Tuesday 26 July

Don Brash Leader of the National Party

'Battlelines for the 2005 Election'

An address to the Radio NetworkBusiness Seminar, Auckland Town Hall

I must say that, despite the fact that addressing your seminar was going to keep me away from the start of the final session of this Parliament, I wanted to accept your invitation.

We now know that an election will be held on September 17. And I welcome this opportunity to tell my fellow New Zealanders what is at stake over the coming weeks.

Many of you will know that, like you, I have had a career in commerce.

I entered politics late in life out of an enormous sense of frustration about the fact that our country was missing the great opportunity it has to offer a decent future to our children and grandchildren.

Last week the Government Statistician released the migration figures for the year to June 2005.

Those figures told us that each week over the past year, 630 New Zealanders on average left these shores to move to Australia, permanently or for the long term.

And the truly worrying feature is that the trend line of departures is increasing with every month that passes.

I know that many of you here today who are parents and grandparents will worry about that, and what it might mean for your family, just as I do.

The problem is that we cannot simply round up those New Zealanders who are leaving and tell them they are wrong.

The sad fact is that, in the past five years, the gap in average after-tax incomes between New Zealand and Australia has grown from $5,000 per year to $9,000 - nearly double.

The way to halt the growing tide of departures is not to tell those people they are wrong - rather it is to start closing the gap in relative income levels. And that is why, three years ago, I decided to enter politics.

Today, I speak to you on the eve of a general election campaign.

For the past week I have been the object of one of the most vigorous personal attacks whichattacks that any politician has experienced for many years.

I knew when I signed up for this career that that sort of thing might happen from time to time. And I signed up anyway, because I couldn't walk away from the opportunity to do something about that long dark cloud that hangs over our country's future.

You see, there is no need for New Zealanders to accept a silver medal, to accept second place behind Australia, as our natural lot in life.

There is no need for New Zealanders to accept that a considerable proportion - perhaps all - of our children and grandchildren will find their futures in another country.

There is no need to just accept that growing exodus and then fill the empty spaces with migrants from various lands with lower incomes than our own.

But if we stay on the course we are on, that will be the way ahead for New Zealand.

So, what do we need to change?

First, we need to change our culture and our attitude. We need to understand that for New Zealand to get ahead, New Zealanders must be able to get ahead.

For the past five years, the Clark Government has attempted to turn this country into the Land of the Lowest Common Denominator. That is what lies behind their absolute refusal to reduce taxation, despite the enormous Budget surpluses we have been running as a country.

This is a government that is obsessed with wealth re-distribution, not wealth creation.

What New Zealand needs is a government that is committed to wealth creation; one that can then afford to provide the standards of healthcare, education and other social services that we aspire to.

A government that understands it is sheer madness to see every dollar of growth confiscated by the public sector - for that is what has happened in these past five years - rather than being left in the hands of resourceful, entrepreneurial New Zealanders to fund new growth and higher paying jobs.

So lower taxes do lie at the heart of the programme which we bring to this election. But that is only a start.

Changes to our education system are critical if we are to lift our standards of literacy and numeracy, and if we are to see all young New Zealanders given a fair start in life.

The current Minister of Education, along with the powerful teacher unions, hold it to be an article of faith that parents are too irresponsible or too stupid to be entrusted with choices about how they will educate their children.

Let me make this absolutely clear: If I am privileged to lead a government in a few weeks' time, the power in the education sector is going to move away from the bureaucrats and unions based in Wellington, and be transferred to the parents and school principals and boards of trustees.

And I have every confidence that they will do a better job.

Like most other New Zealanders, I simply don't know that it would be possible to do worse than the current Minister, his bureaucrats and his union friends.

Just last Sunday, Bill English released our core Tertiary Education policy. We need a new set of priorities in this area. We will scale back the second-rate sub-degree courses that have been funded by Labour - courses that few even bother to complete.

Instead, we will remove the funding restrictions on trade training and apprenticeships.

Yesterday, in this city, I launched our Resource Management Act policy designed to reduce compliance costs and the enormous delays that contribute to them.

That policy is symbolic of our general approach to the growing raft of compliance costs that afflict the productive sectors of our economy.

Our RMA policy will contribute substantially to another of the big commitments that will be outlined during this election campaign: a major catch-up programme with public infrastructure.

I am sure that I have no need, in front of this audience, to tell you of the huge cost associated with inadequate roading infrastructure in this region. We have a comprehensive programme to meet that challenge.

So think about what is at stake in this coming election.

This election is about building a better future for our country. It is about restoring for ordinary hard-working New Zealanders the right incentives to work hard and to get ahead, for the benefit of their families and our country.

It's about providing the right incentives in the tax system, in education, and in the welfare system so our children and grandchildren don't feel the need to move to Australia to have a decent life.

It's about reining in a Labour spending-machine that has collected and wasted much of the economic growth of the past six years. It's about an end to the Treaty grievance process and a new start based on one set of rules for all. It's about mainstream New Zealanders finally saying to the Government "that's enough - it's our turn". That is what this election will be about.

That is why I will be announcing a comprehensive package of tax reductions in a few weeks' time. We must lower the tax burden, we must get better incentives, and we must retain skilled Kiwis in this country.

Those will be the key features of our taxation policy, all of which will be delivered close to the commencement of the formal campaign period, with plenty of time for New Zealanders to digest and understand it.

But I can assure you that our programme is robust, responsible, affordable, fair, and growth enhancing.

Today I intend to focus on some of the issues surrounding our forthcoming tax package - the childcare and student loan elements announced over the past two weeks were just the first instalments of it.

At present, our tax system punishes positive attitudes: it sharply reduces the reward to enterprise, skill and hard work. And our welfare system encourages a set of attitudes that are utterly destructive of self-reliance and self-confidence. These are terrible signals to send to the next generation of New Zealanders.

