3. Hon BILL ENGLISH (Deputy Leader—National) Link to this
to the Minister of Finance
Does he agree with the Governor of the Reserve Bank that “the Government is a net contributor to resource pressures at the minute through the fiscal story.”; if not, why not?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
Yes, in relation to the relative change in the fiscal impulse measure. No, in relation to the overall operating balance position, because it is clear we will be running a cash surplus in the current year. That is hardly a loose fiscal policy. Indeed, I have been under attack for the last 4 years from the member opposite and his colleagues for running far too tight a fiscal policy in that respect.
Why is the Minister, in his last Budget, planning a significant boost to Government spending, when 2-year interest rates have reached almost 9 percent this week, the dollar is at 72c against the US dollar today, the current account deficit is at near-record levels, and a significant boost in spending could make all of these worse?
Hon Dr MICHAEL CULLEN Link to this
The boost this Government will be engaging in this year’s Budget—which will certainly not be my last—is significantly less than what that member was planning by means of very large tax cuts. He would have had $2.5 billion of personal tax cuts in place at last year’s Budget, more this year, and another $1.5 billion next year. I note he has described the business tax changes as something that should not be proceeded with.
Shane JonesHas the Minister seen any alternative assessments of the impact on monetary policy of the business tax review?
Hon Dr MICHAEL CULLEN Link to this
At this, the mid-point of my career as Minister of Finance, I have seen a report, by Mr English, that characterises it as part of a “wasteful spending binge”. On the other hand, the Governor of the Reserve Bank said that although the short-term effects might be mildly expansionary, the long-term effects will be to lift economic growth.
Do the Minister’s answers mean that after years of describing tax cuts as irresponsible and inflationary, he has now decided that when he is being forced to make a billion-dollar tax cut, tax cuts are no longer inflationary nor irresponsible?
Hon Dr MICHAEL CULLEN Link to this
I have never described a business tax cut as a “wasteful spending binge”, as that member has done. It is those kinds of comments that, once again, will put him back into trouble with the business sector, as he was when he was last finance spokesperson for the National Party.
Rt Hon Winston Peters Link to this
Could the Minister advise the House as to whether he has received any reports as to whether there are Governments anywhere in the world, of whatever political ilk, that have created fiscal pressure because of their expenditure; and has he received any reports as to whether the National Party has now decided to stop its myopic obsession with support for the Reserve Bank of New Zealand Act, as suggested by the questioner?
Hon Dr MICHAEL CULLEN Link to this
I have seen reports from Mr English that attack the Governor of the Reserve Bank for his failure, in Mr English’s view, to manage monetary policy. Actually, the member said that the Governor of the Reserve Bank had not used the monetary policy tools available to him, by which it seems he meant that the Governor should have lifted interest rates earlier, faster, and higher than he did.
Does the Minister agree or disagree with the bank’s assessment that his spending plans are putting pressure on monetary policy and that, therefore, interest rates for New Zealand householders will be higher for longer, as he tries to bid for their votes with taxpayers’ money?
Hon Dr MICHAEL CULLEN Link to this
That question comes from the finance spokesman of a party that has called, for example, for Herceptin to be funded for 12 months, not 9 weeks, and for the 20 hours’ free childhood education policy to be funded at a level whereby no early childhood centre would receive any less money for an hour’s provision than it does at the present time. There have been calls from that party for increased spending on Treaty of Waitangi issues. Mr English himself has called for large increases in operating grants to schools. Then he says that National will cut spending. Well, he should let us know which teachers, nurses, fire officers, Department of Corrections staff, police, and social workers will be cut by the National Party if it ever gets back on this side of the House.
Why is the Minister keen to misrepresent our policy but seemingly consistently unable to explain his own policies when asked in Parliament about, for instance, whether he agrees with the Reserve Bank that the effect of his spending binge in the next two Budgets will be to keep interest rates up higher for longer for New Zealand families?
Hon Dr MICHAEL CULLEN Link to this
I am not misrepresenting the Opposition, at all. I actually take its spokespeople at their word and do not assume that they are being hypocritical when they call for increased spending in their various portfolio areas. What I can assure the member is that over this 3-year term of Parliament, this Government will be running a much tighter fiscal policy than the member was planning at the last election—except, of course, that he did not plan it. Mr Key planned it, and Mr English did not agree with that policy.