New Zealand Executive Government Speech Archive

FRIDAY 24 MAY 1996
ADDRESS BY
RT HON J B BOLGER
PRIME MINISTER
POST-BUDGET BREAKFAST 1996
WELLINGTON TOWN HALL

Mr. Chairman, Minister of Finance, breakfast attendees in Auckland, Wellington, Christchurch and Dunedin. I again welcome the opportunity to speak to this post-budget breakfast session and, courtesy of the sponsors, to speak to audiences in our major cities. 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 that 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. For example, towards the end of June we will have the Gross Domestic Product figure for the March quarter which will no doubt confirm the economy is growing slower than at its peak 12 months ago.

It will also confirm that the economy, at the low end of the cycle this time, with a growth rate of around 2.6 per cent, will be growing closer to where it normally does at the peak of the cycle. This will therefore be a positive figure and certainly a great base to work from. In the middle of July we will have the Consumer Price Index for the June quarter, again on forecasts we can anticipate that underlying inflation will be close to the top or even through the 0-2 per cent band. Again in July we can expect the Balance of Payments figure for the March quarter which will certainly show a deficit on the current account, almost certainly slightly higher than the deficit in the December quarter of $3.8 billion.

This again almost certainly will be all covered by inward investment so it is not the issue it was in earlier years when the Government of the day had to borrow to cover the deficit. As a matter of interest, when Singapore was growing strongly in 1970s it ran current account deficits of more than ten per cent. We will have the June Household Labour Force Survey in August which, on forecast, will again show yet another record in the number of jobs but unemployment, as a percentage, possibly up a fraction from the present 6.2 per cent due to greater labour market participation. Always a good sign.

In September we will have the June GDP figure which again will certainly confirm that the economy is growing positively and in October, just before the election, we will have the June Balance of Payments figure. Again this will probably show a further slight increase in the deficit. P> All of these economic 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 1975-1990, that the record number of jobs we have now 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.

There's been much debate in the political arena on the issue of economic sovereignty. All New Zealanders want to know that their sovereignty is secure and this will certainly be reinforced by the knowledge that government net foreign debt is forecast to be nil at the end of the 1996/97 year, so we will no longer be beholden to the gnomes of Zurich and elsewhere. New Zealand's net worth was positive for the first time at the end of December 1995. 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 economy was well positioned to announce the largest reduction of personal taxes ever undertaken by a New Zealand government.

Incredibly the Labour Party stated yesterday that the tax cuts are irresponsible. I totally disagree. Ordinary 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. 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 to international bankers 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 policies 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 12th October.

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. A three-headed coalition of the Alliance, New Zealand First and Labour would be incapable of giving stable leadership or provide coherent government. The 1996 Budget produced by Bill Birch shows how balanced policies bring success. We have great plans for the future which I look forward to discussing with you after next year's Budget.

Thank you.
Ends

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