Why I went into Politics

12 May 2003

An address to the Auckland Rotary Club

President Barbara, ladies and gentlemen,

I greatly appreciate your invitation to speak to you once again. This is at least the fourth occasion on which I have spoken to you, and the second time since I resigned as Governor of the Reserve Bank to stand for election to Parliament just over a year ago.

Last time I spoke to you, I talked about the relationship between monetary policy and economic growth – probably a hangover from my previous job!

Today, I want to talk about what drove me to seek political office, and perhaps to respond to the allegation that I hear occasionally that I am a humourless ideologue intent on pushing the National Party towards the extreme right wing.

I’m not in the least surprised that many people still see me as humourless – it is very hard, or at least unwise, to announce an increase in interest rates with a smile on your face! – but I am always astounded that somebody brought up as a Fabian socialist and a Christian pacifist could be thought of as right-wing.

I think I’m wiser now than I was in the early seventies when I was briefly a member of the Committee on Unemployment in Auckland – along with Bruce Hucker, Margaret Wilson and Helen Clark – but I’m absolutely not one jot less concerned about the plight of the unemployed.

I will carry with me till my dying day the image of a stooped middle-aged woman, wearing a tired overcoat on a cold winter’s day, being turned away by the blonde bouffant receptionist after she asked to see the personnel manager.

I witnessed the incident 40 years ago.

Being unable to find work is totally demoralising and soul-destroying, and I am committed to finding solutions.

I changed my political views not because I became less concerned about unemployment but because I wanted to do something about the problem, not just talk about it. I became absolutely convinced that bigger and bigger government programmes were a part of the problem, not part of the solution.

And this was not about ideology or theory but about seeing with my own eyes well-motivated government programmes, here and overseas, have consequences far removed from those intended.

Just over a year ago, I resigned from the Reserve Bank because I was seriously worried about where New Zealand was headed. I am still worried; indeed, I’m more worried than I was a year ago, no doubt because I have spent time looking at a wider range of issues than when at the Reserve Bank. The more I look, the worse the picture seems to be.

Of course, New Zealand is a great country, with so much to offer us all. We enjoy a wonderful natural environment. Every child has the opportunity to enjoy free primary and secondary education, and heavily subsidised tertiary education. Every person suffering an accident or acute illness has the opportunity to enjoy free hospital care. We have none of the ethnic or religious violence which plagues so many other countries. We have inherited a British legal system, which most of the time gives us access to impartial justice. We have a public service which is almost entirely free of corruption. As Chris Trotter remarked after a pleasant dinner overlooking a beach on the Whangaparaoa peninsula last year, “New Zealand is an unqualified success. We are free. We are at peace. And we are rich in all the things that matter.”1

Yes, but….

I worry that Trotter’s “unqualified success” faces challenges which could rip us apart. At a time when a trained mind has never been more important for earning a decent income than it is today, more than 40% of adult New Zealanders are unable to read and write well enough to perform adequately in a modern economy – with more illiterate people pouring out of our schools every year. At a time when government spending on healthcare has never been higher – either in dollars or as a share of the national cake – we have hospitals up and down the land asking those with serious heart conditions to wait, and wait, and wait. At a time of almost unprecedented buoyancy in the domestic economy, we have nearly 400,000 adults of working age (to say nothing of their tens of thousands of children) living on a benefit. At a time of relatively high export prices, we are still spending more overseas than we are earning, thereby adding about $10 million a day to our already-huge external debt. At a time when successive Governments have made a serious effort to right the wrongs of the past, we have a minority of Maori New Zealanders determined to slow everything from improvements on State Highway 1 to research on the growth of paua and crayfish.

Reading my Christmas mail last year I was struck by the number of letters from people whose young adult children had just left for overseas, or who were just about to leave. Some will come back of course, as they have always done in the past. But the risk is that an increasing number will never come back, or at least will come back only to visit Mum and Dad on holiday. They will take their training and their flair to other countries, and we will be the poorer, both in personal and in economic terms. A growing diaspora of our brightest and best is not the way to future prosperity. These are your children, my children, our children – the future of New Zealand.

