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Goff: Auckland Rotary Lunch

Hon Phil Goff
Leader of the NZ Labour Party

1PM Monday, 21 September 2009.

Today I would like to talk to you about jobs and families.

The most pressing issues confronting New Zealand at the moment are jobs, and the pressure on families who are trying to make ends meet and have something left over at the end of the week.

The global economy has been through extraordinarily difficult times.

When it began to slow, our economy was already in the slow part of the economic cycle. It was inevitable there would be some softening after the longest run of growth since the sixties.

The timing of the global trouble extended our slow-down and turned it into a recession.

As a result, there are thousands more New Zealanders out of work today then there were a year ago.

The people affected are people like a forecourt attendant in Wellington who was made redundant this year.

When he lost his job, the family income halved. But the mortgage payments didn't halve. They stayed the same.

His wife has a job as a cleaner, working sixty hours a week. And because she works hard in a low income job, that family doesn't get any help.

Families like this one, and many others, remind us that we live in tough times.
Last week an independent ‘Vulnerability Report’ was released. It is a stock-take of how tough things are getting.

It shows there were twenty percent more people on the main benefits in June this year, compared to June last year. In other words, the number of people on the five main benefits increased from 258,000 people to 310,000 this year.

The biggest increase was in unemployment benefit - from 17,710 people to more than 50,000. Nearly three-fold.

More people are seeking hardship assistance and special needs grants.

There are ten percent more children who are in families dependent on benefits than there were a year ago.

What that means in practice is that families are queuing outside the Christchurch city mission before 7.30 in the morning.

In Tauranga the food bank is seeing not just low income families and beneficiaries, but also middle income people out of jobs, who are struggling with mortgages.

The Salvation Army says families that have usually managed well now need help.

The Sallies helped seven thousand families in three months - and five thousand of them were families they had never seen before.

While these are the families asking for help, there are tens of thousands more who are worried about their jobs, and worried about simply paying the bills and having something left to enjoy now.

For example, ordinary working families have been getting monthly power bills for hundreds of dollars more than they expect.

It’s tough for a family trying to save a little for tomorrow to suddenly get a $400 power bill - or more. It’s even tougher for someone on a fixed income to get an unexpected bill for keeping the house warm.

That’s happening at the same time that a state-owned power company is paying $230 million in dividends to the government.

Those dividends were effectively financed by a highly regressive tax because it falls hardest on those least able to pay.

We need to give families a break, and so Labour won’t demand excessive dividends coming back into state coffers, above what is needed for investment in new generation.
Government’s can make a difference.

We can provide relief today and we can change the long-term economic destiny of New Zealand.

While New Zealanders struggle to pay bills, and there’s not much left over after the weekly shop, it is right they should expect better times ahead.

While New Zealanders are dealing with the daily reality of getting by, it is right they should have high expectations of what our country can be in the future.

This is a time to be prudent with money.

In practice, that means being careful about our priorities. We have to choose what we spend our money on very carefully.

But that is no excuse for choosing the wrong priorities.

We should make a priority out of helping people who help themselves. Government should be backing people who are getting themselves ready for work.

Unfortunately, it’s doing the opposite.

Two weeks ago on a Monday night here in Auckland, I attended and spoke at a meeting of hundreds of people in Mt Roskill concerned about cuts to Adult and Community Education.

There are thousands of New Zealanders worried that the cuts will destroy night school classes that are so valuable in promoting life-long learning and getting back into education people who missed out the first time round.

People like Linda Everett, who is in charge of Onehunga High’s renowned Business School.

Night classes made the difference in her life, giving her confidence and the opportunity after she had dropped out of school aged fourteen. She now has a degree and a top job and is making a huge contribution back to New Zealand.

We should be backing people like her, not taking away opportunities for them - especially in a recession.

But the National Government has its priorities round the wrong way, slashing funding for night classes at the same time that it’s pouring an extra $35 million into private education where people are already advantaged.

It’s all a matter of priorities.

It will be a matter of priorities in 2011 when Labour comes to write our economic policy.

We are a long way from doing that yet, but I am confident we will have more room to move because this government has made some priorities of some commitments that are very expensive and will produce very poor returns.

I want to give you one example where I think we can do much better - and that is emissions trading.

