NZ Current Account Deficit NZ Current Account Deficit CREDIT: Labour Party
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Overseas debt:  It's mainly private Overseas debt: It's mainly private CREDIT: Labour Party

Speech: Changing Gear – A new economy and fairer society

Tuesday 21 August 2012, 2:41PM
By Labour Party

David Parker  |  Tuesday, August 21, 2012 - 10:41

Good evening.

Thanks so much for inviting me to your central Auckland hub meeting.

I am heartened by so many of you turning out to hear about Labour’s economic plan for our country.


This evening I would like to share our plan for a new economy and a fairer society, which we will roll out when a Labour led government is elected in 2014.

I need your help in finessing this plan and I encourage you to provide feedback via your LEC and your regional rep. 

We are still developing aspects of the plan as you will hear. But major parts of the framework are ready to go.

It will be no surprise to many of you when I say that there are serious issues facing NZ right now.

We have a National Government that neither has an adequate plan nor the political will to tackle these issues.

In stark contrast Labour has a proud tradition of tackling problems head on and I can assure you that is a tradition we intend to uphold. We have the political will to bring about change.

Labour is a progressive party. The party of change. The party of the future. The party that imagines a better tomorrow.

We've always rejected the idea of being in power for its own sake.

And in contrast our opponent is a conservative party, more or less satisfied with the way things are.

Both have a long history.

It’s always up to us to make the case for why change is needed, and why the status quo isn't working.

As Labour’s Finance spokesperson it is my duty to lead the finance team which takes care of one of the main drivers of our society – the economy.

I want to be clear to you all; Labour will challenge and change deeply rooted orthodoxies passed their use by date. One of these is monetary policy. Another is capital gains.

There are some fundamental changes that must happen if we are to grow jobs, earnings, productivity, and savings, and halt the slide to increasing inequality.

What are the top targets that Labour will address?

First up has to be growing the economy.

Our economic pie simply has to grow in order for us to be able to deliver the kind of society where our children and grandchildren want to stay, work, and play,  and contribute to our society, not Australia’s.

Over 150,000 NZers have departed permanently for Australia under National. 53,000 last year alone. Four out of ten - 40% - are between 18 and 30. When you reflect on why so many twenty-something’s are giving up on New Zealand and putting their shoulder to the wheel of the Australian economy, you realise we must change.

Our economy needs to delivers living wages, world class education, and health, a clean environment – and hope.

An economy and society with a secure working population allows the political support and the economic means to stand with our vulnerable.

So how do we go about growing the pie?

A government has at its fingertips levers only it can pull - to change the settings that stimulate growth and opportunity.

Full employment is a hugely important goal and one that I believe we should aim for. The last Labour government helped achieve the lowest unemployment in the world, and we can do it again.

Building a society which strives for full employment, with a vast middle in good jobs, a fair share of assets, and a high degree of social mobility, is the key to economic equality and a core purpose of Labour today.

Of course not everybody can be Einstein, but New Zealand needs better paid and more interesting jobs.  We need jobs which increase the productive output of our country and pay better wages, with the opportunity for career advancement.

And in order to create these jobs we need to focus our attention on

  • Transforming more of our traditional products to create additional value
  • Rebuilding our manufacturing sector – no western country can be prosperous without a vibrant  and innovative manufacturing and processing sector, pushing towards higher value products.

What makes manufacturing so important?  Modern manufacturing is clean and innovative. Swedish economist Goran Roos and others have calculated that every dollar of turnover in manufacturing generates $1.74 turnover in the rest of the economy. That is not a multiplier based on wages being respent. It is a direct contribution to other parts of the economy.

Every manufacturing job produces many more jobs downstream. The designers of products, the makers and suppliers of equipment, the technicians and trades who install and operate them, those who service them, who supply the raw materials or sell what is made. Well-paid jobs.

The multiples for manufacturing compared to say our tourism industry are much, much better. Manufacturing, including but not limited to further processing of our wood and fish, is vital to the high wage growth path.

Labour will rebuild this sector.

We will require all government agencies to purchase New Zealand manufactured goods and services when appropriate. We all know what happened with our trains, which led to the loss of jobs and skills at Hillside, but did you know the ICT sector recently requested the National Government to give them a look in with government department ICT software and hardware purchasing? They were rebuffed. How stupid.

This is one of a number of incentive based approaches we will be looking at to support the manufacturing and high value sectors.

We will also encourage firms prepared to invest in R&D, training and the sophisticated equipment needed to improve productivity and grow our exports.

David Cunliffe has recently visited Denmark which, like South Korea, has used successful strategies over many years to deliver a dynamic and fair economy. 

The Labour Party has invited Goran Roos to our conference in November to discuss the policies needed to achieve success here. 

We have advanced a number of ideas. Some work at the investor level, others at the enterprise, regional, or the sectoral level.

I gave a speech on this to the EPMU last week. There are some copies here, which you are welcome to take if interested, or look on the web.

We are keen to hear your feedback and ideas of how we can best go about redeveloping our manufacturing base.

We need to ensure the support we are prepared to extend maximises both exports and higher wages.

We need to improve the value of what we make and sell to the world, so that for the first time in four decades we start paying our way in the world by exporting enough to cover the costs of our imports and interest.

