Peters: It's The Economic Crisis
Media Release – Embargoed Against Delivery
An address by Rt Hon Winston Peters to a Public Meeting
Tauranga Yacht Club
Monday 20 October 2008
It's The Economic Crisis
Watching the commentary of this election one really must wonder if the so-called experts – who have so much to say – fully comprehend the full extent of the economic crisis we are confronting.
As a former All Black caption was fond of saying – “this is not tiddly winks we are playing here”.
This is serious business which will have serious repercussions for every household in the country.
We are only just beginning to feel the impact of this crisis as it bites what is colloquially called “the real economy”.
The real economy is the jobs that will be lost, it is the houses that fall in value so that many households will have negative equity – mortgages larger than the value of their house.
It is the small businesses getting closer to the edge of survival as the economy slows.
It is the exporter who suddenly gets a friendly dollar, but who then discovers that his market is drying up because other countries are struggling more than we are.
The crisis in the real economy is when it shifts from the stock exchange traders into our everyday lives.
And that crisis is only beginning to be felt in New Zealand.
That is what makes this election so critical – and why the trivial coverage to date is so frustrating.
Let’s be honest here – who really cares whether Helen Clark has a lower voice register than John Key.
How many jobs does that save?
Mr Key has been talking privately to leaders in the banking industry and the stock exchange.
We hope that he has not been saying one thing in the open and promising something else behind closed doors.
He has already said he wants to use forty percent of our superannuation funds to prop up the local share market and it's about time he explained exactly what he intends to do.
This is not a time for private deals to be done - it should all be out in the open.
If we are to have an honest debate – then we must start at the fundamentals – and what each party has to offer in relation to each of these.
What makes New Zealand First different is that we are not bound by ideology.
Ideology fails because it is based on favouring one sector of society over another or one world view over another.
The answers have always been found in eyes wide open pragmatism
And we must confront some home truths – and truths that will hurt – if we are to find lasting solutions.
The first truth we must confront is our addiction to debt.
The simple fact is that as individuals, household and country as a whole we owe more than we make – and that is why the credit crunch causes so much pain.
From highly leveraged mortgages through to massive credit card debt we have too often borrowed for consumption.
This differs hugely from the businessperson who borrows against future earnings to grow their business – they have the income to meet their debt obligations.
This obsession with debt is a global phenomenon – so the crunch bites everywhere.
The second truth we must confront is our historically bad savings record.
This makes National’s raiding of Kiwisaver even more criminal.
The fact is that in New Zealand we have just $60 billion of managed funds, compared to $1.3 trillion in similar funds in Australia.
On a per capita basis that is $14,000 a head in New Zealand compared to $64,000 in Australia.
That is a massive difference – and one built on Australia’s long entrenched culture of savings compared to our years of neglect.
A third truth is the reality that our banking system is overwhelmingly controlled by Australian owned banks.
This has three immediate effects.
The first is that over $4 billion of profits disappears from our economy each year.
That is money we will never see again.
Adding to the profit is the fact that $55 billion worth of government business each year is transacted through an Australian bank.
That is nearly one third of our GDP moving through an Australian bank’s hands.
The final fact is that in troubled economic times, it is Australian shareholders, not New Zealand depositors and borrowers that are the priority for these banks.
That means when push comes to shove – we come off second best.
New Zealand First has a plan to deal with this.
The first step is to separate Kiwibank from New Zealand Post to eventually establish it as a stand alone commercial bank.
The second is to float shares in the Bank that can only be bought and owned by New Zealanders – they cannot be on-sold to foreigners.
The next step is to put all the government’s $55 billion worth of business through Kiwibank – ensuring all the profits stay here in New Zealand and forcing interest rates down.
As a matter of urgency, we must then 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 Australia, 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 a volatile dollar will continue to cripple our economy.
High interest rates has destroyed business and consumer confidence. Interest rates, almost the highest in the OECD, have sliced billions from New Zealanders’ savings in their homes.
And those home value losses are totally artificial. It results from blind ideology and is crippling thousands of small businesses and householders.
As we have already noted – the dogma of the Reserve Bank, as set out in its June statement, 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
The next fundamental aspect of our economy we must address is productivity – put simply that means getting more for our labour.
This begins with bringing our education system into the 21st century – for everybody.
We have a good education system – but we need a great one.
We must up-skill and re-educate our workforce where necessary.
And we must embrace technology and ensure we are at the cutting edge – as we often are –of new development.
But it also means recognising that we don’t have to reinvent the wheel – we know what works.
We know where we have a competitive advantage with the rest of the world.
This is not money sitting on a computer, but goods and services which we grow, make and manufacture better than anyone else.
Where do we have the advantage?
What we do well – which we have always done well – is to produce primary products of the highest quality.
Anyone who has travelled the world will tell you our dairy, lamb and beef and other primary products are the best in the world.
So it makes sense that if we are going to have a lasting economic framework and great productivity then we must bolster our primary sector.
This requires a three step plan.
The first is to bolster Research and Development.
This mean tax breaks for R&D, and building on the partnerships which already exist between government, universities and the private sector.
This is one field where there is already good work – just not enough.
The second step must be to ensure we are getting the maximum possible return from our land, our forests and our sea.
Land use is a huge issue if we are to ensure our economic future – and anecdotally, it does not seem as if we have got it right yet.
The final step is that we must grease the levers of business for our farmers and those involved in the business of agriculture, forestry, aquaculture and horticulture.
We used to offer primary production subsides – but these are no longer appropriate.
But using the tax system to incentivise the right type of land use, forestry and sea use, to promote export growth and to keep the next generation of farmers, growers, agri-business people, foresters and fishing industry people coming through.
We should provide generous grants for those who want to study in these fields at university and who are prepared to then work on the land and our sea.
We are prepared to bond doctors – why not young people and others in these businesses.
We must also get our products to the rest of the world.
This is where expanding beachheads programmes, and market expansion programmes as started through Export Year 2007 needs further and targeted expansion.
We are world leaders in technology and the creative arts.
Here again – the right incentives and opportunities will lead to great returns.
The point here is that it is not all doom and gloom.
There can be a brighter future – built on sound fundamentals, not blind ideology.
We must confront our addiction to debt.
We must reclaim our banking system.
We must re-write the Reserve Bank Act.
And we must bolster productivity through those industries where we already have a competitive advantage.
We must put the right incentives in our tax system.
In a small paragraph in today’s press (Dominion Post) is the news that Britain will impose tougher restrictions on immigration as the global financial crisis lifts unemployment.
Britain’s new Immigration Minister, Phil Woolas, said yesterday: “If people are being made unemployed, the question of immigration becomes extremely thorny” and further “It’s been too easy to get into this country in the past and it’s going to get harder.”
This follows on a recent House of Lords report into the flaws of high immigration.
The rest of the world understands this issue so why does not New Zealand?
But most importantly – we must set aside ideology and embrace a patriotic pragmatism that puts New Zealand and New Zealanders first.
If we are to protect and save our economy – these are the steps that must be taken.
We can take them together – that is your choice and what this election is really all about.