David Shearer's Pre-Budget Speech

Last week I took my car into be serviced. The mechanics there are good guys, skilled workers.

And they haven’t had a pay rise for four years. That’s a long time – and they know as well as the rest of us that their pay has gone backwards.

Their situation is not unique.

People around the country are working harder than ever, taking on extra jobs, doing the right thing, raising their kids the best they can.

Ask them – as I have – what they think the government’s budget means for them and they’ll say “not much”.

They expect nothing. And they won’t be disappointed.

But what they do expect is a fair deal. So when they work harder and harder they expect the Government to play its part in giving their families and communities the best start and opportunities.

So it was a pretty big kick in the guts last week to find that despite their hard work and paying their taxes, their kids will be in bigger classes at school.

We don’t need an educational expert to tell us that when you have more kids in the classroom, they’re going to get less individual attention.

At a critical time in their learning life, if a child misses out on some elementary building blocks in their development, they will never catch up.

That’s why it’s a backward step to cram more kids into classrooms.

New Zealanders work hard and expect the Government to keep its side of the bargain. If it doesn’t, that’s not fair.

That’s the sharp end of a zero budget. Where the rubber hits the road.

It’s not about Government hand outs. Nobody’s asking for them.

It’s about making the right decisions, taking hard choices and getting the economy growing.

And getting behind the people who are working hard.

A zero budget is not something to boast about.

It’s an admission of failure. A zero budget means zero growth in the economy.

Reflect on this.

The Government’s record is the worst growth record of any government in the last 50 years.

Unemployment has risen by 50,000.

More than 50,000 people left New Zealand for Australia last year – 1000 people a week. That’s the largest outflow in NZ’s history.

Nearly 50,000 more people are on benefits.

National’s excuse for all this is the global recession – it’s the problems in Greece

In fact, in some measures, New Zealand is only just ranking ahead of Greece.

My ambitions for New Zealand are a lot higher.

At this year’s Olympics I’ll be cheering New Zealand to win gold, not just limp in one or two places from the back.

And if we look beyond Europe, over the past four years New Zealand has had the worst average rate of economic growth of any OECD country outside Europe.

The other excuse, as you know well here in Christchurch, has been the earthquakes.

The earthquakes have been costly, in human as well as in financial terms.

They increased debt.

But now, even though the rebuild is way behind schedule, the insurance payouts are adding to the economy.

We have listened to many plans. The Government said the Christchurch rebuild – along with the Rugby World Cup – would be the main drivers of growth.

Then there were other plans too:

Tax cuts that would stimulate the economy – but National ended up borrowing to pay for them.

Mining - we’ve got to be more original than mimicking Australia.

Then it was going to be Australian companies bringing their call centres over here, until those companies pointed out they are only coming because they can pay lower wages here.

Now there’s the convention centre at SkyCity – funded by pulling $42 million out of the pockets of mainly problem gamblers.

And asset sales – but selling our countries assets, and losing the revenue stream leaves us worse off.

This week, in the Budget, National will say that because the economy is not growing, our country can’t afford to change.

Every year John Key predicts growth rates and every year they don’t come close to materializing.

National says there was no money last year, there is no money this year, and there will be no money next year. And therefore, they say, we can’t change anything.

I say that’s exactly why we have to change.

And that brings me to the main point: what’s really missing from the Government’s agenda.

New Zealand needs to make some really tough decisions.

And what defines Labour is that we are ready to make those tough decisions.

When the economy is not performing year after year, and we’re falling behind every OECD country outside of Europe, then we need bold action. Not just tinkering.

When we can plainly see a crunch looming in the future, then we need to take responsibility now for making changes – not put it off for another day.

It's also clear that New Zealanders have to be able to clearly understand what's in it for them.

New Zealand needs leadership that delivers more jobs and higher incomes.

1. Labour will create jobs by supporting exporters to expand and earn more.

2. We will get alongside Kiwis to help them get the education and skills they need to seize the job opportunities of a 21st century economy

3. We'll grow incomes by investing in science and innovation to create more high-wage businesses. This is where our future lies.

4. We'll make it easier for Kiwis to save for their first home and build a retirement nest egg.

Delivering on jobs and incomes will also have larger spin-offs for our economy.

What we can’t back away from is the need to look at every decision through the lens of how we will create the high value, high skill economy that will grow incomes, and grow jobs - a clean, green, and clever economy.

Productivity and skills

Our primary industries are important – and always will be – but it’s our talent, science and innovation that is our future, both in agriculture and beyond.

It’s time to lever off our clean, green reputation.

We may not be able fit too many more cows on our land, but through science, innovation, and design we can lift ourselves and grow the jobs that will keep our young in New Zealand.

If we look at like-sized countries in the world – Singapore, Israel, Finland, Denmark – they hold a fraction of the natural resources we have, but they have rocketed ahead through their own innovation and talent.

I know NZ politicians have been talking for what seems like forever about value-added, lamb-burgers and knowledge waves as the solution to our long term problems.

But it’s time we made that bold step.

