2. SHANE JONES (Labour) Link to this
to the Minister of Finance
What advice has he received on fiscal policy?
Gerry BrownleeI raise a point of order, Madam Speaker. I put it to you that this question is completely out of order. If the process that goes into questions each day is considered, one finds there is a requirement that those asking questions take down some verification to back up their questions. Michael Cullen has been Minister of Finance for far too long—7-odd years—and in that time he would have received, I am sure, an enormous amount of fiscal policy advice. I wonder why the Labour Party appears to have got away with not turning up with absolute truckloads of advice and with perhaps being able to pin it down to one small bit of advice, without being specific about what it is.
Madam SPEAKER
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
Recently there have been a number of warnings about any large loosening of fiscal policy. Most recently, those have come from Standard and Poor’s, and also from Fitch Ratings and New Zealand private sector commentators. Those views are consistent with Treasury advice. They occur against the background of a very large current account deficit—nearly 10 percent of GDP—inflationary pressures, a tight labour market, and rising business confidence.
Hon Dr MICHAEL CULLEN Link to this
I have seen a report that suggested an approach of incremental tax reform and not big bang tax cuts, on the basis that “we will not be sacrificing valuable public services to lower taxes”, and I welcome that endorsement from Dr Brash. I have also seen a suggestion by Mr Key that taxes should be cut by $11.5 billion a year. In the absence of corresponding expenditure cuts—more than the entire spend on health—that would lead to gross debt rising from $36 billion now to $105 billion over the next 5 years. Twenty years of fiscal effort would be thrown away in a mere 5.
John KeyHas the Minister seen the comments of the former Deutsche Bank chief economist Ulf Schoefisch, who used the Dominion Post recently to describe him as “presiding over one of the most extreme approaches to fiscal strategy in the OECD.”; or does he just consider that to be an ideological burp, in the same way that he considers all the advice he gets from Treasury?
Hon Dr MICHAEL CULLEN Link to this
No; I often respect the views expressed by Mr Schoefisch. He is an excellent economist in many respects, but he also tends to criticise the Reserve Bank, and has done so for many years, as I am sure Dr Brash will recollect.
Gordon CopelandIs he satisfied that the burgeoning fiscal surplus meets one of the preconditions that will enable the business tax reductions and additional rebates for charitable gifts originally proposed by United Future, and now included in the confidence and supply agreement, to proceed; if not, why not?
Hon Dr MICHAEL CULLEN Link to this
At this point, no, I am afraid I am not. It should be noted that the surplus for 2005-06, as a portion of GDP, is slightly lower than it was in 2004-05. But, more important, there is considerable doubt about the revenue track on the forward path, and that is what counts in terms of the scope of any tax cuts that will come into force on 1 April 2008.
Dr Don BrashDoes the Minister recall saying in a speech to a Hong Kong business audience in early 2000 that he favoured a company tax reduction as soon as fiscal conditions allowed; if a surplus of $11.5 billion in the latest year is not sufficient fiscal headroom to enable a company tax cut, what fiscal surplus would be needed to make that feasible?
Hon Dr MICHAEL CULLEN Link to this
First of all, of course, a simple accounting change in revenue accruals, which accounts for $1.8 billion of that, should be completely ignored. Second, I am quite sure that if the member, after he is overthrown by Mr Key, should ever get back near to being a central bank governor, he would recognise that in a situation of inflationary pressures he would not favour a loosening of fiscal policy.
Rt Hon Winston Peters Link to this
I ask the Minister, having regard to the alarming deficit, in his consideration of future tax cuts will he focus on the need to assist exporters more than any other group in this country, given, as I say, the deficit that we currently have?
Hon Dr MICHAEL CULLEN Link to this
I think that that is a very important consideration. It is interesting that the commentary on the business taxation review so far has tended not to represent well the views of exporters and those engaged in research and development, but basically to represent the views of the foreign-owned service sector, which simply takes profits out of the country.