1. SHANE JONES (Labour) Link to this
to the Minister of Finance
What reports, if any, has he received on alternative approaches to fiscal policy?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
I have received one report that suggests that the Government should be loosening fiscal policy by borrowing more from overseas to fund tax cuts and infrastructure investment. I received another report that the Government should be tightening fiscal policy by cutting half a billion dollars from last month’s Budget. The first report was from National’s leader, John Key. The second report was from National’s deputy leader, Bill English.
Hon Dr MICHAEL CULLEN Link to this
The extra stimulus from Mr Key’s suggestion of a borrow and hope policy would further underpin inflation and drive the currency higher. Mr Key’s plan, even within that offset of half a billion dollars from Mr English, would inject twice the annual effect of the increased Fonterra payout cited by the Reserve Bank last week as the major reason for lifting the official cash rate.
Hon Bill EnglishCan the Minister confirm that late last year he issued infrastructure bonds—which is borrowing money for infrastructure—and that the Budget shows he plans to borrow $4 million over the next 3 or 4 years; and is that going to be for health spending or education spending, or for the Superannuation Fund, or for student loans spending?
Hon Dr MICHAEL CULLEN Link to this
Yes, indeed—and I thank the member for drawing that to the attention of his leader, who clearly was not aware that we were actually issuing infrastructure bonds. However, of course, the proposed additional borrowing of $2 billion a year over the next 4 years would significantly increase the debt to GDP ratio. Mr Key is quoted as saying that New Zealand is too lightly geared in that respect and that he favours higher debt.
R Doug WoolertonIs the Minister confident that the intervention yesterday by the Governor of the Reserve Bank can be sustained, thus leading to a permanently lower dollar?
Hon Dr MICHAEL CULLEN Link to this
As I said outside this House—and I repeat it inside this House—I will not comment on the specific actions of the Reserve Bank in that regard. The Reserve Bank has operational independence, and if I start a running commentary on what it does, either in this respect or in terms of interest rates, then that will obviously infringe upon that independence.