Don Brash MP National Party Leader

23 May 2005

Tax Cuts Key to a Spirit of Enterprise Address to the Auckland Rotary Club

Mr President, Ladies and Gentlemen

Last Thursday, Michael Cullen read his sixth, and final, Budget in Parliament.

What an opportunity lost for New Zealand!

Nearly 600 people get on a plane and leave New Zealand to move permanently to Australia each week - 30,000 in the past year - the equivalent of losing the city of Gisborne each year. They go because they can see a better life with better rewards for themselves and their families in Australia.

And the acid test for Michael Cullen and Helen Clark's Budget is this: will any of the 600 people lining up to leave this week, or any of the 600 planning to go next week, have second thoughts because of the Cullen Budget?

Of course they won't.

There is nothing in the Budget which offers the promise of something better ahead for New Zealand families. There is nothing which will make it less likely that your children and grandchildren will find their futures across the Tasman.

And the great tragedy is that if ever a Government had a chance to change the game, this Helen Clark Government has had that chance.

And they have blown it.

Tinkering with the idea of inflation-adjusted tax thresholds in the future is an insult to all those hard-working New Zealanders who have been savagely over-taxed in recent years. A derisory 67 cent per week tax cut for many, three long years down the track. We can do better than this, and New Zealanders deserve better than this.

National will bring in a tax system that rewards enterprise, rewards skill and rewards hard work. We will lessen the burden on the hundreds of thousands of middle-income families who, under the policies of the current Government, are taxed as if they are the new rich. These policies will be announced within the next few weeks and will be unashamedly aimed at mainstream New Zealand.

I announced yesterday that if I have the privilege of leading a government after the 2005 election, it is my intention to bring down a further Budget before Christmas. That document will set out the substantial tax cuts that New Zealanders can look forward to next year.

I did so because May 2006 is simply too long to wait for a Budget that signals a new sense of hope and opportunity for New Zealanders.

And the reason for that goes right to the heart of our policy.

Helen Clark and Michael Cullen have been quick to portray tax cuts as a policy purely designed to attract political support.

Well, I earnestly hope that our policies do attract political support, and lots of it.

But the reason that New Zealand needs lower taxes in 2005 is that lower taxes are the key to the spirit of enterprise and innovation that will get this country moving back towards parity in incomes with Australia.

If you have lived your life in the safety and security of a university common room and a taxpayer-funded salary, as is the case with a number of senior figures in the current government, then the point may not be understood.

But I am sure that I have no reason to explain to an audience like this one that people with skill and talent and commitment to hard work - the very people who are the economic backbone of this country - are highly marketable in today's world.

If we don't value them, some other country certainly will, as Treasurer Peter Costello has made very clear in his recent Australian Budget.

So I want to send the earliest possible signal to those New Zealanders upon whom our hopes of better economic performance will rest - those thinking of leaving and those who have already left - that this country does value them.

I want them to know that while we cannot at this point match the salary packages which might be available in some other countries, we are committed to giving them a fair go as we re-build this country together.

A fair go is precisely what New Zealanders are not getting now.

I have made the point before that despite the benefit of the very best international trading conditions this country has enjoyed for many decades, and despite reasonable levels of economic growth as a consequence, hard working New Zealanders are, in real terms, no better off.

The reason for that, of course, is that, through a mixture of tax increases, new taxes and the effects of bracket creep, Michael Cullen and Helen Clark have trapped all of the gains for the government.

That may seem hard to believe, so let me repeat the point in another way. Over the last five years, average household incomes have increased, but the tax paid by the average household has gone up more quickly. As a consequence, average household incomes after tax have risen by exactly the same amount as prices have increased. In other words, after tax and after inflation, the income of the average New Zealand household hasn't increased at all over five years!

Or look at the comparison with Australia. In 1999, the gap between after-tax wages in New Zealand and after-tax wages in Australia was, on average, just over $5,000 over the year. By last year, the gap was almost $9,000! Is it any wonder that New Zealanders are lining up to cross the Tasman?

There is a most revealing table on page 80 of the Budget, which has thus far eluded most of the commentators.

