Q+A, 9-10am Sundays on TV ONE. Repeats of Q&A will screen on TVNZ7 at 9pm Sundays and 9am and 1pm on Mondays.
Let's start with you, Mr Norman. What is the number-one priority the Budget should be addressing?
RUSSEL NORMAN - Greens Co-Leader
Well, we have a problem in terms of the debt that's in the Budget. So, National have built in a very large level of debt because they made some very poor decisions. The tax cuts for upper-income earners. It's cost $2 billion in the first 18 months because it was never fiscally neutral.
PAUL Yes, I know you're very big on that. Bill English's reaction to that view is that if we hadn't had the tax cuts, the tax cuts actually spread a bit of money around, stimulated the economy, helped business grow, and if we hadn't had them, we'd be in a damn sight worse situation than we are now.
RUSSEL And if you look at the best way to reduce stimulus from tax cuts, if that was the objective, is to give them to lower-income earners and to give them to everyone. Instead what National did was they concentrated the tax cuts in upper-income earners, and what that meant was you get a much lower stimulus effect because either they save it, they spend it on imports. They don't necessarily spend it, stimulating the domestic economy. So that's one part of it. The other part-
PAUL Well, hang on. The other part is he's got to handle debt, right? And that's what he's doing, isn't it?
RUSSEL No. He's doing the exact opposite. I'm sorry, Paul, but he's doing the exact opposite. Let's talk about what he's doing. He's given $2 billion in 18 months he's had to borrow for upper-income earners. That's irresponsible. Right, that is just basically irresponsible. He's giving about $2 billion in subsidies for greenhouse emissions. Why should we be subsidising greenhouse emissions? It doesn't make any sense, and I think it's just fiscally reckless.
PAUL So in one sentence, what should he be doing?
RUSSEL He should be addressing the debt issue, but he also needs to be looking at the structural transformation of the New Zealand economy. We need to rebalance the economy to focus on exports instead of just the domestic, non-tradable sector. The recovery at the moment, if you look at it, it's the retail sector, it's the housing sector, it's construction. Cameron Bagrie, right? You know, chief economist at one of the banks. He said this recovery is exactly the wrong type of recovery.
PAUL I've noticed that. I've pointed that out on the programme that the only businesses I can see opening are supermarkets. But, anyway, Mr Peters, what's the central priority you would have were you Treasurer?
WINSTON PETERS - NZ First Leader
Our central priority's got to be now to stop the attraction of Australia killing this economy. In short, ever since this experiment started 26 years ago, Australia's economy has grown about 37%, 38% greater than ours in real terms. Just imagine if we had kept pace. We'd be 37% bigger.
PAUL I know that, but-
WINSTON Our job is to follow a rebalanced positioning of our policies that is in our national interest to contest with Australia. If you don't do that, we'll have a zero Budget. We'll have cuts and slashes and the old recipe from the 1930s, which is a failure. We'll get statements like you just made that those high-earner tax cuts were good for the economy. Absolute drivel. Not true about the growth that you speak, and all the figures are there. So we have got to face up to the fact that we're on a slide and that these policies that we've had the last 26 years don't work.
PAUL All right. I think we've faced the fact we're on a slide.
WINSTON We're not facing things at all.
PAUL So what can do, say, next week? What can he do?
WINSTON A zero Budget which you've got next week will not face the facts at all. I'm saying we've got to remember we're an export-dependent economy. Run policies for exports, not consumption. You've got to change the currency of this country so that it favours exporters - where our wealth is to be made. You can't favour the banks and paper shufflers in downtown Queen Street, for goodness sake. Let's face up to some facts in the end.
PAUL With respect, as Alan Bollard told us when he became the Governor of the Reserve Bank, he said, 'Well, you think about Australia, you've always got to consider that Australia is a lucky country.' It's got the iron. It's got uranium in places where nobody cares if you mine.
RUSSEL And we've got water.
WINSTON That's an excuse for failing to run the economy. I know for decades and long before Mr Bollard ever came along that this economy was doing far better than Australia, and they were still having all the mines and all the minerals and everything else. We just failed to follow the recipe that made us number two in the world, and we changed it for an economic experiment which a lot of you loved because it make you very, very wealthy. But it meant the rest of-
WINSTON Not you personally, Mr Holmes.
PAUL Thank you.
WINSTON If you were vicariously fortunate, very good. I'm saying the balance of the population did very badly.
PAUL Hang on, Russel. Can I just-?
RUSSEL Just finally on that, we've had very high commodity prices. It's not like this government has gone through a period that's been terrible for the New Zealand economy. We've had very high commodity prices. What's the government done with it?
PAUL We've had a global meltdown, haven't we? And if we hadn't had the high commodity prices-
RUSSEL Where's the transformation towards the rebalancing of the economy? The government rightly said. So when Bill got in, Bill English said, quite rightly, we've had debt-fuelled consumption boom. I agreed with him. And then he didn't bring the changes.
PAUL I know, and I'll get on to that, I promise you, next. Can we just finish this little bit by saying he's the Treasurer. He's got the books in front of him. He's got a Christchurch earthquake. God knows what that is going to cost. We've had the global meltdown. We've got debt, and he's got to deal with it, and he probably doesn't want to have that debt either, but he's got to deal with it.
RUSSEL So then we look at the actions he's taken. I agree with you. He had two big challenges. He had the GFC and he had the earthquakes. You know, they were the big challenges facing the government. And fair enough - they were big. Right, and so I would say if you look at the decisions they've made, and they're responsible for their response. If you look at the tax changes, they said they were fiscally neutral. They are not. And then if you look at the earthquakes, what we said to them at the time was you need to raise a levy, a progressive levy to pay for the rebuild, and we outlined how you could do it. He went down these earthquake bonds instead. His earthquake bonds have raised $26 million so far, whereas an earthquake levy would have raised $1 billion so far. I just don't think he made the right decisions.
