PM shows where to from here

The Prime Minister’s Statement to Parliament  leaves no doubt that the government is serious about the aspirational goals on which it campaigned.

John Key spoke of the need to maintain tight control of spending.

We are keeping a tight lid on new spending over the foreseeable future, which will enable us to get the budget back into surplus and keep public debt under control. Tight control of spending will also help to keep pressure off interest rates, which means lower mortgage costs for New Zealanders.

Overall, our economic policies are aimed at shifting the economy more towards exports and productive investment, and away from consumption and borrowing.

2010 will be about putting in place policies to grow the economy and create sustainable new employment, not just this year but over the longer term. This Government was elected to achieve a step change in our overall economic performance and that is what we intend to deliver.

The Government’s other priority this year is to make significant reforms in social sectors like the welfare system, education, the justice system, health and state housing. New Zealanders deserve a future with less unemployment, welfare dependence, crime and all the social problems that go along these. To secure this brighter future we have to get to grips with some of the big issues in these areas which have long been left unaddressed.

We owe that not just to the people who receive these important public services, but to all New Zealand taxpayers.

Government priorities include include  a growth enhancing tax system:

We need a tax system that creates incentives for people to work hard, improve their skills and get ahead here in New Zealand.

And we need a tax system that encourages saving and boosts the productivity of investments.

In both these ways, the tax system helps to drive economic performance and create jobs.

Furthermore, we need a tax system which is not difficult to comply with or administer, which is regarded as fair, and which limits opportunities to divert income and reduce tax liabilities.

In other words, we want people to pay their fair share of tax. Fairness is a very important consideration to this Government. In working through reform options we are keeping the equity of tax changes squarely in mind.

He also spoke of promoting economic growth through science and innovation, trade, better regulation and unlocking resources:

New Zealand’s natural resources have the potential to significantly raise New Zealand’s economic performance.

It is a little-known fact that in 2008, New Zealand’s third-largest export earner was oil. Last year the Crown received nearly $1 billion from petroleum production with $543 million being from royalty payments alone. This is revenue that has benefited all New Zealanders.

During this year the Government will progress an action plan to unlock New Zealand’s petroleum potential. Estimates are that the petroleum sector could generate many billions more in export revenues by 2025.

There is also extraordinary economic potential in the mineral estate residing in Crown-owned land.

Mining in New Zealand uses just 40 square kilometres of land, less than 0.015 percent of our total land area. The export value of that land however is $175,000 per hectare, which makes mining an extremely valuable use of land.

The Government will shortly be releasing a discussion document for public consultation on potential changes to Schedule 4 of the Crown Minerals Act. Schedule 4 is the part of the Crown Minerals Act which prohibits mining or prospecting on specified areas of Crown land.

The discussion document will recommend that some areas of Crown land be removed from Schedule 4 and in addition that some areas currently not in Schedule 4 be added to it.

Notwithstanding the public consultation process, it is my expectation that the Government will act on at least some of these recommendations and make significant changes to Schedule 4. This is because new mining on Crown land has the potential to increase economic growth and create jobs.

I know some people have expressed concern about increased mining but I can assure New Zealanders that any new mines on conservation land will have to meet strict environmental tests.

Moreover, the Government is also proposing to establish a new Conservation Fund, potentially drawing on royalty revenue from mining operations on Crown land. The Conservation Fund would resource special conservation projects around the country. That means that if there is an increase in mining activity, New Zealand’s natural environment would also be improved.

This will upset people who think every square centimetre of conservation land is pristine and beautiful. It’s not. If some which isn’t can yield minerals without damaging the environment it is in our interests to allow that to happen.

I was also pleased to see the emphasis on water:

The Government will also take action this year to remove particular regulatory roadblocks to water storage and irrigation in Canterbury. This will be in addition to the work already being carried out by the National Infrastructure Unit and the Land and Water Forum on progressing water storage infrastructure throughout the country.

Overall, the Government is committed to ensuring that water storage and irrigation projects which meet environmental standards, and which are good economic propositions, can happen in a decent time frame.

