Q + A Episode 11: David Parker interviewed by Corin Dann
Q + A Episode 11
David Parker interviewed by Corin Dann
CORIN: Well joining me now is Labour's Finance Spokesman David Parker. You’ve been listening to that interview with Bill English. I want to start first on the issue of spending. If we could talk about spending as a percentage of the entire economy. To get a sense of whether Labour will spend more because National's figures, the budget shows spending as a percentage of the economy is going to go down, and in fact Bill English I think at one point a week ago said he'd like it down to 25%. Will you commit to that?
DAVID PARKER – Labour Finance
What we've committed to is running within the extra revenue that we take from a capital gains tax, and increasing the increasing the tax rate…
CORIN: How much is that?
DAVID: It starts at around 100 million dollars per annum, and grossed quite large numbers, but over a long period of time, but that’s not on welfare spending. Our biggest spending promises are the likes of getting people into universal KiwiSaver. Of course we're also going to lift the incomes of the poorest children who completely miss out in this budget. But we're about changing the shape of the economy so that we can pay higher wages.
CORIN: I need an answer on this point, I mean the credit rating agencies, call it who you will, will look at this. They want to know are you going to keep up that level of spending as a size of the economy?
DAVID Look we traditionally spend a little bit more than the National government, but you're talking 1% of GDP, and it won’t worry the rating agencies. What worries them is if you're running deficits, if you're not covering the cost of your spending through the revenue that you gather.
CORIN: So you won’t run deficits but you will spend more over time?
DAVID: Absolutely clear, and we need to as a country if we're going to push the economy towards the higher value and more secure work that we need in New Zealand.
CORIN: Alright let's talk about immigration. Sources that I've spoken to in reasonably high up in certain government areas, have suggested that if you were to move immigration tools as you’ve talked about it wouldn’t really work because by the time you’ve done it the cycle may have changed. Why are you getting into immigration, it sounds populist.
DAVID: Well actually there's nothing wrong with being a populist politician. You accused the National government of populism in some of their sort of long put off social spending initiatives. Look you know we ought to try and run immigration policy so that it works for New Zealand. Of course there's always going to be a need for some immigration into New Zealand, but look how do we catch up on roading, on hospital pressures, on education pressures, on housing costs when you’ve got immigration going from virtually zero to positive 40,000. It's wrong.
CORIN: But I want to know can it actually be done, because I mean people when they plan to move to a country that’s going to take six months to do that.
DAVID: It certainly won’t be done if you don’t try to do it, and we say we should look at it, and we're not the only ones saying that. The Reserve Bank and the Treasury have both had reports out saying we need to have a look at immigration policy because it's making some of these problems worse. Look all these things are connected, higher interest rates, low wages, low export growth, you’ve got to get the mix right including capital taxes, you know to get the investment signal right, more savings going to the right part of the economy, better exports.
CORIN: But isn't it just a reflection that people are looking at New Zealand and going this country's in good shape, I want to live there. Or more to the point New Zealanders saying they want to stay.
DAVID: There's some of that but it's also true that we've got high rates of net migration from other than you know returning New Zealanders, and you know immigration policy other than the humanitarian component is meant to be in our country's selfish economic interests, and there's nothing wrong with that, and we'll achieve that.
CORIN: Okay to first home buyers, what could realistically have been offered in that budget for first home buyers.
DAVID: A capital gains tax to take the speculators out of the market, or make it less profitable for them, they're chasing a tax bias that needs to be removed. Building some more affordable houses. The houses that are being built are big houses rather than small houses, and you know cutting off some of that foreign demand that’s coming from overseas.
CORIN: But that’s all stuff that’s going to deal with you know …
DAVID: That is both supply and demand…
CORIN: Okay but that going to take some time. Would you offer grants in any way to first home buyers, because the house prices, okay those policies might bring house prices down a little bit, granted. So you get house prices to come more accessible to the market, but it's going to take time, it doesn’t help the first home buyer right here and now, who can't raise the deposit or who can't get in the market. Would you give them more money?
DAVID: Westpac put out a report in the last couple of weeks, their economists saying that the day a capital gains tax gets introduced you change the investment signal for speculators chasing investment housing. At the moment they pay no tax on their gains despite getting tax write offs for their interest losses in the meantime, and that’s just wrong.
DAVID: So these things have instant effect.
CORIN: Okay instant effect. You flatten the house market, it goes into what - 1 or 2% house price...
DAVID: Well you’ve got to build more houses as well.
CORIN: But that’s my point though, how do you get those first home buyers who can't raise the deposit with the house prices still well out of their reach, what would you give them?
DAVID: Well we'd get everyone into KiwiSaver to help them save for their own desposit.
CORIN: And the government already has a KiwiSaver scheme for first home buyers and welcome home loans.