PAUL Let's talk about realigning the economy to a stable basis. A green-tech economy, all right? And you talked in the last election about wanting to spend $4 billion - borrowed, presumably?
PAUL $4 billion-
RUSSEL As we were saying earlier, we actually did cost exactly how we'd pay for it. It wasn't borrowed.
PAUL All right. $4 billion either way. Wherever you got it from. But other people seem to think it was fairyland money. $4 billion to create 100,000 jobs. Could he still be doing that?
RUSSEL What we said is you've got to look at how to rebalance the economy, and that means you need to move capital into the productive sector. That's why a capital gains tax matters. It's not about raising the money. That's part of it. But the key part of it is to push money, capital, into the productive sector. The second part of it was what are New Zealand's key strategic advantages? And that's around the green-tech sector and to protect our clean, green reputation, which is fundamental. So we actually think that is where New Zealand's strategic advantage is. It isn't in casinos, which is where they're throwing the money.
PAUL You can't do it overnight.
RUSSEL But they're picking winners. What are the winners they're picking? The irrigation subsidies, they're picking casinos. We've got Warner Brothers. I think that they're picking the wrong winners.
PAUL All right. I've got to leave you there. Mr Peters, what do you make of all of that?
WINSTON The $4 billion and the green policy that Mr Norman talks about is actually picking winners. That's a very dangerous thing to do. You've got to reward winners and make winners more successful, and that's got to be a tax-incentivised policy. I'm not knocking what he's saying. I'm just saying I do not see the way through for a great economic future on that. We have got to go back to doing things great. That is to add to our great export base. We need research and development systems. We need new market discovery. The tax changes have got to take place. And when we say rebalance the economy, I mean incentivise the people who are going to make us great and not have, for example, Sam Morgan - and Sam Morgan says himself - he sells Trade Me for $700 million-plus. He doesn't pay any tax at all. This cannot go on if we wish to be a successful economy. And we don't have to be brilliant. It's 2012. We were once the best in the world.
PAUL And now we've got 160,000 people unemployed. 6.7% unemployment. What would you do about it? Jobs.
WINSTON Well, the only way you're going to get them to work is with jobs and exports. Timber is our third-biggest export - going out in its most raw state for hundreds of thousands of jobs somewhere else and for billions and billions of extra profits for some other economy. When I say it's in its raw state, a one hour of labour being added to it. Going out as logs. This is a foolish economy.
PAUL Yes, and we've been talking about that for 30 years. And I thought that the third-biggest export was petrol and gas.
WINSTON No, it's not true.
PAUL It's fourth, I think. Something like that. So, what's your attitude to this offshore drilling? Mr Norman has problems with it.
WINSTON If you can provide me a safe experiment for offshore drilling, we'd look at it. But I don't believe you can say it's safe. Not now.
RUSSEL It's the deep-sea stuff. We've been doing shallow offshore drilling for a long time and relatively safely. It's the deep-sea stuff that's the problem. Nobody knows how to plug a well at those depths. And if New Zealand's economy is built on clean and green, how would it be if we had a huge oil spill on the East Coast?
PAUL Quick couple of questions. Are cigarettes likely to go up in price in the Budget?
WINSTON No doubt about it.
PAUL Is Mrs Turia realistic when she wants to get rid of tobacco by 2025, do you think, Russel? Yes or no?
RUSSEL I'm sure that she would like to, yeah. I mean, whether it will happen is a different thing.
PAUL I mean, the other thing I've got to say too in fairness to Mr English and his team is that you two can sit here and say what you like, but you don't have to answer the big questions.
WINSTON Yes, we do. Look, I was the Treasurer once in this country during the Asian crisis. Remember? We lost some of our markets offshore in Asia, and we didn't get through that by cutting and slashing. We had liquidity. We kept confidence up, and that's the way through this one as well, providing you spend money on the right things.
RUSSEL Bill English, the other advantage he's got is he's got all of Treasury to support him, so it's not like he's got to do it on his own.
PAUL Whereas you did your own costings.
RUSSEL We employed people to do it, yeah. That's right.
PAUL A political one for both of you. Mr Key, who seems to be increasingly disappointed with his partners, has indicated he might not be so adamant about not talking to you after the next election.
WINSTON He's got the highest of double standards, Mr Key, hasn't he?
PAUL Would you be interested in talking to him?
WINSTON Well, you know that's for the party to decide. We don't make those sorts of arrangements before the election, go behind people's backs with constructed devices like Epsom, which is the most embarrassing thing I've seen in the history of Western democracy. We don't want a repeat of that, do we?
PAUL Well, it's a big call.
WINSTON It may be a big call, but it is absolutely ridiculously extreme.
PAUL And what about the Greens? Do you still absolutely rule out some kind of accommodation with the Nats.
RUSSEL Well, we didn't at the last election. I mean, what we said was we were open to it depending on what the agreement was, and so what we've done since then is we've worked with them on policy issues.
PAUL I know you do, but I think he was indicating recently he couldn't come much closer to you.
RUSSEL Well, I mean, obviously with regard- We had a memorandum of understanding between National and the Greens, and that's how we did the home insulation scheme. Great scheme. And we're open to working with National where we agree.
PAUL I thank you both very much for coming on. Right Honourable Winston Peters, very nice to see you. Russel Norman, thank you, of the Greens.
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