Panel Discussions Led by Paul Holmes

The panel discussions have been transcribed below. The full length video interviews and panel discussions from this morning's Q+A can also be seen on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news

Q+A is repeated on TVNZ 7 at 9.10pm on Sunday nights and 10.10am and 2.10pm on Mondays.

Response to PHIL GOFF interview

PAUL First of all let's deal with the GST, the idea of exempting fresh fruit and vegetables from GST. Phil Goff suggests the compliance cost might not be great, what do you think, because you've got a long history with GST, you chaired the original design panel didn't you?

DON BRASH - Chair 2025 Taskforce
He's absolutely wrong on that point, he's thinking of a retail sales tax, that's straightforward, you can exempt anything you like, but a GST is not a retail sales tax, it involves quite a complicated calculation, and as soon as you start picking holes in it, the compliance costs go up very substantially. The other point to mention Paul is that most of the money spent on fruit and vegetables is paid by the affluent, not by the poor. So exempting GST on those items certainly benefits people who buy fruit and vegetables, but it's a very poor way of targeting low income New Zealanders.

PAUL` What do you make of that?

HELEN KELLY - Combined Trade Unions President
Well firstly I don't think GST should go up, and that's obviously you know his position as well, then you get to the position where they're in government what do they do about that, and I think he had two solutions, one is to look at other tax distribution issues, and I think that's probably where they're gonna go.

PAUL Putting the taxes back up?

HELEN Yeah possibly and looking at how much tax lower paid people are paying, and then obviously they're gonna discuss whether they also need to look at the impact of GST and the fact is that poor people spend a lot of their wages on food. If you only have a limited income it's spent on food and housing and some of those basics.

PAUL Yeah but the argument for exempting fresh fruit and vegetables is there might be health savings further down the track, people might start going back to the vege shop, and buying the fresh fruit and the fresh veges isn't it?

HELEN Well I think it's more an argument about not exempting unhealthy food, I think you know it's a political thing about whether you take the GST off chippies.

PAUL Well that's right, I mean they remain those, you do start to get into ludicrous area, remember Dr Hewson in Australia got into terrible trouble in front of the cameras about whether there'd be GST on this pie, remember he couldn't work it out. What about dried apricots that you buy in the vegetable shop, what about half sun dried tomatoes, are they processed?

HELEN Yeah GST shouldn't go up, that's the answer.

JON But it's the politics of that I think Helen that I think has in a sense painted the Labour Party into a wee bit of a corner here, because you know they've been saying axe the tax, and they're certainly drawing attention to the fact that GST is going up, but in the absence of being able to say I'm going to repeal this once we come in, then what are you left with, and what we're left with is nibbling around the fringes, but conceptually the clean GST we have is something we should really try and preserve.

PAUL And of course you know there's trouble here for Goff again, simply by reason of his longevity, I mean he was part of the team that designed the GST, supported it all the way through, a bit argument from Labour, from people like Phil Goff, Roger Douglas was it, simple GST tax is the answer and you save yourself a lot. When you talk about the complications going deeper do you mean for example the bloke who grows the cabbages, he's gotta pay GST on what he buys and so there's a whole follow through chain.

DON Yeah I'm thinking about the retailer, he's selling fresh fruit and vegetables and other groceries. It's easy to distinguish at the selling point, but he's gotta work out how much of his power bill for example, how much of his rent is attributable to selling fresh fruit and vegetables, and how much is attributable to the other stuff, that becomes a nightmare.

PAUL So we're generally agreed splitting it would be a nightmare?

JON Well it's problematic, it is problematic.

PAUL Again no commitment from Phil Goff either this morning. Guyon was emphatic of his questing of him wasn't he, persistent. Phil Goff's also talking about changing the Reserve Bank Act to give the bank more levers if you like, your opinion on that Dr Brash.

DON That's an easy one, I mean it's grossly irresponsible, if the poll suggested he was about to become Prime Minister that would drive up interest rates in New Zealand without a shadow of a doubt, he was a Minister of the government which put the 89 Act in place, he was a Minister of the last nine years when there was no attempt to change the Reserve Bank Act, he was part of the government when Michael Cullen got a Swedish economist to review the framework and said it was very good framework. It's absolutely the framework in New Zealand is exactly the same as in Australia, Canada, UK, you name it, now to suggest changing it without actually saying what he would do, is grossly irresponsible.

JON It's part of Labour trying to actually relook in with the baggage of nine years of having managed the economy, of taking a fresh look, as they're entitled to do, and you know the Reserve Bank Act, solid pillar or whatever, but nonetheless it does cause a great deal of volatility, and why not have another look at it all these years on.

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In response to MINOR PARTY BUDGET DISCUSSION

PAUL 1.1 billion of new spending, he says it's all he's got, and there are fears of course that another big world recession might happen any day, I mean we've had a terrible almost collapse of the Euro was it last weekend, so things are still frightening, what do you think, is the world out of the....

DON I don't see another major depression or recession immediately, but we still have very dark clouds around, you mention Greece and Europe, in fact most developed countries now, have very high levels of government debt, and very high levels of ongoing government deficit, and that's a major issue. The other major cloud I think is China. China has kept the world growing over the last couple of years, or parts of the world at least, but there's a fair amount of evidence that the property bubble in China is seriously over inflated and could pop at any moment, that would be bad news for this part of the world.

