2. Hon BILL ENGLISH (Deputy Leader—National) Link to this
to the Minister of Finance
Will he invoke section 12 of the Reserve Bank of New Zealand Act 1989 now that the official cash rate has increased to 8.25 percent?
Why did the Minister raise the issue of intervention in monetary policy last week, when he knew that it would put pressure on the Governor of the Reserve Bank to raise interest rates this week, if only to prove his independence?
Hon Dr MICHAEL CULLEN Link to this
I do not believe that the Governor of the Reserve Bank is so petty as to wonder about who has got the biggest whatsit when he comes to make a decision about interest rates.
Hon Mark GoscheHon Dr MICHAEL CULLEN Link to this
Despite claims from those opposite, we continue to run what Standard and Poor’s—
Hon Dr MICHAEL CULLEN Link to this
No, actually, Iceland is twice as high in interest rates as New Zealand. Despite claims from those opposite, we continue to run what Standard and Poor’s have described as a conservative fiscal policy. That is why it confirmed our current credit rating. Dr Bollard acknowledges the importance of savings, which is one of the reasons why the Government’s KiwiSaver scheme is so important in the long term in redressing the imbalances in the economy. I wait to hear National’s position on those extensions of KiwiSaver.
R Doug WoolertonDoes the Minister share New Zealand First’s belief that it is time to rationally debate the failings of the Reserve Bank of New Zealand Act and consider introducing a far more coordinated approach between monetary and fiscal policy, both to combat inflation and to keep the economy balanced?
Hon Dr MICHAEL CULLEN Link to this
I am very encouraged by the way the select committee inquiry is already proceeding. A number of very interesting submissions have been made to the select committee. Clearly, Mr English has not read any of them. I would recommend them—for example, the submissions from ASB, the New Zealand Exchange, and a number of others. All are very interesting and very well considered, and it is quite interesting to have a debate on such matters.
After 7 years of mismanaging economic growth, what does the Minister have to say to a person with a 2-year $200,000 mortgage who now, when it is renewed, will face additional outgoings of around $45 a week, and to exporters who face an 80c-dollar—a level they never imagined possible—and if he wants to take all the credit for good economic management, should he not take the blame for the highest interest rates in the developed world and the highest exchange rate we have seen since the float?
Hon Dr MICHAEL CULLEN Link to this
We do not have the highest rates in the developed world. That is wrong, for a start. Secondly, the time when the member was the Minister of Finance was the only time we managed to get negative growth in the last 10 years. Thirdly, we have reduced unemployment to around 3.5 percent. Fourthly, we have had the longest period of sustained growth—the second-longest since the Second World War and the longest in the last 30 years. We have seen strong household-income growth and strong real personal-income growth. What about that does the member not understand?
How much less inflationary pressure would there be in the economy if the Minister had stuck to his original, and already generous, Budget spending allocation, rather than deliberately overspending it by $4 billion, as recorded in the pre-Budget Cabinet papers?
Hon Dr MICHAEL CULLEN Link to this
All the inflation measures so far are still reflecting a year in which the Government ran a cash surplus over $2 billion, took another $2 billion out by way of the New Zealand superannuation fund, and reduced demand by $4 billion - plus dollars in one year, while that member’s leader was still promising a tax cut of $2.5 billion dollars.
Does the Minister recall his own words in his own Cabinet paper, in which he stated that Cabinet should stick to the spending allowance because not to do so would “risk higher than necessary inflation and interest rates”; did he then go ahead and sign off a Budget that overspent those allowances by $4 billion, and was that not sacrificing homeowners and exporters in the cause of Labour’s big-spending re-election campaign?
Hon Dr MICHAEL CULLEN Link to this
First of all, the shift in the spending for the current year that we are now in mirrors almost exactly the shift in the forecast revenue for the current year that we are now in, so the balance remained the same. The second thing is that the two big initiatives in the Budget were the KiwiSaver extensions to expand our savings—which National cannot make up its mind about—and the business tax package, which cuts taxes for the productive sector. This member keeps calling for cuts in the bureaucracy while his leader is saying that public servants’ jobs are safe. They are the same people, you know.
Is the Minister now telling us that the one thing that might offset his big spend-up is the higher than expected tax revenue that arises from higher inflation—the tax revenue that will be paid by the same people who will be worse off by $50 a week because of these interest rate increases?
Hon Dr MICHAEL CULLEN Link to this
Let me explain it again to the member. This Government will be running cash deficits over the next 4 years on forecast that are much, much less than the total transfers into the superannuation fund. In other words, this Government will continue to take money out of demand in the New Zealand economy over that period of time. I remind the member that his leader has spent the last 4½ years attacking me for running excessively large surpluses, and suddenly National has decided that surpluses should be much bigger.
Can the Minister tell us just who has been more rattled by his erratic behaviour—[ Interruption] I raise a point of order, Madam Speaker. The Government is interjecting on every question that I ask. I know we can have some interjections on questions, but interjecting on every question is going a bit far.
Madam SPEAKERPlease be seated. I note that from the member, and I also noted that the member interjected constantly on the answers that were given. I just remind all members—[ Interruption] That member will leave the Chamber if he does that again. I just remind members that however tempting it is to comment, please keep your interjections rare.
When the Minister looks back at the last 6 months of various proposals he has floated that have been shot down, at the various times he has been shut down by the Prime Minister, and at his threat of intervention in monetary policy last week, who does he believe is more rattled by his erratic behaviour: Japanese housewives or his own colleagues?
Hon Dr MICHAEL CULLEN Link to this
At a time when the leader of the Opposition cannot wait to get out of this House because he is shaking so much whenever he is in it, we are not rattled at all.