1. JEANETTE FITZSIMONS (Co-Leader—Green) Link to this
to the Minister of Finance
What steps, if any, will he take to reduce the current account deficit, and, in particular, what steps will he take to reduce the impact of rising oil prices on the current account deficit?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
I will continue to maintain a prudent fiscal policy, including the building up of the New Zealand Superannuation Fund, introduce the KiwiSaver scheme, subject to the approval of the House, and support the development of a better energy efficiency strategy. The Labour caucus is united on all these matters.
Jeanette Fitzsimons Link to this
If the Minister is keen to promote New Zealanders saving, what steps will he take to put limits on the trading banks’ aggressive marketing of credit to New Zealanders who cannot afford to keep on raising their mortgages to the hilt; and does he believe that prudential requirements for trading banks should be increased?
Hon Dr MICHAEL CULLEN Link to this
Prudential regulation of trading banks within the legislation is the preserve of the Reserve Bank. Of course, new rules relating to the Basel II two accords are being introduced in that respect. The Government has not interfered directly with credit controls of the sort suggested by the member for some 22 years now.
H V Ross Robertson Link to this
Is the Minister able to tell the House what reports he has received on policy proposals likely to exacerbate the current account deficit?
Hon Dr MICHAEL CULLEN Link to this
What a good question! I have seen reports that continue to call for large tax cuts despite the current fiscal macroeconomic conditions. Such a policy is likely to aggravate our current account deficit, now in excess of 9 percent of GDP, as well as boosting inflation and raising interest rates. Of course, someone who takes out a mortgage only to qualify for a Wellington accommodation allowance is not worried about interest rates.
John KeyWhen the Minister issued his press release this morning congratulating himself on his economic management of the country, was he reading the same report I was reading—stating that the current account deficit is now worse than it has been at almost any time in New Zealand’s history; when he came out and said that there were hopeful signs that things would improve, had he bothered to read the report from Jason Wong at First NZ Capital that states things are going to deteriorate to 10.5 percent; and is this the same Minister of Finance who when he was in Opposition, and the current account deficit was 2 percent of GDP, campaigned on doing something about it, and what he has done about it has been that he has blown it out?
Hon Dr MICHAEL CULLEN Link to this
I certainly do not recall the last part. On the first part, indeed we have a very large current account deficit. I hope the member understands that the current account deficit is the gap between our investment and our savings. What that member wants to do is to reduce our savings further, and he does not back the Government’s initiative to lift savings through the KiwiSaver scheme.
Jeanette Fitzsimons Link to this
Is the Minister concerned that oil imports accounted for some 70 percent of the merchandise trade deficit and, further, that a drop in the value of the dollar resulting from the deficit will increase the cost of oil to New Zealanders even further; if so, is it not time the Government had a proactive strategy to reduce the dependence of New Zealand’s economy on oil imports?
Hon Dr MICHAEL CULLEN Link to this
The Government has a proactive energy efficiency strategy being developed. The member is the Government’s spokesperson on that matter.
Jeanette Fitzsimons Link to this
How will the Minister’s refusal to build more passenger rail infrastructure in Auckland and Wellington, and his $1.5 billion roading binge, reduce our reliance on oil and improve our worst-ever current account deficit?
Hon Dr MICHAEL CULLEN Link to this
The Government has increased spending on passenger transport some sevenfold already. Over the next 2 or 3 years it will spend many hundreds of millions of dollars upgrading the rail infrastructure in Auckland. I have not refused to invest in passenger transport in either Auckland or Wellington. What I have demanded of the Auckland Regional Council—the sole proponent—is that before it puts proposals it has to have a proper supporting business case, particularly if it does not expect to pay for the work itself.
Jeanette Fitzsimons Link to this
Does the Minister believe the Reserve Bank prediction that oil will return to $45 a barrel, the Treasury prediction that it will flatline at around $68 a barrel, or neither; and is he concerned that the difference between these two official forecasts made at the same time is greater than the total price of oil was in 2002?
Hon Dr MICHAEL CULLEN Link to this
Oil was very cheap in 2002. The current price of oil in real terms is very similar to what it was in 1981.
Hon Murray McCully Link to this
I raise a point of order, Madam Speaker. I note that in the course of asking his supplementary question Mr Robertson was wearing a scarf carefully arranged to identify the name of Adidas, the international sportswear company, and to display it for the benefit of the cameras. Members on this side are, of course, alive to the wide vista of commercial opportunity now available to us as a consequence. Before we all rush off and make such arrangements, I invite you to perhaps give a considered ruling on the practice before we proceed too far down that track.
Hon Dr MICHAEL CULLEN Link to this
Speaking to the point of order, I think that that is a very important point. Members opposite should wear scarves saying “Exclusive Brethren”, because they have already been sponsored.
Madam SPEAKER