National is spending billions to subsidise big polluters.

We could instead be using that money to reduce the pressure on hardworking families.

The details are complex, but the fundamental issue affects all of us, and Labour’s different approach will give us much more fiscal room to move.

Emissions trading is a crucial issue because climate change is one of the most serious threats of our age.

If New Zealand wants to be part of the global community, then we have to do our bit.

There are some people around who think we have an option to do nothing. We don’t. Some of our most important trade partners will respond firmly against countries that are not doing their fair bit to reduce emissions of climate changing gases.

Global climate negotiations will impose a cost for increasing the amount of carbon in the atmosphere - for things like burning fossil fuels or cutting down forests, or emitting methane on the farm.

New Zealand has to pay for our increased emissions under the Kyoto agreement it signed in 1997. It is a question of who will pay.

Either New Zealand polluters will pay - or the New Zealand taxpayer.

Labour accepts there are some sectors that will need transitional assistance to adjust to a new climate policy.

But the basic principle should be that polluters should pay. It's necessary, as well as fair.

It puts in place an economic incentive to reduce pollution.

Clean, renewable energy like hydro shouldn’t subsidise unsustainable forms of energy like coal.

When the cost of polluting is born by the polluter, or passed on to the consumer, the incentive increases to switch to cleaner energy.

Some companies have said, ‘why should we pay for our pollution, when consumers will instead buy from our competitors who are emitting into the same atmosphere?’

But it is optimistic to believe economies like the US and EU will permit open imports from large carbon emitters unless those exporters are doing something about their emissions.

Our international commitments mean that if New Zealand polluters don’t pay, the New Zealand taxpayer has to pay on their behalf.

Every dollar we spend to subsidise polluters is a dollar we can’t spend on higher priority needs, like schools for our kids, a superannuation fund for the future and relief for people whose jobs are on the line today.

The best solution is a long-term stable policy that will last through different governments.

The best way to get one is for both parties to negotiate a scheme, and that’s why Labour decided to work with the National Government to try to thrash out a solution that preserved the integrity of the emissions trading scheme we passed last year.

Unfortunately, National walked away from those talks last week, and set up its own scheme.

That was poor process, and bad faith negotiations in itself. As John Key himself acknowledged publicly, Labour went into the talks in good faith, and with some political risk.

But we believed it was in the interests of New Zealand that we did so. Industry, forestry, agriculture needed certainty and durability over time. An agreement between the two major parties could have provided that. The agreement with the Maori Party does not.

The Maori Party explicitly opposed in its Select Committee minority report what it has now signed up to. It stated, "We are deeply concerned about protection in the form of intensity-based allocation and subsidies which distort the market model by allowing business to increase their emissions without penalty and be rewarded for it."

That of course is what the agreement they have signed up to exactly does.

Details of the agreement are still very vague. But it would be a concern if the agreement provides advantages in terms of home insulation and protection of value of assets to one group based on their ethnicity and not to others in the same situation. That would be unacceptable.

But our major objection to what the agreement foreshadowed is its substance. National has caved in to the heavy emitters, the polluters, and given them almost everything they asked for.

Its solution means the taxpayer is going to write out enormous cheques to help some of the world’s biggest companies pollute.

To get an idea of whether this is a good use of tax money, think about the subsidy for a company like Rio Tinto - one of the world’s biggest minerals companies. It has the big aluminium smelter in Bluff.

Rio Tinto will get a direct transfer of taxpayer money, from hardworking families, from businesses doing the right thing and working to make New Zealand stronger - to one of the world’s biggest companies, as a subsidy for its pollution.

An economist last week did some numbers on the size of the subsidy Rio Tinto will receive from taxpayers like you.

This expert calculated the taxpayer will hand over two billion dollars to that one business.

The subsidy exists because the government has set a price cap of $25 a ton on carbon. If the international price of carbon goes over $25 a ton, you and I will pick up the cost.

It is subsidy on a scale we haven’t seen since Supplementary Minimum Prices were abolished in the eighties.

Rio Tinto gets its two billion dollar subsidy if the carbon price turns out to be $30 a ton.

But a few weeks ago, the climate change minister told parliament the carbon price could be as much as a hundred to two hundred dollars a ton.

