Rt Hon Helen Clark
Prime Minister

LABOUR PARTY WELLINGTON RALLY

at

Te Papa

WELLINGTON

2pm
Sunday 19 October 2008

Five weeks ago I defined the election campaign as being about trust.

I said then that it was about which leader and which major party we New Zealanders trusted our families’ and our country’s future with.

I said then, and I say again, that it’s an election between a government which has shown that it is principled and can take the tough decisions – and an opposition which just says what it thinks the audience in front of it wants to hear, and flip flops on every major issue.

Since then a great deal has happened in the world economy.

Without doubt, our world is experiencing the worst financial crisis since the 1930s.

No matter how resilient our economy is, we are affected.

The money traders and greed merchants have brought on a crisis which has reduced growth in developed economies like ours to a trickle.

The developing countries will also be affected.

Their high growth rates depend on exporting.

A severe recession in Europe and the United States would certainly impact on China.

If China’s growth slows – and India’s, that will affect the size of their orders of steel and coal from Australia.

Australia is our biggest trade partner, and particularly important to our manufacturing exporters. A slowing Australian economy very directly impacts on us.

Then in commodity areas of key interest to us, prices are falling.

Skim milk powder prices are 46 per cent off their late 2007 peak, and whole milk powder is around 40 per cent off.

Tourism – our second biggest earner of export dollars – tends to experience large impacts from even small changes in global growth.

The IMF’s October forecasts for world GDP are down around 25 per cent from their July forecasts

And their GDP forecasts for next year in our key markets are dismal – 0.1 per cent growth in the USA, 0.2 per cent in the whole Euro area, 0.5 per cent in Japan – and even in Australia only 2.2 per cent.

These forecasts are now likely to be at the upper end of what could happen, with a rebound in world growth less likely in 2009 – and probably on hold until 2010.

It’s important that we in Labour are utterly realistic about the international context in which New Zealand finds itself.

But we also know that this international financial crisis has turned the New Zealand election campaign completely on its head.

A change to a leader with the learner wheels on no longer seems as interesting as it might have even a few weeks ago.

At times like these, the premium value is attached to those who have experience and judgement; are resolute and steadfast; have done the hard yards; have had their feet held to the fire; and have proved their strength at times of crisis.

That premium value lies with Labour.

I, Michael Cullen, Phil Goff, Annette King and the Labour team know the ropes.

 We are across the issues;
 We have a plan to take New Zealand ahead in these troubled times;
 Our plan is open and transparent;
 Our plan is fair and inclusive;
 Our plan is about growth and investment for the future;
 Our plan doesn’t abandon the poorest to cool economic winds.

Our total focus now is on the steps which must be taken to lead New Zealand through this international crisis, and position our country well for when international trading conditions improve.

That’s why in Auckland last Sunday, Michael Cullen and I announced critical moves to ensure the ongoing stability of our financial system.

The deposit guarantee scheme we have committed to ensures that the hard earned savings of New Zealanders are not put at risk.

We are acting to stem any flow on from the shenanigans of the money traders on our people.

But acting to underpin the stability of the financial system is just the first step needed – here and in other developed economies.

The challenge to us all is to prevent a world financial crisis becoming a full blown economic crisis.

This year’s Nobel Prize Laureate in economics, Paul Krugman, has strong advice for his own country’s leaders.

He assesses that the slow down in the United States will be “nasty, brutish and long”.

His prescription - outlined in the New York Times on Friday - mirrors that announced by Labour last week.

Now he says is the time for extra infrastructure spending to give the non-financial economy the help it needs, and for support for those exposed to the slowdown.

I announced last Sunday that, given the privilege of re-election, Labour will finalise a December economic statement.

That statement, within our first forty days, will contain an economic stimulus package.

That statement will be discussed with our social partners – the Council of Trade Unions and Business New Zealand. Indeed we welcome dialogue with the social partners and other stakeholders in the lead up to, and following, the election.

At the core of that package will be plans to bring forward investment in infrastructure and other projects which are job rich.

I outlined last week that these would include road and rail projects; support for local authority infrastructure; and afforestation.

I mentioned projects like the work needed on the rail line north of Wellington.

Right now, larger containers are transferred from rail to road at Palmerston North, because the tunnels between there and Wellington are too small for them!

Fixing that sounds like a priority to me at any time – and projects like these can certainly come forward as part of a stimulus package.

And transport initiatives don’t always mean major road and rail construction.

There are useful projects which could be tackled to establish walkways and cycle ways to help with managing travel demand.

These are especially helpful to our schools as they develop their travel plans, including walking school buses. They help keep children fit and healthy and minimise peak time traffic in our cities, relieving the pressure of ever more highways through our suburbs.

Another area where investment could be brought forward is in housing – public and private - and in retrofitting.

