Prebble’s State of the Nation 2003 Speech

12pm - 2pm, Wednesday 29th January. The Ballroom, Crowne Plaza Hotel, 128 Albert Street, Auckland.

2003 is going to present the nation with challenges that we are not prepared for. Our government has already made decisions this year that will have profound effects on our nation for years to come.

FOREIGN POLICY

As a trading nation in a global economy the truth is that foreign policy has always had a profound effect on domestic issues yet paradoxically our parliament rarely debates foreign policy and it is almost never an election issue.

So we are in no way prepared for the challenge of 2003, how New Zealand should respond to the challenge of an American led war with Iraq.

Our Prime Minister Helen Clark has not spelt out to the nation the issues, the choices and the profound consequences of the decisions that she is making on our behalf. No Leader should lightly decide to take a democratic country to war. But the decision not to go to war is just as important.

In 2003 the minority Labour government elected with just 41% of the vote has casually decided in January that New Zealand for the first time in our history will reject a request for assistance from Australia, the United Kingdom and the United States of America.

It has been a coalition of English speaking nations that has for over 100 years freed the world from the threat of fascism and then from the threat of communism. Australia, Britain and America who are now preparing for war with Iraq have been described as the coalition of the willing.

Continental Europe led by the Social Democrat Chancellor of Germany are the unwilling. New Zealand without debate has made the profound decision to leave our friends and join sides with a nation we have fought two world wars against. New Zealand's response to Iraq should be the result of a full and vigorous national debate. Instead we are being led by a Labour government that is in turn led by party opinion polls.

I have no doubt that in this country as in Australia, and in Britain and in heartland USA, there are many who would rather ignore Saddam Hussein's challenge. Tony Blair and John Howard have refused to be led by opinion polls and have shown leadership and set out the grounds for supporting the United States.

Iraq has failed to declare thousands of tons of chemicals, gasses, and equipment nations only accumulate to make nuclear weapons. Iraq is in violation of U.N. resolutions that already authorize the allies to use force. An Iraq with nuclear weapons is a threat to world peace.

Last year New Zealand joined Continental Europe in demanding a new Security Council resolution.

To the surprise of the left, the United States agreed to the request and did take the case to the UN - and received a unanimous United Nations Security Council Resolution. While another UN resolution has Public Relations value, New Zealand should acknowledge that legally and morally the US has the right to take action now.

Frankly even if the Arms Inspectors found an operational nuclear warhead, the Iraq apologists would then say, "but he has not used it." The arguments are irrelevant.

Let me set out what the real issue is. Is the world a safer place for small democracies like New Zealand with the world's only superpower the United States prepared to take military action against rogue states? Or are we safer if the United States retreats to isolationism and only defends its own core strategic interests?

That is the issue.

It is important because New Zealand has a crucial role to play. The number of troops we send to Iraq will have no effect on any war. Yet our contribution is crucial.

America is a democracy. Poll after poll has said the American people are reluctantly prepared to be the world's policeman but with an important proviso. The American people are not willing to do it alone.

34 nations, including New Zealand participated in the freeing of Kuwait. Today just two nations have committed troops to the US coalition against Iraq. If New Zealand committed today that we are prepared to send troops, that would be a step of international significance.

Any intellectually rigorous analysis of New Zealand's security interests, and of our place in the world says New Zealand should be there with the coalition of the willing. The lack of international support means America in future will be more reluctant to act against threats, some much closer to New Zealand.

I predict that New Zealand will bitterly regret Helen Clark's casual decision to align our interests with Continental Europe. New Zealand does not live in the "benign environment" claimed by Helen Clark. Last year we had the Bali bombing. This year we have North Korea threatening to make Nuclear weapons.

The idea that our economic interests are separate from our security and strategic interests is a dangerous myth that successive governments have promoted since New Zealand's suspension from ANZUS.

The truth is that since we lost our place on the decision table of the English speaking nations, we have not gained a place at the table of the Europeans. We have lost our influence. New Zealand diplomats report that they cannot ever get interviews with key European Ministers to talk about trade issues.

