A Flat Earth BudgetThis is a "flat earth" Budget; it is based on the earth being not just flat, but infinite. It is a Budget for a world where natural resources are limitless, where the atmosphere can endlessly absorb greenhouse gases, where we can always live way beyond our means, and never be called to account for it. This Budget ignores the huge changes that happened over the last century, it ignores the modern equivalent of the Copernican revolution, and it assumes that we can carry on as we have always carried on.
First, it assumes - with a big increase since previous years - that oil prices will increase to $68 a barrel, and then stay steady throughout the rest of the planning period. We know oil is already over $70 and has been for some time. So, once again, officials are behind the game. I ask members if they seriously think that oil prices will not rise further.
This pattern has been going on for years and one has to ask how much longer Treasury and the Reserve Bank will base their assumptions on the futures market. The Greens pointed out the gross errors in the assumptions in the 2004 Budget that predicted that oil prices - wait for it - would fall to $19 a barrel and stay there. Somewhat red-faced, the next month in its June quarter report, the Reserve Bank again predicted falling oil prices but only to $30 by May 2005. When May 2005 came, oil was around $47-48 dollars a barrel. In the September 2005 quarter, the Reserve Bank predicted that oil would stay at $58 for the rest of 2006, that is, this year - the price is currently over $70 - and then would fall to $40 by the end of 2007. This year’s March forecast - the latest Gospel from the Reserve Bank - predicted the fall to $40 would still happen, but not until the end of 2009. Treasury’s update in December last year finally abandoned $40 and predicted a fall to $54, but not until 2009-10, and the with prices holding steady this year at $59. Apart from a very brief dip in February, oil has not been at $59 since that prediction was made.
Now $68 is the new benchmark. It is behind reality and blind to the long-term trends. No one in Government has ever publicly questioned this widely inaccurate information or why there is no agreement between the Treasury and the Reserve Bank except on their agreement that the price trend will be forever down or, as of today, steady, when it has for years now been consistently up. Why does anyone continue to believe these people? Why does the Minister of Finance not tell them to get real? How can anyone construct Budget after Budget on totally unrealistic and discredited figures? I guess only someone who believes in a flat earth.
Flat-earthers also assume that climate change does not stop business as usual; in fact, accelerated business as usual is the plan. Yet in just the last year we learnt that levels of carbon dioxide in the atmosphere are now the highest for at least 650,000 years - since before there were humans. We have reports of unprecedented amounts of ice melting, acidification of the oceans, slowing of the Gulf Stream, thawing of the tundra, and freak storms, droughts, and floods. People are looking to the Government for a lead, and what is the Government doing? It said in December that it would start work on a brand new policy, having abandoned the old one, but Cabinet has not even signed off the work plan yet.
Meanwhile the Government assumes that Fonterra’s goal of growing dairy output by 5 percent per annum can be achieved without crashing our fresh water systems and our Kyoto commitments. It assumes we can continue to allow our current account deficit to grow, forecasting it to reach $14.5 billion this year, a whopping 9.3 percent of GDP. This is much, much larger in percentage terms than any of our trading partners, even Australia and the US, which are also living well beyond their means. It assumes that the rest of the world will agree with these assumptions and that they will happily continue to buy our unsustainable products and give us the credit to continue to live beyond our income. I do not think so.
Let us look at the big triumphant announcement in this Budget. What is Michael Cullen most proud of funding this year? Roads. There is a gigantic of $1.3 billion for more roads, on top of the billions that fund roads already. Nearly as much as is being spent on the Working for Families package will be spent on tarmac. But there is nothing to close the funding gap for public transport. Not a cent - only a statement that the Government will work with local government to help them meet their funding contributions. There is not a cent of money; just some talkies.
It is recognised around the world that new roads generate new traffic, and they invite people to take the car instead of the bus or the train. For a Government that has a sustainable development programme of action with a key issue being energy, it is a breathtaking insult. For a Government that has a Land Transport Management Act and a national strategy that requires transport funding to be integrated, balanced, and environmentally sustainable it is probably illegal - if anyone wanted to test it. This is a mad, petrolheaded, road-building, tarmac-focused, vote-seeking Budget, but I cannot work out whose vote the Government members actually think they are courting.
It certainly will not be Auckland. Does not anyone over there read the Auckland papers? Letters to the editor are clamouring for better public transport. Aucklanders have moved out of their cars since fuel prices rose, and the use of public transport has doubled in just a year, despite a fare increase. Buses and trains are absolutely chocker at peak hour, and people are demanding more. Many surveys have shown that over 80 percent of Aucklanders want spending on public transport, including on a commuter rail system, not on new motorways. The numbers are overwhelming. If someone thinks that is not true, I will show her the survey figures. So who do Government members think will vote for this? Are they really only interested in the votes of petrolheads and boy racers? The irony is that this roading binge has been largely paid for by the success of an electricity company that is dedicated to 100 percent renewable electricity and has done so well out of that commitment that the Government has raked in the profits. Now that sustainable company’s success is being used to fund massive unsustainability. The Budget pays lip-service to sustainability and climate change with a contingency fund of $100 million to reduce carbon emissions but it spends 13 times that amount increasing our carbon emissions by encouraging a huge increase in traffic on new roads. That is one step forward and 13 steps back, and taxpayers will foot the bill for that in 2012. We know nothing yet about how the climate change fund will be spent. I sincerely hope that it is not for Treasury to speculate on the carbon market by buying and selling credits, as it has suggested it should do, but, rather, to fund serious reductions of greenhouse gases in New Zealand.
These Green initiatives stand like beacons of a new direction in a Budget that is overwhelmingly about the old direction. The public are already sensing that new direction. Thirty years ago, when the Greens first warned that economic growth based on resource depletion was unsustainable and that there were unacceptable environmental and economic consequences from the burning of fossil fuels, we were a voice crying in the wilderness - out of step with the Muldoon Government, political consensus, and public practice. Today, as the public leave their cars at home because they cannot afford to fill the tank, as they trade in their gas-guzzlers for more efficient vehicles, as the motor trade tells me that it is saddled with 6-cylinder cars it cannot sell, as commuters fill the buses and the rail carriages until there is standing room only, and they demand better services, Green warnings and Green solutions are at the centre of the public debate here and around the world. It is time they were heard by Governments.
It is interesting how little support there has been for the last-ditch stand of the flat earth climate deniers, who have just launched their climate science coalition. Even a year ago they would have got some traction with the wishful thinkers. But over the last year the public have seen the evidence piling up.
Managing an economy is about managing not just financial capital but natural capital while at the same time taking care of human capital. We have more than 20 years of research and practical application that charts ways of doing this. We have international measures for the ecological footprint of nations and the genuine progress indicator can be applied universally. Yet we continue to measure only money flows in the market exchange. As long as we count only the growth in the exchange of goods and services we will not move beyond flat-earth economics. Growth in the money value of what we buy and sell only makes sense in a world where there are no resource constraints and where unlimited pollution can be absorbed by an unlimited environment.
But the earth is not flat.
So we find this Budget disappointing in the areas that really matter - future proofing our country against the challenges that are approaching. As in the last term we will not vote for it. Looking across the House there is nothing we could vote for there either, so we will abstain, independent and free to make up our own minds on each issue.
Speech held before the New Zealand Parliament on 18.5.2006 by Jeanette Fitzsimons, Member of Parliament for the New Zealand Green Party.
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