That requires an education system that is truly world class. That means smaller classes, not bigger. It means valuing our great teachers and growing that pool of them.

And it means reaching into our schools to identify those kids who might drop out and transition them to other courses.

I would steer far more of our young people into apprenticeships and a rewarding career in trades.

I would want to see us get more exporting businesses using our science advantage.

Our spend on science is one of the lowest in the OECD, particularly in our businesses. Our goal is to lift that.

There are great companies here in Christchurch – that realize this potential and are growing despite the earthquakes.

The Government’s biggest plan is to merge the Ministry of Science and Innovation – just one year after it was last restructured – together with the department of social housing.

They missed the point. This is just shuffling Ministries. What’s missing is a plan to grow our science, our design, to unleash our creativity.

Investment in our future

What’s missing is a vision for strengthening New Zealand’s economy, building up our own pools of capital and investing it into our economy.

Selling off our farmland and our power companies is ad hoc, and short term.

Instead of seeing how it can sell our productive assets, the Government should be looking at how we can build up more of our own.

What’s missing is a plan to build our savings.

That’s what Australia is doing.

They already save nine per cent of their incomes in a superannuation scheme, and over the next few years that will rise to 12 per cent.

That’s one reason Australia is racing ahead of us.

Labour in government set up the Cullen Fund, set up KiwiSaver, and ran fiscal surpluses in nine consecutive budgets, so we have a good record in growing our savings.

New Zealand needs to do more to increase savings because we are far too dependent on other funds from other countries.

Last week I went to see a large forestry company that’s foreign owned. They want to introduce more New Zealand equity into their business.

But they pointed out to me there is a shortage of large New Zealand investment funds that can make long term investments in the hundreds of millions of dollars in a cyclical asset like forests.

Our capital pools are too shallow because we are not saving enough.

At the same time an entire generation of New Zealanders is struggling to afford their first home.

And they’re worried that when they retire in the next 30 to 40 years New Zealander Super won’t be around.

I am willing to face up to the looming crunch over the future cost of superannuation.

Today there are 5.6 working people for every retired person. In less than 30 years that will more than half to about 2.5.

What’s missing from National’s plan is any thought around how New Zealand will meet the future costs of superannuation as more people reach retirement.

The trade off will be young people having to give up their education and health opportunities to fund older people’s retirement. That’s not fair.

What’s missing is a Government that is prepared to be straight with people about the dimensions of this problem.

Labour will be straight – the status quo is unsustainable. We need a genuine cross-party solution that ensures a fair outcome for everyone, especially those who need to retire earlier and as we move to a gradual rise in retirement age.

When this government won’t take tough decisions, that’s when we end up getting a zero growth economy.

Pro-growth tax reform.

What’s also missing is investment in our productive assets.

At the moment the tax system rewards investment in housing speculation while our productive exporters are starved of the investment capital they need.

New Zealanders are borrowing heavily overseas because we don’t export enough to pay for our imports and interest.

That’s also why assets and land are being sold.

What’s missing is pro-growth tax reform.

Tax credits for research and development are missing.

The Government’s voucher scheme means most companies miss out.

When tax credits are available to all companies, there is an incentive to look at how to harness the opportunity.

And pro-growth tax reform also means a capital gains tax that will encourage people to invest in productive parts of our economy rather than speculate.

And frankly a system that is fairer. It doesn’t matter how you earn a dollar, everyone should contribute.

Pro-exports.

What’s also missing under this Government is a dollar that is anything but export friendly.

Our dollar is volatile, frequently uncompetitive, and interest rates rip into the productive sector.

What’s missing is any policy to help our exporters who are being nailed by our currency.

Our current monetary policy gets the inflation targeting about right, and the independence of the Bank exactly right.

But the Reserve Bank’s objectives were designed for an era when inflation was the main problem in our economy.

They’re out of date. Today, growth and private debt are at least as urgent.

We need to broaden the Reserve Bank’s objectives so that it still maintains a low inflation objective but it also looks at the rate of economic growth.

At the moment the only non-inflationary target it looks at seriously is stability in the banking system.

So Labour will look at giving the Bank more tools to let our export sector fly.


Conclusion

We need stronger economic leadership.

Leadership that's willing to make the hard decisions and try new ideas.

That's what Labour stands for.

Getting the books back into surplus in 2014-15 is a good objective, and it’s one that I share.

Labour also would have the books back in the black in the same year.

But I would never make that my only measure of economic success.

We also need to support our exporters so we can keep profits here and reduce our reliance on foreign borrowing.

We have to increase our savings and reform the tax system so we have more New Zealanders investing in growing businesses.

We need to grow a skilled workforce so New Zealanders can take advantage of the job opportunities of a 21st century economy.

And grow our science and innovation so we have new ideas to take to the rest of the world.

Every parent wanting their kid to get a fair go at school knows the Government can do better.

These parents are working hard, paying their taxes. They expect the government to lead and take the tough decisions for the economy.

We want our younger people entering the workforce for the first time to have high hopes for a career and future in the land they grew up in.

Those New Zealanders dream of something better. And so do I.