And why are they less likely to return now than in the past? Essentially because, while New Zealand is still a pleasant place to live, our standard of living fell during the sixties, seventies and eighties relative to that in other developed countries. In 1960, New Zealand’s living standard was closely similar to that in Australia. Now, Australia’s living standard is about one-third higher than New Zealand’s. This means that the average Australian is better off by about $200 per week than the average New Zealander. So a nurse can leave a job in Auckland and fly to Brisbane and earn substantially more. And a person with cancer in Australia has a better life expectancy than a person with the same disease in New Zealand.

If, as seems entirely possible, we lose an increasing proportion of our brightest and best to the bright lights of Sydney, London and New York, there must be a serious danger that the pleasant society which Chris Trotter rightly praised will gradually unwind – with a whimper rather than a bang, but unwind nevertheless. We might end up like Argentina perhaps or, worse still, like some of the troubled societies of the South Pacific, with racial tensions and conflict to add to the economic woes.

I want something much better, and that’s why I abandoned the relative security of the Reserve Bank for the bear-pit of politics.

I want a society where every child is loved; where every child has a good education; where every person is free to pursue his or her dreams (provided they don’t cause nightmares for others or expect other people to fund them); where the state protects the natural environment and provides security for all; where all can live at peace, irrespective of race, religious belief, or sexual orientation.

So what are the trends which worry me? First, the likelihood of our economy continuing to grow at a rate which will fail to narrow the gap in living standards between here and other developed countries – and may again see the gap get larger. I’m not talking about the slowdown in the economy that virtually all public and private sector forecasters project for this year, from growth of more than 4% last year to something less than 2% this year: that’s a cyclical slowdown driven by the slowdown in the world economy, the rise in the exchange rate, the drought and SARS. That will be very uncomfortable for those most directly affected, especially those in the vital agricultural and tourist industries.

But the real worry is not this cyclical slowdown but rather the fact that there is every sign the economy will grow at an average rate of less than 3% over the next decade – trending down to much closer to 2% than to 3% by the end of that period. And that’s not doom and gloom invented by the National Party Finance spokesman; it’s the official Treasury projection, and I don’t know of too many private forecasters who disagree.

That’s probably why a few weeks ago the Prime Minister explicitly abandoned her Government’s earlier goal to lift New Zealand’s living standards back into the top half of the OECD within a decade – on present policies, there isn’t a dog’s chance of achieving that objective and the Prime Minister should be given full marks for acknowledging that reality.

But we have to do better if New Zealand is to remain an attractive place for our children and grandchildren to live.

Second, I worry that, despite the fact that the New Zealand government spends more on education, relative to national income, than do the governments of almost all other developed countries, we are still a nation where far too many people have poor literacy and numeracy skills. In 1996 – under a National Government, which proves that I am not making a political speech! – a survey found that more than 40% of adult New Zealanders had a reading ability below the minimum judged necessary to perform adequately in a modern society. And just last month, an international survey of nine-year-olds found that those in New Zealand had the second poorest reading skills among English-speaking countries – with the gap between the reading skills of boys and the reading skills of girls worst equal with the children in Iran and Belize! That’s a disgraceful situation.

I suspect our numeracy skills are no better. When my wife and I, with our then nine-year-old son, moved to Auckland in January we stopped off in Rotorua so that our son and I could ride the luge. I asked how much it cost, and was told $3.50. “Good, then I’ll have 10 tickets”, I said. “I guess that will cost $35.” “Just a minute”, said the 18-year-old behind the counter, as she keyed into the till $3.50 ten times and pressed the add button. I guess the good news is that she could add to 10, even if she could not multiply by 10!

I had a similar experience over Easter. I bought five movie tickets and was told that the cost was $72. This seemed a bit odd, since that didn’t look like a simple multiple of five, so I asked how much each ticket cost. “Twelve dollars” was the answer. And when I then questioned the $72 total for five tickets, it took some work with the calculator to confirm that the total should have been $60.

These examples are, of course, utterly trivial, but they suggest an almost total failure to understand the rudiments of simple arithmetic on the part of many people coming out of our schools.

We have to do better if New Zealand is to remain an attractive place for our children and grandchildren to live.

Third, I worry about the huge increase in the number of those on benefits over the last 20 or 30 years. Between 1975 and last year, New Zealand’s population increased by 22%. Despite all the extra government money spent on healthcare, the number of those on the sickness benefit went up by 367% over that period and those on the invalid’s benefit went up by 586%. Those on the DPB went up by 532%, and those on the unemployment benefit went up by an astonishing 4,152%, despite the buoyancy of the economy last year. Believe it or not, the official government projections suggest that the number of those on those four benefits will continue to increase over the next four or five years.