Last week I announced a new initiative for home ownership for modest income families

With housing costs rocketing eighty per cent from 2002, home ownership moved out of reach of many families on the average wage who would once have aspired to home ownership.

Even with prices coming off that peak, affordability is still a significant issue.

Our Welcome Home loans, which underwrite mortgages, have helped those buying starter homes in the regions.

And shared equity loans, where our government takes up to a thirty per cent share in a home, have been introduced for first home purchase in the high cost areas.

I met a young couple in the New Lynn electorate who have bought their first home under this scheme. To see what it meant to them was truly heart warming. They couldn’t have bought their home without that help.

But the economics of even the shared equity scheme still don’t add up for the household earning under $55,000 - which is $10,000 above the average wage.

So our policy announcement last week on home ownership aims to give new hope to the family living on around $44 - $45,000.

Labour is prepared to make Crown land available for families on incomes like that to build their own home in high cost areas.

For good reason, our new scheme is called HOPE – Home Ownership on the Public Estate.

The Crown will continue to own the land – which could be equivalent to making a contribution of $145,000 to a modest home purchase.

On that land a two to three bedroom starter home could be built for $165,000 – maybe less.

It makes a huge difference to have a mortgage of $165,000 rather than of $310,000.

That’s the beauty of our plan.

The underlying Crown land won’t be for sale. It will be available for successive buyers of the homes, to ensure that we retain this way of getting people into homes they can afford.

In Auckland already, where the pressure is greatest, we’ve identified thousands of possible sites, but the concept can be extended to other high cost areas.

We’ve committed to making 1500 sites available for these starter homes to be built over the next four years.

At this time, as house building has slowed, it’s exactly the time to be making moves like this.

As well we can consider, as part of our plan, bringing forward planned Housing New Zealand development and redevelopment.

And there are also our big plans for retrofitting damp, old unhealthy homes.

This work is labour intensive; it brings huge benefits for peoples’ health; and it lowers power bills.

That’s a win, win, win, for our people.

These are the kinds of solutions to the slowdown caused by international conditions which only a Labour government will provide.

The beauty of the economic stimulus package we will bring forward is that it will be consistent with our medium and long term plans for New Zealand.

Our vision has always been for a more fully employed, educated and skilled, healthy and well housed New Zealand.

That vision can’t be put on hold during an economic downturn.

We need to think strategically about how we can advance it with win: win solutions at this time.

Central to our vision, and absolutely critical to investing in New Zealand’s capacity to grow and develop, are education, skills training, and innovation.

Business New Zealand and the CTU have been working closely with the government in recent years on our skills strategy. Such ongoing collaboration will be essential if we are to get though this period with as little disruption as possible and in a way in which the pain is shared fairly.

We in Labour believe in developing a smart economy – not a dumb one.

In the last week I’ve announced a number of new initiatives to lift participation in education and training.

I’ve announced:

 Lifting the numbers training in Modern Apprenticeships by another 1,000 each year over the next three years to a total of 17,000 in 2011.
 Lifting the overall numbers of New Zealanders in industry training to ten per cent of the whole workforce in 2011. That will be around 230,000 – up from last year’s 185,000.
 Introducing a retraining allowance for those made redundant after five years in the workforce. They’ll be entitled to a student allowance for a full year, with no spousal income test, for a quality course.
 For those who’ve worked for ten years and wish to upskill, there will also be a retraining allowance.

And I have also announced a clear timetable for the phase out under Labour of the parental income test on student allowances.

At this time, above all times, of pressure on family incomes and growing pressure on the supply of jobs, this makes economic sense.

Educated and skilled people will lead our drive for a smarter, higher value economy.

The fewer barriers we put in the way of young people reaching their full potential through education, the richer our nation will be in every sense.

Our policy also treats our young people as the adults they are.

They’ve found it demeaning to be assessed against their parents’ income at an age when they can vote and could volunteer to serve offshore in our armed forces.

And many of our families subjected to that means test haven’t been able to help.

Right now a student’s allowance starts abating at a family income of $45,783 – around the average wage.

Sure – that’s up sharply from the $28,000 of only four years ago – but it’s not a level of income on which it’s easy for a family to help out.

By the time family income reaches $77,000, the allowance for a student has abated entirely.

Yet on $77,000 – which can be made up of two very modest incomes – a family certainly doesn’t feel rich.

Under Labour, that parental means test will be gone in 2012.

The pressure on families will be relieved; our students will be able to quit their debts even faster; and we will be encouraging all those with the ability to tackle quality full time courses to do so.

That’s another win, win, win, for New Zealand.

And if it means students get better grades because they are not overstretched working too many hours, we can add a fourth win to that.

I have not come here today to announce any more significant spending initiatives.

Nor do I plan to announce more.

This election is certainly not about who offers the biggest tax cut especially when those who over hyped their claim ended up offering the worker on the average wage with a family only $1.92 more a week under Labour.