It is France's anti agricultural trade policies that are that nation's price for supporting the German Chancellor's anti-American policies. The number one trade policy objective of successive governments has been a free trade agreement with the United States of America. Our worst nightmare is an Australia/ US free trade agreement that excludes this country. In March, Australia/US free trade talks commence. A foreign policy disaster.

It is wrong to blame Helen Clark solely for such a profound setback. Both old parties have consistently failed to give leadership in foreign policy. National still supports a ban on nuclear powered ships visiting our ports even though we know that the ban is without any scientific basis.

Only the ACT party has put forward positive practical alternative policy. ACT MPs in 2003 will put forward a private members bill to amend the nuclear free legislation to allow US nuclear powered warships to visit.

Only ACT says what most New Zealanders know to be true. New Zealand should rejoin the ANZUS alliance. New Zealand should be in the coalition of the willing. The values that the terrorists of September 11 sought to stifle are the values we hold in common with America, UK and Australia. The eternal lesson of freedom is that it must be fought for.

NZ ECONOMY

The situation in Iraq is having profound effects on the world economy and on this country's domestic economy. New Zealand's dollar is seen as one of the safer currencies so we are seeing a rapid appreciation of the Kiwi.

The overall favourable growth figures hide an alarming shift in the economy.

When Labour came to power they inherited an export led recovery. It was the rural export industries that were leading the economy. Now it has reversed. Dairy suffered an 18% decline in 2002. The value of exports is declining. The economy is now being led by domestic consumer spending and an Auckland housing boom. That is being propelled upwards by the biggest immigration program since the government of Julius Vogel.

Increasing house prices and inflation close to the Reserve Bank 3% limit have kept New Zealand interest rates among the highest in the Western world. This in turn drives the Kiwi ever higher so punishing the export sector. It is unsustainable.

It is regrettable that Mr Winston Peters crude racism has meant that ACT's rational questioning of the logic of a Labour government's immigration policies have been lost in the xenophobic headlines.

An open and liberal immigration policy is a good thing both socially and economically. We should select the best. Selection should not be English language tests for entrepreneurs - the country's most successful new New Zealander in business speaks atrocious English but that has not stopped him revolutionising our retail sector and providing low cost electronic products to the average family.

The issue is - can Auckland absorb 32, 500 people, the population of Gisborne, every year? In the year to June 2002 Auckland grew by that amount or nearly a 3% increase in one year.

The boom in house prices creates a wealth effect. The rise in house prices has enabled households to take on more debt.

We read in our financial pages wonderment about the willingness of the US consumer to take on more debt to finance the extraordinary US consumer spending that has powered the world economy for so long. One day, the commentators agree, it must end. 2003 may be the year that the US consumer decides to stop spending.

What we are not told is that New Zealander's appetite for household debt is growing faster than that of the US.

Here are some startling facts. It was reported on the 2nd August 2002 that residential mortgage borrowing has increased to $68 billion compared to just $10 billion, sixteen years ago. Households now have $3 billion dollars in credit card debt.

Dr Neville Bennett, the Canterbury University economic historian said last year that New Zealanders now have the highest debt to income ratios in the world. Borrowing is rapidly increasing. The Westpac Household Savings Indicators reported in November last year revealed that households now owe $80 billion dollars, 8.6% more than a year ago.

Household borrowing in the nineties increased from 57% of disposable income in 1990 to a 112% in 2002.

The average Kiwi has never been more in debt. When the official figures are released I predict that retail spending at Christmas and the now important Boxing Day/January sales were a record and we owe record credit card debt. Spending through the bank's electronic system payment was up 11% in December. And let's not forget that student debt has doubled under Labour.

Our banks that have financed household debt have borrowed from overseas. Our own savings are insufficient. The Reserve Bank Governor (now MP Don Brash) stated "New Zealand banks now rely more heavily on overseas borrowing than banks in any developed country - roughly a third of the total assets of the banking system are now fuelled by borrowing overseas".

The alarming state of our trading bank's balance sheets does not concern the Reserve Bank. Banks borrowing overseas to on-lend for domestic mortgages and credit card spending is a crash waiting to happen. The official answer is that our major banks are Australian and they are strong enough to refinance their New Zealand subsidiaries in the event of a downturn.

