29 May 2009 Media Statement

Budget 09

This is a budget that has all the competence that you would expect from the people responsible for Melissa Lee’s Mt Albert by-election campaign.

The good news: Inflation is no longer a problem.

We have finally got the low inflation economy the National Party always said would deliver us its dream economy.

How’s that working out now?

National has produced a lacklustre budget that Bill Birch would have been proud of.

In troubled times, when the economy is rocking on the waves of global economic storms, the government has responded weakly.

Not with a vision for the future.

Not with bold steps that will lead New Zealand on a developmental path.

But with a weak, uncertain, sitting on their hands response.

Governments around the world are investing in the future.

This one has slashed the future.

This one is the Broken Promise budget.

The total value of primary sector science investment falls from $2 billion in NZ Fast Forward under the last government to as little as $1.2 billion now.

It is cutting nearly as much out of science and research in the primary sector as it is investing in infrastructure.

Government spending on science and research, on a like for like basis, falls from around a billion government dollars in the NZ Fast Forward Fund, to $610 million in National’s replacement.

With matching private sector funding, the total investment in primary sector research and development falls by $800 million, or about 0.4 per cent of GDP.

In addition, the government has not replaced a cent of the cancelled research and development tax credit.

This is huge cut in science and research.

It is a disaster for the future of New Zealand’s economy.

It is a disaster for the future of our most important economic sector.

Other developed countries are preparing themselves to come out of this recession stronger.

New Zealand is preparing by switching from science and research to poltergeists and UFOs.

The government promised the primary sector it would spend more on science and research.

That is what David Carter repeatedly promised.

He promised it as recently as this year.

Farmers and our agri businesses will be looking it up.

And they will find not increases, but cuts.

It has broken that promise as surely as if it has broken its promise on personal taxes.

I want to turn to some other features of this disappointing budget.

I want to draw the House’s attention to the table on Page 55 of the fiscal strategy report.

In there the government points to its expected increases in nominal average wages over the next four years.

If you deduct those from the CPI – the cost of living index - there will be no increases in real wages for four years.

No increase in real wages for four years!

This is the curious branch of economics that says the way to make New Zealand better off is to make everyone worse off.

Not since the eighties have we had an economy that didn’t increase real wages for four consecutive years.

It’s hardly conducive to keeping working New Zealanders here.

If they were leaving before, wait until John Key’s policies result in no increase in real wages for four years.

I have to give the National party credit for one thing.

There was a time in the past when National would have said the way to fix that would be to spend up on tax cuts.

At least Bill English and John key have now accepted that tax cuts do not stimulate the economy.

But that is not what they said when they wanted to get elected.

They promised New Zealanders tax cuts.

They now say they can’t afford them.

Fair enough.

But that’s not what they said when they wanted a vote.

Back then they said their promises took into account the worsening economic climate.

Back then they said

“National has structured its economic package to take account of the changing international climate.”

They weren’t telling the truth when they made the promises that got them elected.

They said: “Our tax cut programme will not require any additional borrowing”.

They weren’t telling the truth when they made the promises that got them elected.

The only way that promise could have been true is if his tax policy wouldn’t require borrowing because it was never going to go ahead anyway - and John Key knew that even before the election

Last year John Key said his tax policy was "appropriate for the current conditions" and would require "no additional borrowing.”

There is no excuse for this.

John Key was here in the eighties and he was here in the nineties when governments got elected and immediately tossed out the promises they got elected on.

I was in here in 1991.

I remember the Bolger government got away with the 1991 budget to begin with.

People gave them the benefit of the doubt that the economy had been wrecked by Roger Douglas and needed hard measures.

But over time it was a disaster.

This one will be too.

Those tax cuts needed to be cancelled.

But they should never have been promised in the first place.

John Key owes New Zealand an apology for getting himself elected on a promise that could never have been kept.

Did he know before the election that the international economic situation was deteriorating, or did he only find out when the Treasury told him?

Neither possible answer reflects well on his fitness to lead a country through a crisis.

I want to turn in the time left to the cuts to the Super Fund.

This is very sneaky politics.

Cutting the Super Fund now reduces the ability of any government in the future to provide for super at anything like existing rates or retirement age.

So what Bill English is doing is pushing out by ten years the hard decisions about the huge tax increases or cuts to super that will be needed to make super affordable.

He has calculated he won’t be finance minister in ten years.

He is right about that!

After this budget he won’t be finance minister in three years.

But he has delivered an enormous burden to future taxpayers.

The affordability of superannuation in the future must decline because we are no longer putting aside something now to pay for some of it in the future.

It was going to pay for around fifteen percent of the future cost.

Now it will pay for less than seven per cent.

That means the age of eligibility for superannuation will be increased to around 67; or else there will be huge tax increases required to pay for it.

That is the doozy the government has announced today.

This is not a budget that prepares New Zealand for the challenges of the future.

There is not a word in here about preparing New Zealand for the effects of climate change.

The Green party will be disappointed that the sum put aside for home insulation has been slashed from a billion dollars to $244 million.

Then we look over at the infrastructure spend, and we can see that the government is shifting $258 million of spending from rail to roads.

So this is what the Greens have got for their cooperation deal with the National party.

They have actually lost money!

They have lost $14 million!

Then what about the Maori party?

Who do they think is going to be hardest hit by this recession?

The National party is not doing anything for new jobs, and the Maori Party is voting for that!

At least Pita Sharples can wave at the unemployed as he drives by in his new car.

ENDS

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