Don Brash on the NZ Herald live chat

Earlier this afternoon Don Brash participated in an online live chat on the New Zealand Herald website. Below are some of the highlights.

On ACT’s appeal in 2011:

I subscribe to most of the values that National espouses on its website - limited government, personal responsibility, equal citizenship, to name just three.

My disappointment with National is that they seem to have forgotten those values - government spending now higher, relative to the economy, than in any year of the last Labour Government and no obvious commitment to Article III of the Treaty (which commits to all NZers being equal under the law). 

And low and middle income earners are those most disadvantaged by the relatively poor performance of our economy. ACT has policies to fix that underperformance.

On tackling household and government debt:

Yes, household debt is a bigger issue than government debt at the moment, though government debt is rising fast - by hundreds of millions of dollars a week. Restraining the growth of private sector debt is not straightforward, but one of the causes of it over the last 20 years has been a persistent belief that property prices always rise, and therefore borrowing against property is a riskless activity.

The rapid growth in house prices was driven in significant part by the dopey restrictions which too many local governments have placed on the availability of residential land, so that, though we are one of the most under-populated countries on Earth, our residential land prices are truly ridiculous.

On whether National can get New Zealand into surplus by 2015:

Well, the Government has projected surpluses in the medium-term future for the last several years, and so far at least those surpluses seem to constantly slip further into the future. Over-hanging those projections is an extremely threatening world economy: if that turns out to be half as ominous as seems like at the moment, getting back into surplus by 2015 will be very tough.

On what one issue he could fix right now if he could:

Excessive government spending. That's not only driving a big increase in government debt (albeit from a low starting point, as I've mentioned), it is also a significant fact in keeping our exchange rate too high - much of the borrowing to fund that spending is being done offshore, and overseas investors have to buy NZ dollars to buy the NZ government bonds. That makes life tough for exporters, and with a high level of international indebtedness that isn't what we need.

You asked for one policy; If I had a second one, I’d go for radical reform of the RMA.

On the trouble with Capital Gains and land taxes:

I used to favour a CGT, but I now believe there are more arguments against than for. They don't prevent property price bubbles (Australia and the US have both had property price bubbles, and both have a CGT), and effectively involve double-taxation of corporate income. (When a company share is sold, the value of that sale is the present value of an expected stream of future after-tax profits.) 

The trouble with a land tax is that it would hit hardest the most important part of our export industry, namely farming, and perhaps indirectly jeopardise the soundness of the banking sector.

On how ACT policies help students:

ACT does not support interest-free student loans (and I well recall Bill English describing the policy as an unprecedented electoral bribe when Labour introduced it in 2005). But even under previous policy, interest did not become payable until the borrower was earning above a certain threshold.

NZ now spends quite a lot on tertiary education, but a disproportionate amount of that spending goes to students rather than tertiary institutions themselves. The danger is that, because universities are increasingly unable to compete with the best universities overseas for good staff, the degrees which our students get will be progressively less valuable, with our very best students heading overseas to better universities.

On whether governments should own certain assets:

Actually, I believe that National is using a rather weak argument for selling minority stakes in four of the SOEs. Yes, that will avoid some borrowing, but selling assets is a poor way of bridging a deficit caused by too much spending. 

The real argument for selling SOEs should be that governments very rarely make good owners of commercial businesses. Yes, there are a few exceptions (most of them in Singapore!), but that's the general experience around the world. And yes, the government "had" to purchase railways because their private owners couldn't make a go of it. But then nor could the state: railways made a loss for the taxpayer in almost every year for the 20 years before it was sold. 

There are a few SOEs which I would not favour selling - those operating natural monopolies like Transpower - but why government would want to run three competing generating companies is beyond me. Power generation is important - but so is food production and retailing, and nobody seriously suggests the government should run a chain of supermarkets!

On catching up with Australia:

The main reason why I'm seeking to get back into Parliament is well illustrated by your question. Far too many people are finding it very tough indeed to make ends meet now, and can see a much better future for themselves and their families in Oz.

As a fifth generation New Zealander, that makes me angry. There is no inherent reason why we can't have incomes similar to those in Australia. I was delighted when the National Government committed to closing the gap between incomes here and those across the Tasman by 2025, but I've been profoundly disappointed that so far at least they've shown no serious commitment to that goal.

On ACT’s small business policies:

First, we will strongly oppose any increase in the minimum wage (you can't raise wages by decree - if you could, why not raise it to $50 an hour and eliminate poverty at the stroke of a pen?): many small businesses are finding it tough to pay even the current minimum wage. 

Second, we will make a strong attack on red tape - the RMA is a symbol of that, but there are a raft of other areas too where red tape makes life a misery for small businesses (and large businesses). 

Third, we will cut the company tax rate - not to favour "our rich friends" but because the only sustainable way to raise wages and salaries to have more capital per worker, in other words more investment. Countries with a seriously low company tax rate (and we've suggested 12.5%) attract investment better than those with a high company tax rate. 

On New Zealand’s relationship with Fiji:

Fiji has long been a part of the New Zealand family and I think it is a tragedy that we are gradually pushing them away (and into the arms of other countries). We have tried ostracism and is doesn't seem to be working. It's time to look at a change in direction, in the interests of both Fiji and New Zealand. After all, we already deal with plenty of governments around the world which are not remotely democratic.

On whether we should be more like Singapore:

I greatly admire Singapore, and have visited there many times. But I very much doubt that most New Zealanders would vote for that kind of regime. As John Key said once, Paula Bennett spends more than a million dollars an HOUR on social welfare; in Singapore they spend $40 million per YEAR. But there are things we should copy: their dedication to education, savings, family values - those are all things we should and can emulate. 

But at the end of the day, New Zealand is unique, with our own values and own environment. There is no good reason why we can't have a country which is wealthy enough so that families are not struggling to make ends meet, and which has a social and natural environment which is the envy of the world.

On education:

I think Anne Tolley has been trying very hard to deal with the fact that, though many of our schools are extremely good by any standards, too many children still come out of school unable to read and write, or do basic arithmetic. 

The ACT Party wants to go much further, and allow the money which the taxpayer provides for the education of our children to be used at any school of the parents' choosing. We'd also make available the information from SchoolSMART so that parents could make an informed choice about the best school for their child. 

And we'd allow good state schools to expand, by opening additional campuses elsewhere in the country.

On Don’s overall ambition for New Zealand:

I very badly want to help set New Zealand on a path where most families can make ends meet, where everybody who wants a job can get one, where we protect the natural environment, and where every citizen is equal before the law, no matter his or her ethnicity.

That's the kind of New Zealand I would dearly like to leave to my children and grandchildren.