No one asks what happens if Australia also has a downturn? No one asks what if the Australian banks also tighten up in New Zealand.

Our whole economy now depends on increasing house prices that in turn depend on levels of migration that are at record levels.

It is not sustainable. EDUCATION Dr Cullen boasts that his policies are resulting in New Zealand leading the OECD. Producing a $3 billion surplus, record government revenues and a government savings scheme is not something to boast about when it's achieved by lowering real take home pay and a deficit in family finances of $8 billion a year.

4% growth that's based on a house price bubble, the OECD's highest interest rates and declining export sector is nothing to boast about.

Only ACT is providing a practical workable solution.

Mr Peters "cutting immigration to he bone" would result in a crash.

Immigration should instead be fine tuned to result in an overall net population increase and a reduction in non-productive migrants. When there are 20 million refugees in the world it makes no sense to take queue-jumping unskilled refugees.

Giving middle New Zealand tax relief can ease the household debt to income crisis.

The McLeod Tax Report proposals to give working families tax relief are now urgently needed. Cutting red tape would also help the productive sector.

Last year when the schools opened, thousands of children found they had no teacher. The government had failed to tell the Education Ministry of thousands of new students it had let into the country.

I predict that the teacher shortage this year will be critical. A total of 388 secondary teacher vacancies appear in the first education gazette of 2003, that's 116 more than last year. That equals a teacher a school. A class in every school has no teacher.

Our teachers are aging.

There are critical shortages of maths, science and English teachers. Standards are falling. Attracting and retaining good teachers should be a top priority if we are to stop the fall in education standards. Labour's solution? Let's have no standards. Let's have no external examinations. Let's not give students their marks.

The NCEA is a revolution in our schools.

It should have been an issue in the election but the two old parties are in favour of NCEA. Nowhere in the world where schools have abandoned external exams for internal assessment has it been successful. The pupils who will lose the most are the good students from poor schools - who used to be able to use good School Certificate marks to convince employers that they have talent.

ACT is going to continue our campaign this year for external examinations as the only guarantee of high standards.

The ACT party is also going to take the lead in health. Health policy is bankrupt, just like our hospital boards are bankrupt. Health expenditure in New Zealand is rising rapidly. It is a myth that our health system is relatively cheap.

We know that our health outcomes are slipping down the OECD ranking but that is usually attributed to our relative decline in wealth and belief that our health expenditure is low. Not so. Health expenditure is not just a crude percentage of GDP. Your costs of health rise as you get older.

To see what the real relative health spend is we must look at our expenditure relating to the number of citizens over 65. Then we find our spending is among the top of the OECD.

HEALTH

We all know we have a fiscal crisis when the baby boomers start to retire in just ten years, what we are even less prepared for is an explosion in health costs.

Health is the biggest issue facing the nation and I predict that Health will be the biggest issue facing many families.

Our hospitals are in urgent need of reform. By December only 8 of the nation's 21 boards had their current year's plans approved by the Minister even though we're half way through the year. The combined deficits are estimated to be around 200 million.

Just throwing money at the problems won't help. A monopoly, state owned hospital system - the Soviet model - is incapable of providing heath services when we need them.

ACT's health policy would see hospital waiting lists eliminated. Only ACT is putting forward practical alternative solutions. At our caucus retreat next week the number one item on our agenda is health policy.

Our focus group polling says that ACT's idea of a patient guarantee - any patient on a hospital waiting list is guaranteed the operation they need within the medically acceptable time limit, in a private hospital if the state cannot provide - is a policy that has started to appeal. I like the patient guarantee because it's focus is on the outcome.

It's my experience that people who need an operation do not share this government's ideological view that only state health is good health.

ACT's guarantee will force hospital boards to use the private sector just as ACC's guarantee of accident cover has forced the Corporation to use the private sector. ACC has gone from an ideological 100% of all operations in the state sector to now most ACC surgery being carried out in the private sector. When Labour made ACC only use the state hospital system, accident victims waited years for simple surgery that would enable them to return to work. Now ACC patients are treated more quickly in the private sector. The figures are impressive. Since ACC started using the private sector for elective surgery contracts, the average claim duration has dropped from 56 days to 34 days. It's a huge cost saving and a large reduction in pain and misery.

