New Zealand Executive Government Speech Archive

Ladies and gentlemen, thank you for inviting me here today to talk to you. In many ways it's been quite a week - on Tuesday I announced the date of the General Election and yesterday afternoon Finance Minister Bill Birch introduced this year's Budget. An excellent Budget which balanced competing demands between additional social spending, tax cuts and debt repayment.

So an interesting week so far and we still have the rugby Super 12 final tomorrow on which to speculate. Speculation on the election date is over. In selecting October 12th I did so for the simple reason that it was consistent with my long-stated view that the Government should go its full term and that the election should be held in October or November. It also removes any suggestion that the Government was seeking an earlier election because some of the economic statistics coming through in October could be difficult.

There are a number of key economic statistics that will come out in the 20 weeks before the election. All of these statistics and many others will clearly show one very important thing. That is; that the economy is growing very strongly compared with the 15 years between 1975 and 1990; that the record number of jobs we now have in New Zealand is still being added to; and that the New Zealand economy, which is now 25 per cent larger than it was in 1990, will, with present policies, continue to grow year on year.

Because our economy is so much larger than it was 5 years ago, even lower percentile increases in GDP still mean very substantial additional levels of economic activity. The OECD report released in New Zealand last week commented that New Zealand is projected by the Secretariat to remain one of the fastest-growing economies in the OECD. The report made some other comments which bear repeating. New Zealand's economic performance continues to be impressive. The current expansion has already lasted longer than previous ones and, in a marked break from past trends, GDP growth in recent years has outpaced that of other OECD countries."

Further on the report states, "while other OECD countries have pursued similar policies, few, if any, have done so in the context of such a coherent overall framework, stressing predictability, transparency and accountability." Those are observations by the OECD that all New Zealanders should be proud of. New Zealand now has a new electoral system. There are no free votes, no room for protest votes because they all count. The new system requires positive voting. The new system is also an opportunity for all political leaders to honestly deal with the issues. To stop the half-truths. To put forward real alternatives which can be intelligently debated by the public. If any other political party or leader has a clear alternative policy to the ones of my Government then let us debate them.

Let me give you an example. There has been much debate in the political arena on the issue of economic sovereignty. As one who leads the debate on constitutional independence I certainly want to secure our economic sovereignty. To achieve that the Government has been repaying its foreign debt. The knowledge that the Government's net foreign debt is forecast to be nil by the end of the 1996/97 year means that the Government and people of New Zealand are no longer beholden to any international banker. The knowledge that New Zealand's net worth was positive for the first time at the end of December 1995 is good news.

The strong growth in the economy, the reduction in payments in areas like unemployment benefit, the virtual elimination of government net foreign debt has all meant the Government was well positioned to announce significant new spending in the largest reduction of personal taxes that any New Zealand government has ever undertaken. Incredibly the Labour Party stated yesterday in Parliament that the tax cuts are irresponsible. I totally disagree. Working New Zealanders in my view deserve a tax cut and will get one starting 1 July this year.

All this strong, positive, economic news which has caused excitement and admiration around the world is of course up for grabs at the election in 20 weeks time. With National the largest political party in New Zealand, I am confident we will form the core of, and lead, the next Government. Not the least because, as David Lange said in Parliament only four days ago, with reference to the Alliance, Labour and New Zealand First -that "we will not get a coherent Government from that lot" and further "a Government cannot be forged out of three completely disparate groupings with different philosophies." I totally agree, but that is the risk New Zealand faces unless New Zealanders vote on the true facts and the real issues. With that in mind, I wanted this Budget to be more than a collection of statistics. I wanted a document that sets out the alternatives that the country faces.

We have done that. We have demonstrated that with judicious management it is possible to secure the future that New Zealand needs and deserves. It is a question of balance. In 1993/94 my Government achieved the essential aim of a balanced Budget. We sought in this Budget to achieve real, longterm balance among the priorities we face. You may, if you are cynical enough with election bribes, be able to buy election outcomes. It has been done in the past. But you cannot buy prosperity. You can spend income before you have earned it. But you cannot fool debt into disappearing. You cannot wish growth into existence.

