John Key speech: National is serious about growing wage rates

Address to National Party Northern Region Conference, Waipuna Conference Centre

In life, individuals face choices.

Education, occupation, partnerships, marriage, family, retirement… we make major choices all the time.

For most people, the results of those choices play an overwhelming role in determining the quality of life they enjoy.

And governments are no different.

They too face choices; in everything from spending priorities, focus, principles, and vision - just to name a few.

If there is a difference between the two, it’s one of scale.

Individual choices for the most part affect individuals, their families, and friends.

But Government decision-making affects everyone, whether we like it or not.

In a nutshell - that’s why we have elections.

As voters we may not be able to make the daily decisions the government undertakes on our behalf; but we sure as hell can make the ultimate decision about who gets to control the levers.

Actions always speak louder than words. What better way to judge how someone will act going forward, than to reflect on how they have acted in the past?

If history is the judge – and it always will be ultimately the economic prognosis for three more years under Labour isn’t good.

For starters; these guys love spending your money… heaps of it.

In their first term in office, 1999-2002, they increased new spending by $6.1 billion, while from 2002 until 2005 that doubled to $12.7 billion. Give them a third term and that number will balloon to at least $14 or $15 billion.

That, in part, explains why they have taken an extra $35 billion in taxes in the past five years from your back pocket.

In a recent Herald survey, 52 per cent said they would prefer the government spent more on health and education.

Only 29 per cent said cut taxes.

But would this really be the case if that 52 per cent fully understood where the spending has gone? Or where it’s likely to end up in the future? I don’t think so!

For starters take a look at the number of employees that now fill the ranks of the state sector. In broad terms it has ballooned from 260,000 to over 300,000 in five years.

Or put another way, nearly 1 in 6 full-time jobs are paid for by the state.

I am not arguing NZ has too many nurses, police officers or teachers. If anything the opposite might be true.

What we can confirm is that the cost of this hiring binge is coming home to roost, while the core state sectors - the bureaucrats engaged in policy developments and the machinery of government - has grown by 23% from 30,000 in 1999 to 38,000 in 2004. They are now a bigger group than the whole population of Taupo.

Recently Treasury widely criticised the government’s hiring policy, saying that without changes, the cost of all these new employees would grow the state sector wage bill by around $1 billion a year.

In addition, they noted:

• The average annual pay increase for every public sector employee in the

last 5 years has been 8 per cent, well above the private sector

• Despite the increase in the head count, output was not improving

• 80 per cent of all departments have increased staff numbers, yet most of them have not been aligned with government policies

• Rising pressure in the state sector adds pressure to raise interest rates

• Without change, future governments will have no room for other initiatives

It would be hard to find a more damning document from Treasury.

So let me say this, National will not sit back as a government and tolerate this massive build up in the number of core state sector employees, especially when the evidence shows:

• It’s not improving performance;

• It’s not improving decision making;

• It’s negative on other parts of the economy; and

• It’s unaffordable.

We will undertake a thorough headcount review and where more can be achieved with less National will do so. National believes in quality, not quantity.

This Labour Government is recycling taxpayer dollars; it’s not creating anything…except a desperate shortage of employees in the private sector. The Government’s sucking up the talent which the private sector is screaming out for; and make no mistake - economic growth doesn’t come from more bureaucrats.

Economic growth won’t come from the Tertiary Education Commission, or – despite its name – the Ministry of Economic Development.

As National supporters, we know that productivity is driven by the business sector – the very people this Labour Government has ignored.

But it’s not just the people side of the equation that’s chewing up great dollops of taxpayer cash.

Let’s examine some of this government’s spending programmes.

We have all heard about the sing-a-long song courses and the twilight golf.

And sure it’s easy to dismiss this as a small amount of money.

Except when you sit back and see that this area, the “Tertiary Sector”, has grown from 1.8 billion in 1999 to 3.1 billion in the past five years.

The scale of this waste is legendary.

In 2003 alone, more people enrolled in the Eastern Institutes sing-a-long song course than the total number of people signed up to undertake modern apprenticeships across New Zealand

Last year, the Te Wananga O Aotearoa received nine times more funding than the modern apprentice scheme.

In the four years from 1999 to 2003 the government spent a cumulative $2.5 billion on sub-degree courses.

Meanwhile, the number of bureaucrats in the Ministry of Education, NZQA and associated central education agencies rose by 1200 in the past 5 years.

So I’d like to ask those people filling out the survey, those people who still want more spent on education, do they really know what’s being spent now? And where?

Possibly not. Perhaps health is better?

I don’t think so! Just take a look at the number of people employed by the Ministry of Health.

The numbers have soared from 850 to 1,050 in just five years and last week we learnt that - while our senior citizens are being asked to wait in a very long queue for hip, knee and cataract treatments, and while far too many New Zealanders have to wait for intolerable periods of time before they receive cancer treatment - this government has enough spare cash to allocate $7.5 million to fund 1000 sex changes. Who really believes that such operations are the highest priority in the health sector?

