Audrey Young

Audrey Young is the New Zealand Herald’s political editor.

Labour's money man ready for a power play

David Parker is gung ho about Labour's prospects especially when he looks at National's track record.

Despite taking a pummelling from business over the electricity policy, David Parker is showing no bruises. Photo / Greg Bowker
Despite taking a pummelling from business over the electricity policy, David Parker is showing no bruises. Photo / Greg Bowker

The one thing alternative finance minister, Labour's David Parker, won't be criticising in tomorrow's Budget is the Government's confirmation that it is on track to return to surplus in 2014-15.

"I always thought it would; I've always said it should, and we would have too," Mr Parker says.

"We go into deficits after 20 years of surplus in New Zealand following the global financial crisis and the Christchurch earthquake and it's completely appropriate but you can't do it forever."

But that is pretty much where the non-combat zone starts and stops.

Although he was "not disrespectful" of Finance Minister Bill English, he had to give him a "fail" for not achieving what he set out to do, which Mr Parker singles out as rebalancing the economy with an export-led recovery and to create 170,000 net new jobs between 2011 and 2015.

Mr Parker is buoyant and it shows. He is showing no bruises despite taking a pummelling from business over the policy, announced with the Greens, to establish a single buyer for the wholesale electricity market and to set a price based on each generating company's production costs - a policy which wiped hundreds of millions off the value of listed power companies.

Mr Parker says National pulled out its traditional election year "guns", Business New Zealand and Federated Farmers, to battle it out as though it were in the middle of an election.

While agreeing the announcement with the Greens was a late decision, he knew the policy would lay down a stark difference between National and Labour "and we thought long and hard before taking that step".

It hasn't stopped an increasing number of businesses taking Labour seriously as an alternative Government, he says, and more people are beating a path to Labour's door.

The electricity policy was but one difference.

Labour's major changes would make New Zealand a better place, a wealthier place "and a more equal one too".

The capital gains tax (excluding the family home), announced at the 2011 election, is a cornerstone element of its economic policy designed to encourage investment in more productive areas of the economy and away from rental housing.

"It's no coincidence that the OECD, the IMF, the Treasury, the Reserve Bank, most western countries and the Labour Party think we need to have a neutral investment signal into the economy.

"The is a gaping hole in the Government's economic programme," he said. "It is becoming clearer by the week as you see ever increasing house prices in Auckland, especially, in part driven by the tax bias that drives more and more investment money into rental housing."

Labour would also expand the KiwiSaver programme and along with the effects of a capital gains tax would see increased investment directed to the right parts of the economy.

And, as ever, Mr Parker is passionate about the current account deficit, and using monetary policy to address it.

Mr Parker said he was committed to broadening the manufacturing sector outside the primary industries to help the country pay its own way in the world and provide jobs for young people.

"We can't overcome these problems under current settings. We've got to change the mix of our economy to have better job opportunities and more exports."

Current account - a beginner's guide

The current account, also known as the current account of the balance of payments, is the difference between what New Zealand earns from the rest of the world through trade and investment and what the rest of the world earns from us. It covers not just the transactions of the Government but all people and businesses within New Zealand.
This graph shows that New Zealanders have borrowed more from other countries' savings to finance their spending. The deficit as a percentage of gross domestic product (GDP - the size of the economy) reduced during the global financial crisis, which started in 2008, as New Zealanders spent and borrowed less, but is on the rise again.
In the Government's last set of forecasts, the December Half Yearly Update, the current account deficit was forecast to increase from a $10.7 billion deficit in 2013 to $16.3 billion in 2017, or 6.5 per cent of GDP.
The last time that New Zealand registered a current account surplus was in 1973.

The Green question

Are the Greens and Labour getting too close? That's one question Labour Finance spokesman David Parker would not answer in an interview with the Herald, which suggests he thinks they are.

"I won't answer that directly," he said. "I'll say I always talk about a Labour-led coalition."

Mr Parker was not so reticent about criticising the Greens for suggesting last year the Reserve Bank add printing money to its suite of options to bring down the kiwi dollar. Mr Parker said there was "a bit of over-reaction" to what Greens co-leader Russel Norman had suggested but "it was unhelpful and unnecessary".

Asked if he expected to have any more joint policy announcements with the Greens between now and next year's election, as Labour did over electricity, he said: "I doubt it."

- NZ Herald

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