They over promised and under delivered – that’s always a fatal mistake in politics.

This election is about who New Zealanders trust to move our economy forward at this time.

It’s about who has a plan – and there’s only one plan on offer to take our country ahead.

The announcements we have made are all aimed at supporting the growth and development of our economy and our people’s ability to be in work at this time of economic slowdown.

That includes the announcement last week to lift the threshold of allowable earnings before abatement for beneficiaries – which hasn’t been adjusted since 1996.

We don’t have the revenue to lift the base level of benefits.

But we can help beneficiaries lift their own income by lifting that threshold before abatement.

We’ve undertaken within the next five years to lift it to the equivalent of ten hours work a week at the minimum adult rate. At present it’s the equivalent of under seven hours.

It will lift by April 2010 to $100 a week, and to the full ten hour equivalent by April 2012. Thereafter it will continue to increase in line with minimum wage increases.

And we do undertake to keep the value of the minimum wage to at least its current relativity to wages.

If we can do better we will.

New Zealand’s reaction to the global downturn will be crucial to determining our country’s living standards for years to come.

Labour’s economic management over the past nine years means we are starting out in a strong position – with only 18,000 on the unemployment benefit as of June this year, and not the 161,000 we inherited from National in December 1999.

But we are determined to ensure that those numbers do not track back to those 1999 levels.

In recent weeks we’ve seen our opponents utterly fail to grasp the reality of the international crisis.

They’ve carried on with slogans crafted by their Australian spin doctors many months ago.

Does anyone seriously believe that a mantra about national testing in schools, slashing public spending, throwing a billion and a half dollars at Telecom, further deregulation of the economy and the labour market, and a tax package delivering big time to the wealthiest is any kind of response to the needs of our country now ?

National’s policies are both short sighted and sinister:
 because this is a time to invest in and build our capacity – not cut it back, and
 because they aim to wreck two major areas of Labour policy which address longstanding failures in the economy.

Like our low rate of savings.

Yet, given encouragement to save, Kiwis will.

816,000 have signed up for KiwiSaver – young people dedicated to saving for the deposit on their first home, and workers up to their early sixties all interested in having a more secure retirement.

What’s National’s plan for them?
 To wreck KiwiSaver
 To cut its value in half
 To ruin our peoples’ plans for a home and a secure retirement
 To make every single KiwiSaver worse off than they are under Labour
 To deprive our nation of the best opportunity it’s had since Norman Kirk’s government to build up indigenous capital

Muldoon destroyed that scheme.

His mokopuna want to destroy this one.

Don’t give them that chance.

But wait, it gets worse.

Because KiwiSaver isn’t the only programme put on the scrap heap to finance National’s tax cuts for top earners.

To the astonishment of every New Zealander who cares about an innovative, high value economy, National announced it would remove the research and development tax credit for smart companies – just like they’d previously refused to support the major Fast Forward package to fund innovation in our pastoral and food sectors.

Only short sighted, plodding, conservatives with no vision for New Zealand could come up with idiotic policies like these.

There is no doubt that National has produced no plans to take New Zealand ahead in these troubled times.

But for guidance on what they would do, think how they have responded before.

After the 1990 election, they cut benefits, brought in the Employment Contracts Act, means tested New Zealand Superannuation, imposed market rentals on state houses, and charged people to go to a public hospital.

Unemployment soared to over ten per cent; for Maori to 25 per cent; and for Pacifica Kiwis to 28 pre cent.

In the 1998 economic slowdown, National decided to cut New Zealand Superannuation; sell Contact Energy – one of the jewels in the crown of our SOEs; and eliminate tariffs on the car industry – forcing componentry firms out of business because they had no time to adjust.

I believe that National would show its true colours in this time of international crisis too.

It would use it as an excuse to trot out the policies which have always been part of its secret agenda. Like selling state assets.

What did Bill English say about KiwiBank ?

They’ll sell it eventually.

What has National said about public spending?

They’ll set up a razor gang to go through it. Forget about participation of the social partners in that exercise.

Where do they think they will get the money for infrastructure?

By wrecking the New Zealand Superannuation Fund and treating it as a private piggy bank for their pet projects.

That makes the future of New Zealand Superannuation as we know it unviable.

And then there’s the other planned privatisations:
 Of our prisons
 Of ACC
 Of our healthcare
 And of our schools

This is not the kind of future I want for New Zealand.

Without vision the people perish. What our nation needs now is the people with the plan for growth and investment in our country.

What our nation needs now are the leadership team with the experience, with the judgement, with the strength, and with the resolve to lead through this crisis.

What our nation needs now is the return of a Labour led government, to build on the progress we’ve made and take us forward.

With your help, with your commitment, with your vote, we will serve our country again for a fourth term.

ENDS

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