And growth - real, sustained, measurable growth - is our only means of securing the future that all New Zealanders want. So it is a question of balance. This year's Budget was constructed on balancing competing demands. In one corner we have tax reductions. In another corner we have social spending. And in the third corner we have debt reduction. Let me explain each of these. Firstly tax reduction. New Zealanders must see a dividend for their work. So tax reductions worth $3.3 billion will boost their take-home pay, starting from 1 July.

All New Zealanders will benefit from the tax cuts. The household budget of middle- and low-income working families will also gain from significant increases in family support. For example; a family with two children and one parent out working earning $25,000 will be $61 a week better off by July next year. A family with three children gains $81 a week. That is both fair and commonsense. It is fair because low and middle-income New Zealand families need a break. It is sensible because when ordinary New Zealanders can maximise the benefits of working, the whole country gains.

In another corner we have social spending. We must deliver the best health, education and community services that we can afford. That is the New Zealand way. So an additional $3.7 billion will be invested over the next three years in education, training, the environment, health, family assistance and family safety. In the broadest sense, that is an investment in social security. A nation that is well educated, healthy, safe in their families and communities is secure and stable.

Take one area that is at the core of our Budget plans. Excellent education cannot be a choice for just a few. It must be an opportunity for every New Zealander. It represents nothing less than the chance to improve one's life and the life of one's children. In grabbing that opportunity, individual lives and the future prosperity of the country are lifted immeasurably. I am passionate about that. I visit a large number of schools and say without hesitation that New Zealand has a very good education system. There is no crisis as teacher unions allege. What we have is growth and demographic pressures which the Budget can, and is, accommodating.

Teacher supply needs and school property have been given top priority and are being adequately funded according to projected need. With regards to the PPTA there is a $52 million wage offer on the table for secondary teachers which is equal to a 7.4 per cent increase on the current salary bill. PPTA propaganda that portrays the Government as the enemy of public education falls very short of intelligent debate. The Government is unambiguous - its money is where its mouth is - for better schools, better paid teachers, and better teaching for students. From my perspective education, like health, the environment, safe communities, is not a luxury. These are the core of New Zealand values. We must protect and better them.

In the third corner there is debt reduction. We cannot lose sight of that priority. We have reduced New Zealand's net public debt from 52 per cent of GDP in 1991/92 to 32.4 per cent. With a further $8 billion debt reduction over the next three years we will reduce debt to below 20 per cent of GDP. That is vital. In less than 15 years, New Zealand will face the demands of a rapidly ageing population. We know that is going to happen and it would be wanton irresponsibility not to prepare for that day now by getting the monkey of debt off the country's back.

That is what our surpluses are all about. They are not money in the kitty to be thrown about according to passing whims or to try and buy votes. Creating that balance has not been easy. I would suggest that the failure to consider the broad balance is where the other alternatives fall down so badly. Most of their advocates presumably believe they are doing the right thing. But they have become distracted. They seek to apply old solutions to new realities. New Zealanders are intelligent. They want the outcomes that we are producing. So they must see the real alternatives.

They don't want to walk away from policies that have created over 200,000 jobs in the last four years. They don't want to abandon a path that will see the average New Zealander 50 per cent better off by the time today's babies turn 15. They don't want to throw away low inflation that year by year, month by month, is hauling back the advantage we lost during years of high inflation. They don't want to jeopardise excellent health and education services, sound safe communities, real opportunities to work and prosper. But between now and the election New Zealanders will be assailed from political quarters telling them there is an easier way, a quicker fix.