The Government will introduce legislation this year to change the regulations governing the aquaculture industry. This is an area where the current regulations are stifling all prospects of growth in the sector.

Reform of the benefit system is another priority:

I need to be able to look taxpayers in the eye and assure them that their hard-earned wages are not being used to support those who lack the will or desire to work as hard for their living as their fellow New Zealanders.     

There are many people on a benefit who will realistically never be able to work, and the welfare net will continue to support them.

But for most people, a benefit should only provide temporary support until they can return to work. In fact there is little chance of a better future for beneficiaries and their children unless they do come off a benefit and work for an income. Long-term welfare dependency imprisons people in a life of limited income and limited choices.

Our benefit reforms will therefore be squarely focused on helping people get back to work as soon as possible, and ensuring that they do so.

He backs up the benefits of this with statistics:

These welfare reforms will have positive effects not just for beneficiaries themselves but for the sustainability of the welfare system.

If, for example, just 100 DPB recipients were to move off their benefit and into work, the welfare system would save close to $10 million over their lifetime. If we were to assist five percent of the sole parents whose youngest child is aged over six years into work, we would save almost $200 million over the next 10 years.

Concern over the increasing welfare bill has prompted the government to  appoint a working group of experts to recommend ways to reduce long-term welfare dependency and thereby reduce the welfare bill future generations will face. 

Kiwiblog gives a summary or the speech and says:

Overall pretty encouraging that the Government is going to pursue some economic reform that will increase the size of the national cake, rather than merely get obsessed with how to divide it up as the left do. If we grow the cake, then everyone benefits in time. . .

. . . Overall I give the package a solid B. If the GST was 100% confirmed (I judge it 90% confirmed) and they had gone for land tax also, I would have gone for a B+. And if they left out the nonsense about the number of liquor outlets being a problem I may have even gone for an A- after a few rum and cokes 🙂

Colin Espiner says: 

Overall, I’d give Key an Achieved, plus a grading of “above the National standard”. There’s still a lot left unsaid, though, and the proof of just how radical National is prepared to be this year won’t be known until May.

4 Responses to PM shows where to from here

  1. Tired Farmer says:

    John Key at his best.I agree with Cactus Kate and her description of the proposals. “Smile and Wave”.Should we add so long and goodbye to that?


  2. murrayg1 says:

    Key is between a rock and a hard place. Helen Clark mentioned ‘sustainability’ (the opposite of which is unsustainability – think about it), then went silent. It would have been polled, and looked like political suicide.

    The problen is that we have a populace conditioned to believe in economic growth forever (thus they can presumably dream of ‘improvement’ from their current situation) and we’ve hit the wall.

    There is no ‘doubling time’ left, and the pathetic best they can come up with is to divvy up what is under the Doc Estate, and carve up the sea-space a bit.

    So sad.

    It’s time our media stopped quoting economists (those folk were just trained to address a passing phase) and to ascertain the physical realities.

    Then maybe we would have an informed populace, and they in turn might vote for their children’s chances, at the expence of having themselves ‘coming out better off / never having felt better / everyone getting a bargain – and all the other brainwashing they get bombarded with in the ad breaks.

    Key is clearly the last expression of a dying phase – and the sooner we get to the new one, the better.

    A sustainable one.

    One we can hand on to our kids, and they to theirs.

    Digging up finite resources is a bankrupt philosophy. Morally and mentally.

    A step-change? Ha. Cry, beloved country, more like.


  3. Red Rosa says:

    No wonder JK can smile and wave. Those tax cuts will give him even more cash for holidays overseas!


  4. murrayg1 says:

    Actually, Labour is equally as myopic. They too tout growth.
    Might have been the correct thing socially when emerging from the dark satanic mills and into the John A Lee era, but we are facing the end-game of a species (ours) in overshoot.
    Who gets what share of the cake is irrelevant – there isn’t enough cake to go around now.
    We either face that as a society with maturity, or we fight over that which remains. I prefer the former.
    Regardless, it means that Goff is as irrelevant from here on, as Key.
    A plague on both their houses.


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