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The Brash Report - No. 31, 2 June 2004

The Brash Report
No. 31, 2 June 2004

Dr Cullen's fifth Budget

Last week, the Minister of Finance brought down his fifth Budget. There has been an abundance of media comment about it, so let me make just a few additional comments.

First, the Budget revealed the biggest spend-up by any Government in New Zealand's history. It is very clear that hard-working New Zealanders have been over-taxed for some years, with the Budget's surplus now around $6 billion a year. But instead of reducing taxes, the Government plans to hugely increase its spending, by some $14 billion over three years - or nearly $10,000 for every household in New Zealand.

Second, there will be a range of measures adopted designed to help low and middle-income families. Nothing wrong with that in itself, but these measures are entirely focused on one in five households - the other 80% of households will gain virtually nothing from the Budget, and certainly no reduction in their tax burden.

Even this support for low and middle-income families is cynically structured, with much of it cutting in only after next year's election. The Government is implying that, unless those families vote for Labour, that additional support will be snatched away from them.

There is no tax relief for the young couple who are saving up to buy their first house, or pay off their mortgage, doing the responsible thing by waiting till they are more financially secure before starting a family.

There is nothing for the middle aged couple who, having raised and educated their children, are now trying to put something aside for their retirement.

There is nothing for the young person trying to build up a small business, or develop a farm, perhaps trying to take on another staff member.

There was not even the slightest hint that there might be tax relief in the future, either for individuals or for companies; just confirmation that the Government will continue to over-tax us all, so that they can buy votes by redistributing the taxes of the hard-working - employing more public servants both to collect the tax and to redistribute it.

But for me the saddest thing about the Budget was not what it did but what it said. The projections published with the Budget show that the number of working-age adults on the unemployment benefit, the DPB, the sickness benefit and the invalids benefit - totalling 330,000 today - is expected to rise to almost 350,000 in four years time. And the average growth in the economy is expected to be markedly slower in the next 10 years than it was in the last 10 years.

Once upon a time, the Government talked grandly about raising living standards in New Zealand back to the top half of the OECD within 10 years. Even in August 2002, the Government declared that raising our rate of economic growth was its highest priority. Not a sign of that happening - indeed, the reverse. Yes, the Government can redistribute the wealth delivered by the strong economy it inherited in 1999 but it has totally failed to increase that wealth.

The full text of my speech about the Budget in the House on 27 May 2004 is at:

Roading now!

Just a few days before the Budget, I gave an important speech on roading. There are clearly serious problems of inadequate roading infrastructure in several parts of the country - the Bay of Plenty around Tauranga, the Hamilton/Auckland corridor, Wellington, Nelson, to name just a few - but the most immediately pressing problem is in Auckland.

Fixing that problem is partly about finding adequate funding, but right now it is mainly about fixing the appallingly slow decision-making structures related to laws passed by central government (in particular the Resource Management Act and the Land Transport Management Act) and to the wrong structures in Auckland itself.

In my speech, I committed the next National Government to completing the Auckland Corridor Network within 10 years of our election. I believe that is an eminently achievable objective. The text of my speech is at: and since many Aucklanders seem not to have heard of the commitment, I invite you to "spread the word".

Foreshore and Seabed Bill

The National Party is encouraging public submissions to the Parliamentary Select Committee considering this legislation. To make it easy for you to do this, we have set up a special website, Please help us defeat this divisive legislation by making an online submission with a few easy clicks of your mouse.

Another Holidays Act anecdote

It is absolutely obvious to all those who have ever operated a business in a competitive market that it isn't possible for the Government to legislate for additional holiday entitlements without having an effect on other parts of employees' remuneration. Sadly, there is hardly a person in the Labour Cabinet with the slightest experience of running a business. But the implications of what the new Holidays Act has done are clearly understood by one person who responded to my last newsletter:

"In the last 18 months I have started a xxxxx company from scratch, and we now employ 20 people. The Holidays Act has added another unnecessary cost to a business that was just getting to the breakeven point. Our business must, by its nature, operate 24 hours a day, seven days a week, and a number of our contracts are fixed term and fixed price so we can not immediately pass on these extra costs. To compensate, I am hiring new staff at a starting rate that is 9% lower than previously as it is the only way to recoup these extra costs. While these idiots we have in Government claim they are looking after the 'working class', it is in reality union pandering nonsense that in many cases will not benefit the workers, as not only does it cut jobs but in many cases will lead to lower hourly rates."

Visiting Washington, London, Beijing, and Canberra to discuss trade

Two days ago, I left on a 13 day trip to visit Washington, London and Beijing, and three days after returning I will make a three day visit to Canberra and Sydney. The main focus of both trips will be trade, and the prospects for improving our relationship with all four capitals.

Don Brash

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