Heather Roy's Diary Address And Reply Debate

act-new-zealand

Fri Feb 16 2007 13:00:00 GMT+1300 (New Zealand Daylight Time)

Heather Roy's Diary Address And Reply Debate

Friday, 16 February 2007, 12:32 am
Column: ACT New Zealand

Each parliamentary year begins with a 14 hour Address and Reply debate - an address by the Prime Minister followed by replies from other party leaders and then the rest of Parliament.

The Prime Minister usually begins by saying what her Government intends to do in the ensuing year. The Leader of the Opposition traditionally tests the Government's majority by moving a motion of "no confidence".

At the time John Key moved his motion of no confidence the government's majority (including support from their United Future and New Zealand First coalition partners) was just one vote. Subsequently, Phillip Field's expulsion from the Labour Party means the motion isn't entirely academic. The actual vote will be held next week at the conclusion of the debate, when Field will be allowed to vote as an independent. Labour's paper majority has disappeared, but their strength is increased by an agreement by the Greens to abstain on issues of confidence and supply.

I gave the reply speech for ACT and talked about the Prime Minister's denial of the real problems that confront Kiwis. There's denial that children turn up to school without breakfast, denial that our health system is sick, and denial that too many are failed by our education and justice systems. The full speech can be read at www.act.org.nz.

In her speech, which was dominated by talk of sustainability, the Prime Minister reminded us of her own contentment with her Government's economic performance. Any Prime Minister in their third term is likely to regard the status quo as akin to perfection, but other observers might be inclined to make their own soundings.

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The Current Account

Any reader of overseas reports on New Zealand will know that our large current account deficit weighs heavily on the minds of overseas investors. We simply import a lot more than we export and we borrow the difference. Only Iceland exceeds us in this type of extravagance. According to Statistics New Zealand we run an annual deficit of $14.4 billion - $3,453 per man, woman and child each year.

I suspect this statistic weighs heavily on the mind of the Minister of Finance, who does not wish to be remembered as the Minister of economic collapse. Last week Michael Cullen was musing aloud about a "levy" to be put on fixed rate mortgages. Many, including the Prime Minister, concluded that such a "mortgage tax" would be political suicide, and the policy is now a dead duck.

But it is worth asking why Michael Cullen was so keen on it in the first place. He must have realised that it would be a loser politically. The Minister of Finance has seen the New Zealand government move into a position as a net lender. It has been rarely that the New Zealand government has been in the black. Unfortunately he has achieved this by overtaxing those hard working kiwis who contribute to the economy. He has forgotten that the Government's job is to balance the books - by getting just enough money in to cover the services government buys for taxpayers.

This issue causes much confusion. The New Zealand government has a huge surplus (around $11 Billion) but the country as a whole is heavily in the red. In household terms it is like being ahead in your mortgage payments, but having a lot of other debts unpaid. So what is going on?

At a national level the government runs a surplus, but individuals and companies are swimming in debt. The net effect is strongly negative. The whole country's balance of exports and imports is called the current account, and it is this which is in the red.

Dr Cullen sees all this as evidence that money is much safer in his prudent hands than in the hands of reckless taxpayers who will simply spend their money and worsen our balance of trade. This may explain his compulsion to collect extra taxes, so he can safely squirrel the money away whereas the fickle taxpayers may spend their extra cash on imports and worsen the current account.

But when it comes to our overseas deficit our current cabinet has no answers. The recent suggestion that a tax be imposed on mortgages so that there is a financial penalty imposed on fixed interest house loans looked like desperation rather than considered policy. It was, however, better than sending officials to Japan to talk them out of buying our bonds. That was like something out of Don Quixote.

So why are we running a large current account deficit?

The simple fact remains that New Zealand governments of every political stripe have found a number of ways to separate citizens from their hard earned savings. In doing so they have made saving something of a mug's game, so our investment necessarily comes from overseas. The current ruse to separate the saver from their property is to impose a high tax rate and then run a generous but means tested welfare system - it's not quite outright confiscation but it's close. It will take a great deal of effort to persuade New Zealanders that savings in future are safe from predatory Ministers of Finance.

We know that the Finance Minister relishes his reputation as a fiscal hawk but there is some dove like behaviour that he keeps quiet. I recently discovered that the government offers a four year tax holiday to new business residents. The same offer extends to New Zealanders who have been resident overseas for more than 10 years. Our Finance Minister is, it would seem, a sheep in wolf's clothing. It used to be a Labour motto to "soak the rich" but is now the middle classes who are being soaked. No wonder our people immigrate at a rate of 1500 per week.

ENDS

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