This is an appalling situation, and not just because these benefits eat up billions of dollars a year, though they do. It also means that nearly 400,000 working age adults and their children are suffering from the indignity of being dependent, in some cases for years and even decades, on a taxpayer handout. What could be more destructive of people’s self-esteem and morale than being dependent on such hand-outs, month after month and year after year?

Worse still, we effectively tell people that there is nothing they can do, or need to do, in return for these hand-outs. In some parts of the country, this dependency culture has become so engrained that children going through school take it for granted they will simply graduate onto a benefit, as their parents and grandparents did before them.

We have to do better if New Zealand is to remain an attractive place for our children and grandchildren to live.

Fourth, I worry at the direction in which race relations are heading in this country.

Yes, it’s a myth that race relations were perfect in the past. But I’d argue strongly that where we are headed now – a society where people have special rights and privileges on the basis of their race – is fraught with serious danger.

We should be moving towards a colour-blind society. I am not suggesting we should ignore the injustices of the past. On the contrary: those injustices must be examined and, where warranted, compensation must be paid.

But with that behind us, we have to stand firmly on the principle that all New Zealanders are equal before the law, with one standard of citizenship. We simply can’t have government funding for research allocated on the basis of whether it benefits one racial group or another. And we can’t require local governments to consult with their communities and separately with Maori, as if Maori were somehow not members of our community. We are one people. Much of what is now being written into legislation in the name of the Treaty of Waitangi is patronising towards Maori New Zealanders, and it is demeaning. It must stop, before we create a Pakeha backlash of resentment and anger and before we demean Maori any further. We are turning a proud people into a race of panhandlers and beneficiaries, and that spells trouble for us all.

As Bill English argued in an important speech last year, the Treaty of Waitangi established a single sovereignty in New Zealand, and not two sovereignties – and therefore, a single citizenship, not two citizenships.

So in this area too, we have to do better if New Zealand is to remain an attractive place for our children and grandchildren to live.

Fifth, I worry about the way in which we are gradually distancing ourselves from traditional friends and allies. In saying this, I am not arguing for being indifferent to our new friends and neighbours in the Asian region. Countries in this region are already hugely important to New Zealand – in terms of trade, tourism, investment, and immigrants – and they will get even more important in the future. We must continue to develop strong relationships with these countries.

But that doesn’t mean turning our back on our traditional friends and allies. It doesn’t mean letting our defence forces run down to the point where they are really only capable of peace-keeping duties. It doesn’t mean we should casually insult the leadership of our most important ally and second most important trading partner.

We have to do better if New Zealand is to remain an attractive place for our children and grandchildren to live.

President Barbara, I know that Rotary does not like speakers to be too political, so let me acknowledge that some of the trends which worry me have been moving in the wrong direction since well before the present Government came to office nearly four years ago. Some of the trends have persisted through successive Governments and over several decades.

But allow me to say that in my view the present Government is making most of these trends markedly worse. Our growth prospects are being impaired by a lot of legislation which will make it very much more risky to invest and employ staff. Our education prospects are being damaged by the strong moves to re-centralise the whole school system and remove what limited freedoms principals and teachers began to enjoy in the nineties. Our welfare system is being further entrenched by moves to abolish the work tests which were rather tentatively introduced in the late nineties. Race relations are assuredly being damaged by the welter of politically correct racial preferences being written into law, after law, after law. And as for the tendency to distance ourselves from traditional friends and allies, nothing more needs to be said.

We need to reverse these trends if New Zealand is to remain an attractive place for our children and grandchildren to live.

Does my concern for a widening gap between our living standards and those in other developed countries, or for our high levels of illiteracy, or for the fact that we have hundreds of thousands of working age adults subsisting on a benefit, or for the rapid deterioration of race relations in New Zealand, or for our gradually increasing international isolation, do any of these concerns make me “dangerously right-wing”? If so, I happily plead guilty.

But the real issue is not whether I’m right-wing or left-wing. Indeed, I am not even sure what these terms – coined in late 18th century France – mean today. What is important is whether I am right to be concerned about these issues or whether I am wrong.

And I am happy to let you be the judge of that.

 


1 The Dominion, 1 March 2002.

12 May 2003.
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