I think he was wrong - I think he was trying to play politics by telling electricity consumers we will face higher power bills if a high carbon price is passed on.

But you can’t use one number for one purpose and then a different one for another purpose.

If the carbon price of a hundred to two hundred dollars really does result, there is no way the taxpayer could pick up the tab for a company like Rio Tinto.

Emissions trading sounds complex, but it boils down to one very simple truth: The government is taking money from hard working New Zealand families and giving it to heavy emitters including businesses like Rio Tinto, Holcim Cement, the oil companies and the agricultural sector.

The commitment it is making will go on and on, for decades.

Labour understands the need to make sure we don’t lose jobs.

That’s why the emissions trading scheme we introduced last year did enough to make sure businesses like Rio Tinto wouldn’t leave.

A good emissions trading scheme is fair, and best for our economy as well as our environment. New Zealand needs a scheme that will last, that provides certainty for businesses, and endures over time.

National’s emissions trading scheme that means big polluters will pollute more, and families pick up the bill.

This is a question of priorities.

There are much more important uses for the money.

For example, we could instead have made a long term commitment to the science and the research and development we need to reduce emissions by our primary sectors.

We need them to be competitive, because they are the lifeblood of our economy. They are also very exposed to climate change, as well as to global climate change policy.

So last year we decided to invest $700 million into a fund to invest in science and research.

One of its top priorities was to investigate ways to reduce emissions from our farms. There are exciting developments in the science around so-called nitrification inhibitors, for example. If New Zealand leads the world in that research, we can reduce our farm-based carbon emissions and produce technology in demand from farmers in other countries.

But this year, the government cut that Fund, along with research and development tax credits.

I mention this because it is an insight into quite different ways that National and Labour approach handling the economy.

National is a conservative party that fundamentally believes in staying on the sidelines and not getting involved.

They talk about ‘knocking the sharp edges off the recession’ (although anyone who has lost a job or a business in the recession is finding there are plenty of sharp edges.)

Labour does not believe in staying on the sidelines: We will always have a vision for a better New Zealand, and a readiness to do our bit to realise it.

The role for a government is to stand alongside those kiwi innovators who are creating a better tomorrow.

This is a fundamental difference between the major parties: Labour believes government can work with industry to drive more investment in science, more research, better use of design.

Over the long term, we need investment based on research and science to change our economic destiny, give our innovative companies an opportunity and deliver results for hard working families.

Companies like high-tech cyber-technology company Endace. Research by the Crown Research Institute Scion.

These are New Zealand success stories built on research and development grown right here in New Zealand.

The focus for government should be to work with innovators like these, rather than on privatising electricity companies.

And secondly, we need to invest in education and skills training.

That can be a revenue earner for New Zealand in its own right.

When I was Minister of Education I passed legislation to bring overseas students here to study in New Zealand.

Critics sneered at it, but today our export education sector is worth two billion dollars a year.

When you realise that this year China will produce 45,000 PhDs, you realise the competition we will face in future will be not only on price - but also from vibrant economies that are increasing their skills very rapidly.

We will need not only PhDs, high tech scientists and researchers - we need skills at all levels of the economy, including tradespeople.

That’s why I’m glad the Modern Apprentices scheme produced eighteen thousand new apprentices by the end of last year.

Those apprentices opened great new opportunities for the young people who completed them - they also provided a wider benefit.

Just stop to think about the businesses that got eighteen thousand highly skilled apprentices because of this programme.

Where would they otherwise have got those skills?

It’s a matter of priorities.

My priorities are jobs and families, and giving young New Zealanders the best possible start in life.

Ladies and gentlemen, a lot of New Zealanders are finding the going tough right now.

I don't agree with National that the best thing to do is sit on the sidelines and just "blunt the sharp edges of the recession", as they put it, while families are hurting and struggling to pay bills as hard economic times cut into their incomes and threaten their jobs.

What 130,000 people out of work in New Zealand today need is jobs.

Jobs that help them provide for their families, help them provide for the future and enjoy life now.

And they need some reassurance that there will be better ahead - a more confident future, just as our parents gave to us a country that was better than they inherited.

A fair and decent society with a modern, vibrant economy will both take care of people who need help today, and provide for New Zealand’s long term strength.

That’s what I am committed to working for.


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