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Douglas: Raising The Kiwi Standard Of Living

Raising The Kiwi Standard Of Living
Hon Sir Roger Douglas
Speech to the Institute of Chartered Accountants; 27-33 Ohinerau Street, Remuera, Auckland; Wednesday, June 4 2008

When I was at university 50 years ago, New Zealand was ranked as having the world’s third highest standard of living – today we are ranked 30th, with Greece having recently slipped past us.

Why? Because – aside from the years 1984-1992 – New Zealand has elected politicians and governments that have not had the guts to do what’s right.

The fact is that New Zealand does not have to be 30th in the world’s ‘standard of living’ ladder. The 1984-92 period demonstrated that, with the right policies, our productivity – which ultimately determines income and standard of living – increased. As a result of those changes we were ahead of Australia and created hundreds of thousands of jobs.

So what did Finance Minister Dr Michael Cullen’s latest Budget do to restore New Zealand’s relative position or lift our international standing? The answer is: next to nothing. All it did was ensure that we will continue to slide down the ladder. Dr Cullen’s Budget:
1) Lacked a long-term vision and strategy for New Zealand.
2) Lacked imagination or ambition for New Zealand.
3) Was a typical ‘business as usual’ Budget that will continue the slow decline in our standard of living of recent years – we will probably be passed over the next three years by South Korea, Hungary and the Czech Republic.
4) Was all about how to cut up the existing economy cake rather than growing it bigger.
5) Primarily helped families that could – or already have – split their income.
6) Did nothing to help the growth sector of the economy, from which we create jobs and a higher standard of living.

The tax reductions contained in the Budget didn’t make up for bracket creep. By 2011, New Zealand will have experienced 40 percent inflation under Labour and National – if they HAD compensated for inflation the $38,000 bracket would lift $54,000, rather than the $42,500 it will reach by 2011.

Budget also failed to address the fundamental issue of economy: that is the fact that New Zealand is a low wage economy. There were no measures in the Budget aimed at increasing productivity – the key to higher wages. There was also no regulatory or tax reform, or any measures to eliminate waste and increase the efficiency of government activities.

Meanwhile, the National Party’s response to the Budget was – in a word – pitiful, and largely confined to talking about a block of cheese. Worse, Bill English agreed that, as Dr Cullen had spent everything, National’s options were limited in the tax area.

National’s Budget response was a ‘me too’ policy that plays large in that Party’s thinking and that means the wasteful and illogical spending of Labour is effectively locked in. Without a strong partner, National will be little better in government than Labour, and will return to being the tired old National Government of 1993-1999.

But does it really have to be like that? Of course it doesn’t; what New Zealand needs is a goal we can all agree on. My goal is to beat Australia by 2020, and thereby see New Zealand move up the international list of nations in terms of per capita income.

Everyone knows that if you don’t know your destination you can’t expect to get there – or anywhere else for that matter. The size of ACT’s goal is major: New Zealand wages are $450 a week behind those of Australia. ACT’s objective is to increase wages by $500 a week, in order to beat Australia over and above its yearly wage increases.

Can it be done? Of course it can – it just takes the guts to introduce policies that WILL create the productivity growth required. These are easy to work out; what’s hard is to have politicians with the guts to do what’s right.

Labour and National politicians are reluctant to do what’s right because they believe the public is unlikely to agree to the changes that are necessary, even though the benefits would be immediate – two-three years in many cases – and the cost small but for the odd bureaucrat here and there.

Labour and National are locked into a system where they believe people will only vote for Parties that bribe them, scratch every itch they have, lie to them by continually exaggerate what their promises will return, and won’t vote for policies that deal squarely with the problems the country faces.

I don’t believe that – and I never have. I acknowledge the communications problem: getting people to stop, read or listen and think about any solutions put forward. But Labour and National’s leaders are so busy waltzing across eggshells that they don’t ask themselves where New Zealand is today, where we should be going and how we’re going to get there.

Their approach is to keep their mouths shut until they win the election – then along comes ACT with Hide and Douglas asking questions like: why, if Cullen and English are so smart, are we $100 a week behind Tasmania? And why is our health system such a mess? And why is our education system failing so badly?

Do we have to stay down there? What are we going to do about it? The fact is that it’s broke, and ACT is about fixing it, simple as that. The answer lies in ACT’s 20-Point Plan.


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