10. Hon Dr NICK SMITH (National—Nelson) Link to this
to the Minister responsible for Climate Change Issues
What is his response to this week’s Wall Street Journal editorial “Kiwi Climatology”, which refers to estimates by the New Zealand Institute of Economic Research that the emissions trading scheme will result in a $4.6 billion annual loss in GDP, or a $3,000 cut in household annual spending by 2012, and that the Government disputes this conclusion because it assumes “… New Zealanders will be willing to take lower wages.”?
Hon DAVID PARKER (Minister responsible for Climate Change Issues) Link to this
My response is, firstly, that the writer in the Wall Street Journal has not even managed to quote the New Zealand Institute of Economic Research report correctly—
—it is on this occasion—as the figures quoted for 2012 are clearly supposed to be for 2025, so I suspect that he or she had not even read the New Zealand Institute of Economic Research report. But, more important, I would note that this is the first time that the New Zealand Institute of Economic Research model has been used in New Zealand, and it is increasingly clear that there are problems with it. I have been advised, and the New Zealand Institute of Economic Research now confirms, that the model predicts as a general proposition that if subsidies were provided to agriculture, then New Zealand’s overall GDP would increase. This flies in the face of general economic theory internationally and in the face of New Zealand’s economic history and settled economic theory for New Zealand, but it probably explains why the New Zealand Institute of Economic Research model came up with a answer that was not only counter-intuitive but also diametrically opposed to the modelling done by and for Treasury using models that had been tried and tested in New Zealand for many years.
Hon Dr Nick Smith Link to this
It is normal practice to take a question from the member opposite; that is why I was mistaken. Does—[ Interruption] I am sorry, Trevor?
Madam SPEAKERHon Dr Nick Smith Link to this
I notice that they all complain about my interjections, but they interject on me continuously.
Hon Dr Nick Smith Link to this
Do Labour’s affiliated unions share his view that the reason the New Zealand Institute of Economic Research analysis of the employment and GDP projections is wrong is that “… New Zealanders will be willing to take lower wages.”?
Hon Bill EnglishI did not. It is not a quote from me. Dr Smith has not even said that it was from me, I tell Mr English, so the member should listen. Further, the New Zealand Institute of Economic Research model did come up with a conclusion that was counter-intuitive, and everyone was scratching their heads as to why. It is actually pretty clear now that there is a fundamental flaw in it.
Su’a William SioWhat has the Parliamentary Commissioner for the Environment said about the Government’s emissions trading scheme?
The Parliamentary Commissioner for the Environment—whom the member opposite, Dr Nick Smith, has himself extensively quoted on other matters recently—has said: “The Emissions Trading Scheme must proceed, as it is an essential system for New Zealand to adjust to a carbon-constrained future and live up to our clean, green image,”.
Hon Dr Nick Smith Link to this
Is the fundamental problem here not that the Government wants the international accolades for its carbon-neutral, world-leading climate change policies when it is not prepared to be honest with New Zealand households and businesses as to how much they will pay for New Zealand to be world leading?
No, it is not true, at all, even if the member does not understand the fundamental flaw in the New Zealand Institute of Economic Research study, which has now been exposed as being the assumption that subsidies increase overall net welfare for our country. That is not just in respect of carbon policy but generally in respect of all economic policy. It is a point that I am sure Mr English well understands. That is the problem in the study.
Hon Dr Nick Smith Link to this
Does the Minister stand by his statement about the Government’s emissions trading scheme quoted on national radio: “The effect on the economy is minuscule.”, and does he really think that New Zealanders believe that we can be world leaders on carbon neutrality and on climate change with the effect on the economy being “minuscule”?
Yes. I think that any adverse effect on the New Zealand economy would be minuscule and I think that is abundantly clear. Indeed, most of the commentators now get the point—Dr Smith clearly does not—that the emissions trading scheme does not create any cost for the economy. It minimises the cost of New Zealand meeting its obligations under the Kyoto Protocol.