PAUL Still I spose the concerns about the world economy is giving an excuse for a very tightish budget.

DON Oh indeed, I think the Minister of Finance has pointed out he's still borrowing a couple of hundred million dollars every week, and that's a significant amount of borrowing.

PAUL What do you want to see in the budget?

HELEN We think we are still in a recession and the government needs to continue to invest in stimulating the economy, and we don't think you do that by taking money out of the economy and having such a small spend.

PAUL How are they taking money out of the economy?

HELEN Well by only spending 1.1 billion they're actually missing an opportunity to do things like invest in things like training, skill development, job opportunities, I mean that youth unemployment figure is a disgrace, and if we see spending quality spending as having a long term benefit, we think there's plenty more room to spend. We're not borrowing 240 billion dollars a week, billion/million a week whatever they say, it's actually about half that amount, we're actually borrowing some money to repay ongoing debt, and Bill English actually has confirmed that, the government is trying to scare us into a low spend budget, which is unnecessary and unhelpful at this time.

JON Well I mean if you look at the politics of this budget, I mean it's a crucial one for this government, and you can see the battle of the narratives. Phil Goff's Labour Party will be focusing on the inequality and you know where the tax cuts are going to be distributed, and we're going to see a battle between those narratives, and the government will be trying to say well actually this budget is fair to all, and of course we've got the GST is going to be increased, it's going to be a huge part of the debate afterwards.

PAUL Well so will the tax breaks.

JON Is this step change, and that is the ultimate test for the government, and from its announcements so far Paul the tax switch doesn't look like step change to me.

HELEN It's a tax swindle, I mean why cut taxes when you're saying you don't have enough money to spend, and when clearly, and Peter Dunne I think confirmed they're going to cut education spending this budget, we've just heard that whole panel say education spending's important, they've indicated they're going to cut funding in early childhood education, they've indicated that they're going to cut the teacher's spending budget, you heard people say that the teacher pupil ratio is still too high, so I think the tax cuts are ill thought through and are going to benefit the wealthy.

JON But then Roger Douglas is right you know people have been banging on about the centrality of education for you know 70 years ever since Bebee, but we have never looked at it from a first principle approach, okay where do we want to be in 2050, what does our education system need to look like from early childhood education right through to continuing education, real first principle debate, all we're seeing is tinkering, a bit of new money here will be released.

HELEN Lots of new money in private schools, 15 thousand dollar scholarships to send your kids to a private school.

JON But is it really going to create the sort of type of educated New Zealander we're going to need in the decades ahead, you know highly flexible individuals.

DON This government is committed to raising New Zealand income levels to the Australian level by 2025, that means we have to grow by about 2% per annum per capita, faster than Australia for 16 years.

JON But isn't that in itself a short term focus, why Australia, why 2025?

DON There's some good arguments about that, why Australia because they speak English, they have broadly the same culture, and our kids are going there, it's hugely important, in any case whether it's important or not, they're committed to that. It's a 2% per annum increase in our growth rate above Australia's growth rate.

PAUL For 16 years?

DON For 16 years, now can we do that? Some countries have done, we have never done that sort of growth rate historically in our past, so this budget I'd like to see make the transformational change that we need to achieve the government's own goal.

PAUL Can I just talk about unemployment, when we look at that figure Roger Douglas was quoting, 38% of young Maori men are not in training, not at school, and they can't get a job.

JON And that'll be a resilient number Paul, you know that's gonna be very difficult to bring down.

PAUL See Roger Douglas says well you bring in a youth rate and of Metiria says no you've got to raise the minimum wage, but surely cheaper labour would encourage workers to take people on.

HELEN You've gotta do more than that, you've gotta create job opportunities for young people, and the government introduced two good schemes at the beginning of recession they job operations and the community max, both those schemes are due to finish, they're going to finish in June at a time when unemployment is higher than when they started, and so actually I agree with Don Brash, what we need in this budget is a wages policy, an economic growth policy, more than taxes and mining. We need to see a step change which actually sees us invest in our young people, get them into work, get them into training.

PAUL The aim of the tax cuts of course at the same time as GST is hikes to 15% is that the tax cuts will help the strugglers when they look at the GST going up to 15%. Will that work?

HELEN Yeah the CEO of Telecom will get $6000 more dollars a week, and somebody on $10,000 will get 84 cents a week, and so no that won't help the strugglers at all in fact, it'll drive up the costs.

DON Who's getting $10,000 a year, I mean no one working in a full time job is getting less than $26,000.

HELEN Well someone on $50,000 will get $6.50 a week then.

DON But be honest about this, no one under $26,000 is working in a full time job, that's the minimum wage.

HELEN` Well if you look at $50,000 a year you'll get $6.50 if you're John Key you'll get $272, and if you're Paul Reynolds you'll get $6,640.

DON But how do you get the step change, you don't do it by tinkering with the minimum wage.

JON Well I think you do it by you actually have first principle debates about the things that are going to lift your country's wealth and productivity over the long haul. Those debates have to be fresher than what we've heard for the last 25 years Dr Brash, this endless just patter that you know lowering taxes is going to be nirvana.

DON If you're referring to 2025 Taskforce, that was absolutely consistent...

JON No I'm referring to an incredibly stale debate that is going nowhere and is not actually helping this country move forward.

PAUL Most intense, I'm sorry I have to break the flow because we have a time issue.

ENDS

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