DAVID: Well it was actually our scheme that they opposed, but now we're saying it should be universal for everyone. You’ve got to build more affordable houses. We're going to build 100,000 over 10 years, as well as taking – so that’s on the supply side, you increase ….
CORIN: The government argues it's got 33,000 houses in the pipeline in Auckland. I mean they are coming on board on that type of issue.
DAVID: No they're not, they're writing lines on maps that’s all they’ve done, they haven't built one extra house. We're still not building enough houses to meet the rising demand especially in Auckland.
CORIN: But I come back to the point though, what would you put in this budget right now that could have helped a first home buyer tomorrow?
DAVID: Building 100,000 homes…
CORIN: No, tomorrow.
DAVID: Well the first of them would be built virtually straight away. Capital gains tax to take the speculators out, a ban on foreign buyers who are pushing up prices at the margin. Those three things will make material difference. The government’s been an absolute failure. I heard Bill English then say, prices were high when they came and that was a problem, they’ve gone up 200,000 dollars on average since. They have just been asleep at the wheel when it comes to that, and things like superannuation. You know this budget is quite underwhelming, Bill English deserves a bit of credit to get back to surplus. We actually deserve some of that too because we left low government debt, low unemployment. But none of the long term problems whether it's superannuation or housing, or our low wages in New Zealand are addressed by this budget.
CORIN: Let's talk about tax, why is the Labour Party talking about taxcuts?
DAVID: We haven't the National party has flown the kite…
CORIN: No no, you very clearly signalled that you would look at middle to low income taxcuts.
DAVID: No actually what we said is we weren't ruling anything in or out. Look the Prime Minister has flown a kite, the Minister of Finance has said look probably can't do it. The Prime Minister then said we're going to put up GST then he said he wouldn’t. This is just like the rest of the budgets …..
CORIN: With all due respect you guys flew a kite as well.
DAVID: No we didn’t.
CORIN: Yes you did, you came out very clearly and sent the signal that you wouldn’t rule out taxcuts as well.
DAVID: No we didn’t. What we did is refuse to be wedged by the National Party, that’s all we did. And we won’t be.
CORIN: So you were just playing politics signalling that you might offer taxcuts.
DAVID: Look all our spending is paid for in the additional revenue that we garner. If outside of that pool the government can afford taxcuts, well so can we. Whether it be a wise thing to do rather than put money into the prefunding of superannuation or you know health spending has gone down by 2.3% in real terms this budget.
CORIN: You quote the top tax rate and that’s an important difference between the two parties isn't it? How much? Some people in the tax community have suggested to me that it could go to 45.
DAVID: Oh no.
CORIN: You rule out 45?
DAVID: Yes. What we did last time was 38 cents over $150,000 and it'll be within the ballpark of that, it won’t be much different to that.
CORIN: And that’s important at $150,000 mark.
DAVID: Much lower than the highest rates in Australia by the way.
CORIN: And so just that 150,000 mark, that’s where you believe, what is that sort of a wealthy band if you like?
DAVID: We think that in New Zealand the tax paid by middle income earners is higher overall than it is by wealthier people, that’s undoubtedly true once you take into account GST and capital gains, and we want to get a fairer tax system. So yes we're going to gather some more tax from those people who've got 40% of the taxcuts under National.
CORIN: Alright can I talk about your variable savings rate. You haven't yet told New Zealanders what the impact would be, how much they'd have to save in order to get a corresponding reduction in the OCR, what would it be? Because on paper it looks pretty small.
DAVID: No I disagree with that. The big gains actually don’t come from the variable savings rate, they come from the transition to everyone being in universal KiwiSaver. That was the Australian experience. We're not inventing something here. If you have people saving more there’ll be less consumption pressure, and it's a once in a lifetime opportunity to get New Zealand interest rates….
CORIN: How much needs to be saved to stop the quarter percent increase in our interest rates?
DAVID: Well less than the amount that savings will be going up during the transitional phase and that takes some years.
CORIN: How much?
DAVID: Well I'll give you a more accurate figure on that later in the election cycle.
CORIN: Well Steven Joyce says it's 400 million.
DAVID: Well he's always making numbers up. He was arguing last week with you that our wages have gone up when Labour rates for 46% of New Zealanders didn’t go up by anything last year.
CORIN: Sure but why can't you tell us now because that’s one tool.
DAVID: Well why I won’t tell you now is the variable savings rate is a small wedge of a big package that includes capital gains tax, universal KiwiSaver, looking at migration rates, improving the industry outlook for our export industries. All these things work together to reduce interest rates. Now Steven Joyce wants to have a debate on a tiny little part of the wedge and I'm not going to play his game, because our policies work together, they connect with house prices, interest rates, higher wages. That’s what New Zealanders want. You know the government's been accused of having taken some of our social policies, they're actually now having to respond to our economic agenda, because we've got one and they ain't.
CORIN: David Parker I will leave it there, thank you very much for your time.