Health is an area that needs ACT's fresh thinking because I predict that in 2003 Labour will fail in health.

LABOUR'S POWER POLITICS

But Labour's inability to lead is more fundamental than a mere lack of fresh thinking. Labour is paying a heavy price tag for Helen Clark's power politics. No one can now remember the alleged reason for a snap election. The Prime Minister said she could not rely on the Alliance. The real reason was a miscalculation that Labour would win 50% of the vote.

Labour then decided to conduct a tactical campaign trying to persuade Centre Right voters to vote Labour to keep out the Greens. The tactic failed and Labour is reliant on the Greens to pass some of its most important policy. This year the Labour government must resolve the GE issue. Labour promised not to compromise and not to give in to the Greens. Now Labour is dependent on the Greens and something or someone has got to give.

If the Greens decide - as I think they must - that their future support is dependent on the GE moratorium continuing, then this government must either face defeat on a core policy or seek a new mandate.

POLITICISING OUR JUDICIARY

The most important constitutional issue to face the country in my lifetime is on the 2003 Parliamentary agenda. It's an issue far more significant than shifting from First Past the Post to Proportional Representation. It's an issue far more important than the number of MP's or the length of the term of parliament. These are issues that are so important that they have been determined by referendum.

I am referring to the Labour government's intention to set up a new final Court of Appeal, a New Zealand Supreme Court. Labour intends to appoint every judge. So it will be a court that will decide New Zealand law for the next 20 to 30 years.

In Common Law countries, the make up of the judiciary is a major political issue. President Roosevelt tried to stack the US Supreme Court. President Bush's power has just increased because the Republicans now control the Senate that must confirm federal judges.

Most law that affects us is not passed by parliament. Most is Common Law, judge- made law. The Statute Law is not what was passed by parliament but as it is interpreted by judges.

I have witnessed many laws that have been interpreted in a way that has come as a complete surprise to Parliament. A famous example is the way that the Court of Appeal has invoked the idea that the Treaty of Waitangi is a partnership. With the exception of the example I have cited, judge-made law is not a divisive issue in this country. This is because we have a high quality, truly independent and free from political bias final court - the Privy Council.

The New Zealand Supreme Court will be radically different: politically selected judges who are chosen not for their knowledge of the law, but whether they fit Margaret Wilson's ideology. Margaret Wilson has already decided that one judge must be selected not for his knowledge of the law but his knowledge of Maori custom. These politically selected judges will be free to rewrite our basic constitution.

It's a revolution by unelected judges. Labour has no mandate for this radical change. At no time did Helen Clark seek to make abolishing the Privy Council an election issue. It is my view that the constitutional convention in this country in 2003 is that major changes in the constitution, like a new Supreme Court, should only be made by referendum.

Labour's actions are unconstitutional. We need a judicial commission to ensure that any judges appointed are non-political and it's very hard to see why the first judges should not all be the present Court of Appeal. Last year the Judges of the Court of Appeal were the best judicial talent in the country. How is it the Government now says it can find half a dozen better judges?

Politicising our Judiciary as Margaret Wilson intends is a measure that will make New Zealand less politically stable, more party political, and reduce people's freedom, property rights and the right to make their own choices. ACT is going to lead the fight against this bill and I believe we may win. My prediction is that Labour can only pass this bill with the Greens, who do support Margaret Wilson's vision of an Aotearoa Socialist Republic and separate sovereignty for Maori. Abolishing the Privy Council is an important step to the Socialist Republic nightmare. But the Greens, if they are consistent with their election promise, must make the GE ban a precondition of support. Labour in turn, if they are consistent with their election promise, the government must lift the GE moratorium. So it's an interesting year. This government is nothing like as stable as commentators opine. Minority governments can always fall.

THE STATE OF THE PARTIES

Traditionally in my state of the nation speech I give a thumbnail sketch of the state of the parties.

Labour is weakened by its lack of a clear mandate and any vision.

But Labour's electoral strategy is as clever as it is immoral. Labour strategy is to add to its traditional trade union worker vote with blocks that have deserted the party or not traditionally voted Labour. Maori in 1996 deserted Labour for New Zealand First. Labour has showered Maori with largesse.