Now I don’t care if someone wants to change from being a boy to a girl, that’s their issue; but I do care that as a taxpayer I am funding it.

The list is almost endless.

This is a government that each year has given away around $50 million in business development grants through New Zealand Trade and Enterprise.

This is a government department that likes to say yes, but doesn’t keep records beyond 12 months to see if the companies which received the grants are successful.

So poor is the NZTE’s administration that the Auditor General was sent in to investigate, and concluded that significant management effort would be needed to fix the problem, after discovering some invoices supporting grants were so vague that the purpose behind all the spending could not be determined.

And the same can be said for the advertising budget around the government’s Working for Families package. The Government’s Social Welfare for everyone package. Initially the government planned to fork out $21 million in advertising; an amount totalling more than the entire spend of all political parties in the 2002 general election.

Only after Murray McCully complained to the auditor general was this promotional spending scaled back to $15 million - a relative snip! And isn’t it all a co-incidence that much of the spending is in election year!

This is really just the tip of a much bigger iceberg. It just shows how sloppy the Labour Government gets when it is awash with our taxpayer-funded dollars.

Every day New Zealanders make hard choices, they scrimp and save and struggle to get ahead, and they don’t do it so that a bunch of Labour ministers in Wellington can go around spending like drunken sailors. Ordinary New Zealanders want more than just being told to ‘keep the change’.

National can be trusted with the purse strings, Labour cannot.

Don Brash can be trusted to keep his word, unlike the Labour Prime Minister and her deputy.

When was the last time you heard Helen Clark or Michael Cullen mention getting New Zealand back into the top half of the OECD for per capita income?

They just don’t care any more. They should.

We live in a world that is mobile for human capital, especially our skilled and professional workers. Already they are getting the message – Labour’s policies aren’t working.

That’s why 500,000 New Zealand citizens no longer live here, a quarter of all tertiary trained people. It’s why we have a brain drain 10 times larger than Australia.

It might not bother this Labour government that in 1999 there was only a $5,000 gap in the wages of the average Australian and New Zealand worker.

Or that in the past six years that gap has widened to $9,000, or that under this Labour government’s policies New Zealand has become - and will remain - a low wage economy.

This growing gap should bother us all a very great deal. Because unless we take action, we’ll continue to export scientists and import taxi drivers.

Ensuring our economy stays on a long-term trend of higher growth rates will require focus and discipline. It will require us to eliminate some of the roadblocks that stand in our way.

Like the chronic traffic jams that clog up our city for longer and longer each day.

We cannot sit back while Auckland’s economy is robbed of something between 1 and 4 billion dollars each year because of our poor roading.

We have to build extra capacity, so that our city - the centre of great swaths of domestic and external migration - has a chance of coping.

Fixing New Zealand’s roads, including Auckland, will be a top priority for an incoming National government. That’s why Don has pledged to spend an additional $2.1 billion on new road construction in our first six years in office, with more to come from the private sector.

Fixing the output from our schools and tertiary institutions will also be critical.

Closer alignment between our economic needs and government-supported education will ensure more flows into trades and apprentices - and less into Politically Correct courses like listening to music and twilight golf.

But we also need to put the right incentives in our economy to reward people for working; for getting out of bed on a cold winter’s day; for staying at work late on a balmy summer’s evening.

When the Labour government rolls out a package like Working for Families; a package that says it doesn’t matter if a family earns $38,000 or $70,000 because the difference in take home pay is only going to be $2200 – you know something’s gone terribly wrong.

National believes in a society that provides every New Zealander - regardless of background - the opportunity for a fruitful and rewarding life. Some will - of course - work harder; take more risks; and value financial matters more than others.

To me, that’s ok. What isn’t ok, is that the person who selects a more laid back lifestyle gets paid the same.

Our leader, Don Brash, will roll out a tax package before the election that will send the message - if you work harder, you will be rewarded for your efforts.

A National government will let you keep more of what you have earned.

We will lend our support to businesses, through less red tape and lower compliance costs.

Most of you will be aware the bulk of New Zealand businesses are small, around 90 per cent of all businesses.

What you might not know is that the average compliance cost per employee for a small business is six times larger than that of a big company.

Compliance costs eat up around $3,000 per employee for a small company and only $500 for every employee in a large company.

Our small and medium sized enterprises can’t afford that burden. Our local hairdressers and plumbers shouldn’t be sent broke because of clumsy big government

For the same reason, I announced a fortnight ago that National will cut a huge amount of the mindless form filling and bureaucratic nonsense involved in Fringe Benefit Tax.

If we want to grow long-term productivity rates, we need to encourage greater levels of capital investment by our businesses while continuing to build ever stronger access for New Zealand goods and services abroad.

When - and only when - we start increasing the efficiency of our goods and services; and when the price and quality of what we sell rises; can we seriously expect the wage growth we so desperately need.

Delegates. National is serious about the Economy.

We are serious about growing wage rates and living standards.

National is serious about education, health, and making New Zealand a better place for us all.

Ends

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