3. Dr RUSSEL NORMAN (Co-Leader—Green) Link to this
to the Prime Minister
Does he stand by his statement “… we can use this time to transform the economy to make us stronger …”; if so, does this transformation involve an economy that uses fewer natural resources and produces less pollution?
Rt Hon JOHN KEY (Prime Minister) Link to this
I stand by my full statement, which was “We don’t tell New Zealanders we can stop the global recession, because we can’t. What we do tell them is we can use this time to transform the economy to make us stronger so that when the world starts growing again we can be running faster than other countries we compete with.” To the second part of the member’s question, I say that this Government thinks the country should be making the most of its natural resources, but obviously that needs to be balanced against environmental considerations. I note that the Green Budget Paper 2011 actually takes a similar line, arguing for more efficient use of natural resources to help grow the manufacturing and agricultural sectors of the economy.
Why is he adding around $800 million to the deficit to subsidise free allocation of units under the emissions trading scheme, when a fair price on carbon would both help balance the Government’s books and create the right incentives for the economy to transform to a more sustainable footing?
The first point I make is that this Government does have a fair price on carbon. The second point I make is that New Zealand as a country signed up to an international agreement to maintain emissions at a 1990 level. What the Government did in putting together the emissions trading scheme was to reflect the fact that those property rights of those credits that are earned by foresters should stay with foresters. The reality is that where a company exceeds its 1990 levels, then it pays itself for those emissions and those credits. It can either choose to reduce its bottom line or pass that on to the consumers of New Zealand.
Does the Prime Minister agree with the OECD, which says that we should strengthen the price signals in the emissions trading scheme in order to protect our environment and the integrity of our “clean, green” brand?
I think this Government has always taken a balanced view in terms of economic growth and caring for and maintaining the environment.
I raise a point of order, Mr Speaker. I agree I was asking an opinion question, but it was about a specific report by the OECD, and I do not know that the Prime Minister addressed that particular issue.
Mr SPEAKERI thought the member asked whether he agreed with something and I thought the Prime Minister gave the impression that he agreed, pretty much, with what the member was highlighting in his question. I might be wrong on that.
Has the Prime Minister read the latest OECD country report on New Zealand that highlights our inefficient use of natural resources like water, and why will he not consider a resource charge on commercial water use to raise some revenue for the Government while giving a price signal regarding the efficient use of water?
From memory, I have read the OECD country report. The Government is taking steps towards a more efficient use of water. That was the aim of the National Policy Statement for Freshwater Management and also the work of the Land and Water Forum. The Government has signalled that there is more work to be done there, and the member makes a fair point. Water is a very critical resource for New Zealand, we can grow our economy if we use it wisely, and we will need to think about ways to ensure there is efficient use of water while maintaining both its quality and the river flows in general.
Why is the Government ignoring the advice of the OECD, the IMF, and the Savings Working Group, all of which have found that New Zealand is an outlier in not having a comprehensive tax on capital gains, the absence of which undermines Government revenue, as well as the competitiveness of the productive sector because all the capital flows into the housing market?
The first thing I will say is that this is probably not the week to be quoting the IMF. The second thing I will say is that if one looks at the Tax Working Group and its analysis of a capital gains tax, one will see that the Tax Working Group went on to say that on balance the majority of the experts did not agree with the capital gains tax, because of its inefficiency and its difficulty to apply. Once one takes the domestic family home out of a capital gains tax, it becomes a more inefficient tax.
I raise a point of order, Mr Speaker. The Prime Minister may have misheard me. I said the Savings Working Group, not the Tax Working Group. I acknowledge that the Tax Working Group did not come down on the side of a capital gains tax, but the Savings Working Group did.
If the member is absolutely certain that that is what he said—I thought I heard what the Prime Minister answered. If the member wants to repeat his question—
Why is he ignoring the advice of the OECD, the IMF, and the Savings Working Group, which have found that New Zealand is now an outlier in not having a comprehensive tax on capital gains, the absence of which seriously undermines Government revenue, and also directs capital into the non-productive sector, the housing sector?
I do not think this is the week to be looking closely at the IMF, and I prefer the advice of the Tax Working Group to that of the Savings Working Group.
Why is the Government risking a double-dip recession due to spending cuts, and a credit downgrade due to record borrowing, when raising some targeted revenue avoids both of these dire consequences and shifts the economy on to a more sustainable footing?
The analysis from Treasury is that, far from risking a double-dip recession, the Government is putting the economy in a very strong position to grow both real after-tax wages and the employment levels in New Zealand to get the country back into surplus and to deliver an economic base from which New Zealanders can enjoy a brighter future.
I seek leave to table the Green Budget Paper 2011, which lays out five costed initiatives that the Government can take to reduce Government debt and shift the economy to a more sustainable footing.