We must broaden the base of our exports. That requires more high value manufacturing exports. We can’t succeed off the back of our primary sectors alone.

But as you all know, our exporters are facing difficult times.

They need our help.

There are some things only a government can do.

New Zealand needs a government willing to take the decisions needed for us to progress. Willing to pull the levers open to a government.

Labour is willing and knows the levers we want to pull.

Let’s take monetary policy.

Time and again export businesses say their greatest challenge is volatility in and overvaluation of our currency.

The IMF agrees our currency is overvalued. Our currency is one of the most traded in the world, and is volatile against currencies except Australia. It is sustained at uncompetitive levels. This is often the difference between profit and loss. Between employing, exporting and not.

In my view we face competitive devaluation abroad and ignore it at our peril. Other countries are competing to increase their exports and jobs by devaluing and manipulating their exchange rates.

But New Zealand operates monetary policy as if the last two decades didn’t happen.

Labour has pulled out of the previous consensus on monetary policy.

That was a big step.

We have already announced a number of changes.

In the coming weeks I am meeting with a number of global experts on monetary policy and exchange rates, in order to refine our policy in this complex but important area. 

I make this commitment; our government will focus on exports and export jobs.

We will do everything in our power to ensure the settings around exchange rates and inflation do not prejudice New Zealanders and the exporters we rely upon to earn our way in the world.

What we are really talking about is a change of direction.

Let’s talk about tax – always a big point of difference between the National and us.

We need pro-growth tax reform.

Currently the tax bias in New Zealand favours speculation in land and buildings, to the detriment of investment in productive businesses and jobs. 

Some of New Zealand’s wealthiest people pay lower rates of tax than less wealthy New Zealanders, which is plainly unfair.

Labour will introduce a capital gains tax. This aligns us with the rest of the developed world. It broadens the tax base and over time generates $3 billion pa additional revenue.

It will also direct more of our precious investment capital into the productive export sector, and sustain well-paid jobs.

I want to talk about wage growth because it is implicit in the previous discussion on building a dynamic economy with high value jobs that we intend to lift wages.

Labour wants to make it clear that we will not only raise the minimum wage to $15 an hour but we stand for a living wage. The UN Declaration of Human Rights gives prominence to freedom of association – the right of workers to join unions and the right of unions to better negotiate their share through collective bargaining. We, together with unions, will ensure workers get their fair share.

None of this is tax and spend or cutting the pie differently, or any of the tired old clichés thrown at us by our opponents.

Our record of reducing government debt under Helen Clark and Michael Cullen was second to none. We were truly Keynesians, which is a major reason this country has not been as badly affected by the global financial crisis as many others.

But our private debt levels and external deficit are a long term concern. 

We need to save and Labour proposes to progressively build a Universal KiwiSaver scheme of the type which has so clearly benefited Australia and their workers.

Superannuation – if we don’t change the current age of entitlement, future governments will cut the pension, because it will become a choice between young and old.

In just four years’ time super costs close to twenty times the unemployment benefit. More than all benefits combined. More than the total spent by government on education - that’s more than pre- school, primary, intermediate, secondary, tertiary and trade training combined. How can this be right?

Labour is committed to a fair and sustainable superannuation scheme. We plan to gradually adjust the age of entitlement to 67 over a number of years, meaning those currently nearing retirement will not be affected. 

It must be fair, and Labour will make sure those who can’t work passed 65 in their normal occupation and need super will get the equivalent from 65.

I mentioned earlier the need for New Zealand to stay in control of our own destiny.  What I mean by this is the need to tighten the rules around foreign ownership around land and strategic infrastructure assets. 

Globalised trade is averaging the price of many goods and services. But asset inequality is increasing. This is sometimes the result of less egalitarian economic settings or the state control of trade surpluses.

Labour does not want New Zealand to be a country where our farms are priced beyond the means of New Zealanders, and we become tenants in our own country. Where the only people who can buy the likes of a farm have inherited large amounts of wealth or brought it from overseas.

We are amongst the world’s best farmers. Overseas ownership will not increase NZ’s output, but will reduce social mobility and stop sharemilkers from graduating to being farm owners. Labour will clamp down on the sale of farmland to overseas purchasers.

It is clear we must do more to protect our planet.

We must protect our rivers and lakes so they are clean enough to swim in.  We must stop killing the albatrosses and petrels we have guardianship of for the world.

Climate change must not be ignored. We must continue the push towards more renewable electricity, which Labour did so much to advance when last in government. Our emissions trading scheme is well designed. Half our emissions come from agriculture. National has kept them out of the ETS. You currently cross-subsidise agriculture. This hurts other sectors of the economy like forestry. The ETS should be extended to agriculture. Labour will.

Let’s be honest, of course the full benefits of these changes will not all be felt immediately. But they will start making a change from day one.

I have outlined the important blocks for rebuilding a dynamic, outward focused economy, delivering a fairer more prosperous society.

Wages will go up.

More people will be able to save.

Our manufacturing sector will have a reason to stay in New Zealand and will benefit by the active support of a Labour government.

Our exporters and entrepreneurs will see our country as a place to invest and thrive.

And finally, our kids will want to stay because there are good jobs to be had, fair wages, the schools are first class, the health system is great and the environment is treasured.