Over the summer I have been shocked to learn that a Maori Trust associated with an ACT MP has received over $800,000 of taxpayers money. The trust has admitted money was spent on things like business class tickets to Sydney, and five star hotel accommodation to watch a fashion show.

The Trust has never been audited or produced an annual report. If Labour gives over $800,000 to a trust associated with an ACT MP what has Labour given to trusts associated with its friends? First I am going to take responsibility for our problem and fix it. Then I intend finding out who else is on the gravy train.

Hundreds of millions of dollars with little accountability being transferred to buy the Maori vote, and spending like eight million dollars for Pacific Island Radio to buy the Pacific Island vote. Labour, by measures, like providing special entitlement to the Community Card to 1,370 Superannuitants whose incomes took them above the entitlement threshold, is buying the vote of Senior Citizens. Interest free student loans has also bought the student vote. It is a calculated policy to take working families for granted and buy the vote of the non-productive sector. The "workers" - the productive sector - have financed Labour's huge transfer of wealth to the non-productive sector.

While gross wages have basically matched inflation, government has taken much more in tax, so take home pay of the average worker has actually fallen in real terms.

Over this summer I have had the parliamentary library research real take home pay. The average worker's take home pay after tax, and inflation is $14 dollars a week less today than when Labour took office, a reduction of 2.4%. Increased income tax, user charges, petrol tax, government charges and stealth taxes have reduced the real income of the average working person. What families have done is take on more debt to keep up living standards. As interest rates are lower, households can do this. So now we have the most heavily indebted families in our history. A small increase in mortgage rates will have a disastrous effect on New Zealand families.

Labour's neglect of its own traditional voters is its electoral Achilles heel.

Fortunately for Labour, National is no electoral threat. National is not an alternative government when I cannot tell you what National party's policy is on the most important issue of 2003, Iraq. National cannot lead until that party is willing to take a stand on principle. And it cannot do that until it decides what it believes in.

Trying to outdo Winston Peters is just not a viable strategy.

Mr Peters' himself has gone too far. A trading nation just cannot afford to have as a Minister a person with Mr Peters' record. He is now too extreme, too divisive, to be a leader in a multi-cultural nation.

I think that the United Future Party's future is behind it. Peter Dunne has refused to admit that more important than the worm was the support of former Christian Heritage voters. Peter Dunne collapsed the Christian Heritage vote. For his party to succeed he needs to keep the Christian vote. Those voters did not expect the United Party to not only support Labour but also Labour's social agenda. They will never vote United again.

I see no sign that the Alliance can break through the 5% margin.

ACT'S ROLE

So I see the role of ACT being crucial. ACT provides the only real alternative solutions to Labour.

During the election and since, we are seeing significant new support coming to ACT. ACT is already the party of first choice of our business leaders. Professionals and small businesses prefer ACT's approach to National's.

Though this often has not translated into votes, ACT support from women keeps rising - among voters saying they would consider supporting the party there is slightly more women than men.

Male voters are suckers for the latest thing. Just as men like the latest model car, so too with politics. Men go for the new party. Women are more cautious. They want a proven product. Our focus groups suggest that women give ACT top marks for doing what we say we will do and always looking after the taxpayer's interest. We are now a proven product. Women wish other parties were more like ACT.

Add to this two new groups of voters. The Herald exit poll says ACT is the party of first choice of new New Zealanders. The new business immigrants who have come to New Zealand hate red tape, government charges and taxes that small businesses face. New immigrants look with-out traditional bias at all parties and they like not only ACT's policies but also our values of personal responsibility. This vote is going to grow and take ACT well above the threshold.

The next vote has the potential to make ACT a major party. Our focus group polling shows that the "working families vote" - of people who have always voted Labour and will never vote National - really like ACT. The families that work for a living, provide their own housing with a mortgage, like what ACT is saying on tax, the economy, education, health and law and order. These are traditional Labour voters who this government has totally ignored. If this group of predominant urban families shift, it will rewrite the voting landscape. ACT will become the `liberal' party of New Zealand, much the position the Australian `Liberal' party occupies and National will become like the National Party in Australia, a country party.

Very exciting.

Roll on 2003.

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