This year, the Clark Government is projecting that total Crown expenditure will be 39.5% of GDP.

In 2007, the tables show us passing the 40% mark.

And in 2009, Michael Cullen's own figures show Crown expenditure reaching 41% of GDP.

Put simply, the central government and its agencies will account for nearly 40 cents in every dollar spent in New Zealand this year, and even more over the next few years.

And they will do so at the cost of denying New Zealanders who work hard, gain new skills, or take a risk, a fair return on their efforts.

They will do so at the cost of sending a clear and unmistakable message to thousands of our best and brightest New Zealanders that, if they want to get ahead, they should look across the Tasman.

The Labour Party will, of course, attempt to portray any tax reductions as being funded by cuts to services.

Let me reassure you that there is plenty of scope for the government to give New Zealanders some tax relief while still making improvements to key public services, like health and education.

Suggesting otherwise is to argue that recent increases in government spending on health and education have all provided valuable benefits to the community. But of course that is patently not the case.

In health, we have seen an enormous increase in bureaucracy, with 21 DHB bureaucracies and 78 PHO bureaucracies, to say nothing of the increased staff in Wellington at the Ministry of Health. And despite the increased expenditure on health, we have seen little increase in the number of operations performed, the continuation of long waiting lists, and aged care facilities under desperate financial pressure.

In education, we have seen a total shambles in the implementation of NCEA, with pupils, parents, and employers all unsure what the new qualification means. One of the many tragic consequences of this situation is that employers are increasingly looking only at the secondary school a job applicant went to, rather than the qualification he or she obtained at school. There has always been some tendency to regard some schools as better than others, but the appalling way in which NCEA has been introduced inevitably makes this situation worse. Good value for money? Hardly.

Or think about tertiary education - and the Cool-IT courses, the twilight golf courses, the homeopathy for pets courses. Or think about the Wananga, which last year absorbed almost a quarter of a billion dollars of taxpayers' money, up from just $5 million in 1999. Or think about the Tertiary Education Commission which, in theory, is responsible for ensuring the Government is getting good value for money in the tertiary sector - at an annual cost of some $40 million. Good value for money? Hardly.

I am a strong believer in a taxpayer-funded health and education system, but the extraordinary profligacy of recent years makes me convinced that there is scope to deliver high quality services with substantially less waste than in recent years.

As many of you know, I left the Reserve Bank to enter Parliament just three years ago.

I did so because I was intensely frustrated that this country was simply not facing up to the challenges which it must face if it is to provide an attractive home for my children and grandchildren.

Let me make it clear that I have no problem with New Zealanders going overseas to further their education or their experience. I spent nine years overseas myself, in Australia and the United States.

But I want our young people to feel they have a real choice about whether to come back or not!

I want them to feel that they can give themselves and their families the very best opportunities on the planet here in New Zealand - with incomes which are as good as they can get elsewhere, with a tax system which rewards hard work and initiative, with an education system which ensures that every child gets the very best education of which they are capable, with a welfare system which provides support to all who need it but to none who do not, in a society where our families are safe and secure from all who would harm them, and where everybody, regardless of race, is treated with equal dignity and respect.

Over the last three years, my sense of frustration has grown more acute, as I have watched the Clark Government presiding over the greatest opportunity we have ever had to invest in a better future, and deciding to put that future in the "too hard" basket.

Given the opportunity to put in place policies that would substantially increase our economic performance, and start closing that gap with Australia, they walked away from that opportunity, and in doing so, they abdicated their responsibilities to future New Zealanders, to my children and to yours.

Stop the world, New Zealand wants to get off, was the cry from the 2005 Budget.

Well, ladies and gentlemen, I lead a party that does not want anyone to stop the world so that New Zealand can get off.

We believe that we can look our Trans Tasman cousins, or anyone else for that matter, in the eye and compete on even terms.

We have confidence in the thousands of New Zealanders who want to work hard to get ahead, and see their country get ahead - New Zealanders who have aspirations and dreams for themselves and their families.

And we are utterly determined that in a few weeks' time those New Zealanders will have a government that shares those aspirations and those dreams.

ENDS

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