The alarms our opponents raise will try to distract them from the balanced picture. Unfortunately politics is often not good territory for rational discussion of complex issues. Some of our opponents assume that New Zealanders can be taken for a ride. That they can be seduced by partial pictures, worn-out solutions. Every half-truth has a hidden cost. Labour's spending plans, for instance, would burden the country with $9.1 billion more public debt before the turn of the century. The servicing of that extra debt means one thing - higher taxes.

It would take $3 million every day to pay the interest. That means $3 million a day that can't be spent on education or elsewhere Labour was founded on the fair delivery of social services. Its equation has gone wrong. It has lost touch with the reality of the world we now live in. So its promise of more spending now simply doesn't work. It is a tragically expensive half-truth. Or take the Alliance's plan to erect barriers around the New Zealand marketplace. Presumably it is well-meant.

The Alliance says it wants to protect New Zealand workers. It appeals to a constituency that feels besieged, and it believes it has an answer. Have they looked at the facts? The fair and open economy actually works. As Bill Birch put it in the Budget, you don't produce a top team by locking it in the dressing room. You send it out onto the field, pitched against the best in the world. Between 1991 and 1995 when New Zealand manufacturers were exposed to open competition, they raised their real value 44 per cent faster than the rest of the economy. Exporters facing tough global competition produced new jobs at nearly twice the rate of those with domestic sales only.

That is the new world we are working in, not behind barriers but in open competition with the world. The old barrier mentality doesn't work any more. In trying to sell it, the Alliance is deceiving the very people it claims to protect. Either the proponents of some of the ideas jostling for space in the political arena are misguided or they are deliberately deceiving New Zealand. Being charitable I believe they are misguided. They have not thought out the consequences of their policies - the sheer inadequacy of their suggestions.

They have become distracted and they have not caught up with today's world. I think you all understand the balance I have been talking about. It is self-evident - but only if we demand to see the full picture, only if we look to the solutions that actually work in the late 20th century. New Zealanders deserve real answers. Anything less is cheating them. Deliberate or not, the false answers are theft. They would deny New Zealanders the right to prosperity and well-being.

We have come though a demanding decade. We would not merely throw away the gains if we looked to old answers and half-truths now. We would waste a generation catching up again. Put bluntly, the risk is that the recent very successful economic performance will collapse if irresponsible coalitions seek to outbid each other to see who can spend the surplus first and force New Zealand back down the dreary path of debt, higher interest costs and loss of sovereignty once more.

In the October 12th election, the first under MMP, an angry or frustrated vote could mean the difference between continuing, stable, far-sighted government policies or a return to the black past of inward xenophobic policies that deny New Zealanders the opportunity to grow and enjoy life. I believe a lot of New Zealanders have yet to realise the enormous difference in the level of responsibility required in voting in this first MMP election.

Who remembers Bruce Beetham or Social Credit with their strange economic theories based on printing more money? 15 years ago the political flavour of the day was Social Credit and Bruce Beetham, with Social Credit receiving 31 per cent support in the polls and actually receiving 21 per cent support of votes in the election. This time with New Zealand First there is a similar level of support at this stage but there are big differences possible because of the change to the voting system. The similarities are that the policy of both parties are really quite irrational and are designed only to gather in disgruntled voters from across the political spectrum. The big difference is that under the old voting system Social Credit gained 21 per cent of votes but only gained two members in Parliament whereas under MMP 21 per cent of votes would produce 25 seats in parliament.

Protest voting in 1996 could change the face of New Zealand forever. There never was a free lunch and there are now no free or protest votes - they all count. Business leaders and leaders in all other fields across the nation need to reflect on that and not be complacent because New Zealand is going to face a real test of its character on October 12th. The overarching question is, are we going to continue our tradition of being a liberal outward-looking democracy that it is inclusive, or are we going to campaign on unspoken fears and sly innuendo?

That is the choice New Zealanders will have to make. I am proud we insisted that the 1996 Budget must offer the full picture, the real balance. It can now be judged in the months before the election. I am confident that the way ahead is sound - if we all demand nothing less.

Ends