We need to change the incentives, and send better signals about how to get ahead in life.

There are a number of problems with our tax system, and we will work our way through them in government.

But let me focus on one on which I have recently announced our policy. Our tax system has been very tough on families, and especially tough on mothers.

The reality is that most women simply have to get a job to get their families established, even though many would rather not work outside the home when their children are young.

By not recognising childcare costs as a legitimate work expense, we leave many second-income earners (usually mothers) with very little cash in hand after tax and childcare costs have been paid.

That becomes a barrier to getting back into the workforce, a barrier to staying in touch with the workforce, and a huge barrier to getting ahead in life financially.

For sole parents it is even worse. Numerous studies have shown that many sole parents are effectively locked out of the workforce because by working they are actually worse off.
That is why I announced that the next National Government will recognise as tax deductible the pre-school childcare costs of working parents up to $5,000 per child. Costs will be deductible at 33% of out-of-pocket childcare costs.

In effect, one-third of pre-school childcare costs will be able to be claimed, resulting in a tax refund of up to $1,650 per child.

In government, we will be reviewing the whole area of family taxation, in particular the pressures on single income families which have incomes outside the range supported by the so-called Working for Families programme. Many of these families have one income supporting two adults and several children.

Moreover, many middle-income families eligible for some Working for Families payments simply won't claim them because they don't want to line up at a WINZ office to make their claim - and nor should they have to.

It speaks volumes about the values and attitude of the Labour Government that they expect decent, hardworking New Zealanders, who want to get ahead, to queue up at the local WINZ office and hold their hands out.

That is an approach that the National Party and I reject, totally and absolutely.

National will provide a less bureaucratic and complex system than Working for Families, one where we endeavour not to tax people, and then use a demeaning bureaucratic device to return money to them.

This is all part of building a fairer society, and a culture that allows people to get ahead in life, not blocks them every step of the way.

Labour is building a culture of self-esteem without achievement, of financial rewards without hard work, of dependence on others instead of self-reliance. National will be supporting those traditional Kiwi values of self-reliance and enterprise.

At the next election, New Zealand voters face a momentous choice. We are reaching a fork in the road, and the choice will substantially determine the sort of country we become, the sort of attitudes and aspirations the next generation will adopt.

It is not just a matter of a shift in policies in a few areas.

The choice at the next election will also determine how many of the next generation decide to stay and build their future in this country.

It is a choice about whether to just continue waving goodbye to departing Kiwis - and in Michael Cullen's case to actually abuse them for making that decision - or to do something about the underlying problem.

Against the evident need for a change in direction, what is Labour saying about tax?

Both Helen Clark and Michael Cullen are running spurious arguments against lowering the tax burden.

The first point one can make is this: We have the biggest Budget surplus in our history. If Labour does not see scope for a tax cut for all hard-working New Zealanders now, then clearly under Labour there will never be one.

And at least Labour have acknowledged that. They made that very clear when they pre-announced minor inflation adjustments to tax thresholds: the first in 2008, the next already scheduled for 2011.

But it is simply preposterous to argue that, with a sustained Budget surplus as large as New Zealand now enjoys, we cannot lower the tax burden.

So let me say this to you today clearly and simply:

In 2005 New Zealand does not have a debt problem. In 2005, New Zealand has a very serious growth problem, with all projections for future growth showing a very marked slowdown from the growth of the last decade.

New Zealand needs a government that will deal with that growth problem.

So I want to conclude by dealing with the primary argument which Helen Clark and Michael Cullen have been running against tax cuts: that tax cuts will be inflationary, and will lead the Reserve Bank to push up interest rates.

What they are saying is that if they spend your money it isn't inflationary; but if you spend it, or save it, it is inflationary. This is self-evident nonsense.

I say this with some confidence, as someone who has spent much of my career working on economic issues, and the most important part of it - until recently - as Governor of our Reserve Bank, charged with getting inflation down and keeping it low and stable.

Following my period as Governor of the Reserve Bank, I think I can say that I understand as well as anyone the influence of government spending and taxation policy on short-run inflation and interest rate pressures.

And I didn't spend 14 years getting inflation down to put that at risk now.

Incidentally, one of the benefits of that much lower inflation was lower interest rates: when I became Governor in 1988, the floating rate mortgage cost 15.5%; when I left the Bank in April 2002, it was 7.5%. And although rates fluctuated over that 14-year period, the trend was steadily downwards as people became more confident that low inflation was not just a temporary phenomenon. I have not the slightest intention of putting that low inflation, with its consequentially lower interest rates, at risk by promising irresponsible tax cuts.

Ladies and gentlemen, the battlelines for the 2005 general election are now clear.

In the red corner, we have a government which has run its course - a government which has run out of ideas, run out of ambition for our country, and patently run out of respect for those who elected it to office. All it has left to display is the politics of the gutter brawl and the personal insult - the politics of the classroom bully.

In the blue corner, we have an alternative government that is now, day after day, releasing fresh ideas and policies, and bursting with ambition and aspiration for our country.

Over coming weeks, my colleagues and I will be releasing further details of the programme which will drive the next government of our country - including, of course, our tax policy.

As we enter this final phase of the campaign build-up, I simply invite you to ask yourselves these two questions:

Can New Zealand do better than this? and,

Don't we owe it to our children and grandchildren to try?

If you believe the answer to these two questions is yes, there is a political party and a party leader that share your hopes and dreams.

I feel privileged, in the weeks ahead, to have the opportunity to put our programme before the people of New Zealand.

I thank you for the opportunity to address you at this critical time on the political calendar. And I invite you to be a part of a New Zealand that is determined to get ahead, by giving New Zealanders the opportunity to get ahead.

ENDS

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