2. Dr the Hon LOCKWOOD SMITH (National—Rodney) Link to this
to the Minister of Finance
What is the cumulative total of any operating balance surpluses between 2000 and 2006?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
The cumulative operating balance excluding revaluations and accounting changes figure over the 7 years is $35.5 billion. That has enabled us to reduce net debt by $13.7 billion and invest $9.9 billion in the Superannuation Fund, and, particularly over the last 2 or 3 years when the exchange rate has been high and monetary policy has been tightening, fiscal policy has continued to lean against inflation.
Dr the Hon Lockwood Smith Link to this
Is the IMF wrong when it states in its recent analysis of the New Zealand economy, released publicly this month, that the fiscal surplus has risen to levels well above that required to meet his fiscal objectives; if the IMF is not wrong, is this further evidence of the consistent over-taxation of New Zealand workers and businesses by his Government?
Hon Dr MICHAEL CULLEN Link to this
I remind the member that yesterday his party’s spokesperson on finance asked me a question about the same report, which suggested that we should actually be maintaining a large fiscal surplus at the present time. It would be helpful if the National Party could get its position on macroeconomic management consistent from one day to the next.
Dr the Hon Lockwood Smith Link to this
I raise a point of order, Madam Speaker. The Standing Orders require the Minister to address the question and not make comments about other members of this House. My question was very clear: is the IMF wrong when it states in its recent analysis, released this month, that the fiscal surplus has risen to levels well above that required to meet his fiscal objectives; if the IMF is not wrong, is this further evidence of the consistent over-taxation of New Zealand workers and businesses by his Government? It was a very clear question. The House deserves an answer.
Madam SPEAKERI thought the Minister did address the question. He did make other comments, but they were in response. But that was addressing the question.
Dr the Hon Lockwood Smith Link to this
Why, given periods of low inflation and high surpluses, has he not taken the opportunity to cut taxes in any of his Budgets over the past 7 years?
Hon Dr MICHAEL CULLEN Link to this
I have. I invite the member to read the Budgets again. There were substantial cuts to business taxation and there were the Working for Families tax credits, which mean we now have the second-lowest tax wedge on the average wage for a family with two kids in the developed world. I also invite the member to read the IMF report more closely about the difference between the fiscal issues and the macroeconomic issues. He clearly has not read that part of the report.
Charles ChauvelWhat reports has the Minister seen on the impact of announcing large-scale tax cuts in a macroeconomic climate such as ours?
Hon Dr MICHAEL CULLEN Link to this
I have seen a report from Bloomberg this morning, which particularly relates to yesterday’s question, confirming what many commentators expected. The market has now priced in an almost certain interest rate rise in Australia following the tax cuts announced in this week’s Australian Budget, and that is the actual differential between the Australian and New Zealand exchange rate movements. I do not believe that either homeowners or exporters want higher interest rates in New Zealand, which would follow from large-scale tax cuts in this year’s Budget—which Mr English has been rejecting for the last 3 weeks.
R Doug WoolertonHave the surpluses been earmarked for future services and projects, and are these surpluses likely to extend to future years?
Hon Dr MICHAEL CULLEN Link to this
I think the first point to note is very important. The operating surplus includes the transfers to the New Zealand Superannuation Fund and the earnings in the Superannuation Fund. We need to run an operating surplus of approximately 3 percent of GDP simply to keep gross debt to GDP ratio constant. That amounts to the sum of $5 billion a year in the size of the current economy. Above that, the surplus is above what is required to meet the debt target. But they were required for macroeconomic management, which is what has happened in the last 2 years.
Dr the Hon Lockwood Smith Link to this
Is the IMF wrong when, in its recent analysis of the New Zealand economy, it recommends shifting towards greater tax reductions and smaller expenditure increases; if so, why is the IMF wrong with that recommendation?
Hon Dr MICHAEL CULLEN Link to this
I do not disagree with this; this is where there is a legitimate case for discussion about whether one has tax cuts or Government spending. I note that Business New Zealand today actually said what those cuts in Government spending should be in order to have a smaller size of Government—which Mr English will not tell us. It nominated the following: first, income and asset test New Zealand superannuation; second, cut Working for Families; third, cut the rates rebate scheme; and, fourth, put interest back on student loans. I thank Business New Zealand for telling us what National’s secret agenda actually is.
Dr the Hon Lockwood Smith Link to this
After 5 consecutive years of tax reductions in the Budgets of the Minister’s Australian counterpart, is it correct that the net after-tax income of a person working at the average hourly wage in Australia has risen by 33.6 percent, while the after-tax income of a New Zealander working at the average hourly wage has increased by only 18.9 percent?
Hon Dr MICHAEL CULLEN Link to this
Economic growth in the two countries has been roughly similar. The main differential movement has been in terms of gross wages. That has been because Australia had more union power, pushing gross wages up. The right-wing Government in Australia has now changed that situation. The National Party has actually promised to loosen New Zealand’s labour market, not tighten it.
Dr the Hon Lockwood Smith Link to this
How is it that the Minister’s Australian counterpart has been able to both increase spending and reduce taxes every year over the past 5 years, while the Minister has been able only to increase spending?
Hon Dr MICHAEL CULLEN Link to this
That is not true. Indeed, there will be tables in the Budget summarising what has happened on taxation over the last few years, showing significant reductions in both business taxation and in taxation on savings, and an increase in tax credits for low to middle income families. Those people who have children and are on modest incomes very much appreciate it. I keep on getting stopped in the street by people thanking me for Working for Families. I do not expect Dr the Hon Lockwood Smith to thank me for that.