceived.

When you look at the tax packages on offer you will find New Zealand First has the edge.

But look further.

Look at who is facing up to the deeper economic issues facing New Zealand and who is offering new thinking about the economy.

Because in the area of economic policy the time is ripe for bold and innovative thinking – and that is what we intend to bring to the 2008 election.

Today we have set out a number of policy steps that we see as priorities if we are to ensure New Zealand’s future prosperity.

All of these steps are practical and achievable.

But most importantly they will go a long way to safeguard the wellbeing of all New Zealanders.

They deserve nothing less.


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