4. Hon BILL ENGLISH (Deputy Leader—National) Link to this
to the Minister of Finance
What is the cumulative total of any operating balance surpluses for the years 2005, 2006, and 2007?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
The cumulative total was $26.4 billion. That is accounted for by accounting changes and revaluations of net $940 million; contributions to earnings on the New Zealand Superannuation Fund of $8.1 billion; net retained surpluses of State-owned enterprises and Crown entities, which includes the other Crown financial institutions, of $5.3 billion; purchases of fiscal assets of $5 billion; and advances and capital injections, such as loans to district health boards and tertiary students, of $5.8 billion.
Why, in 2005, election year, when the surplus was $6.2 billion, did the Government say that it could afford tax cuts, but then in 2006, which was the year after the election, when the surplus was almost twice as much, at $11.4 billion, the Government said it could not afford tax cuts?
Hon Dr MICHAEL CULLEN Link to this
If one refers to the Budget this year, where the clearest statements were made around that matter, I said quite clearly there was room for movement in that respect fiscally, but the macroeconomic circumstances demanded a tight fiscal position. The reality is that if the member’s policies had been followed—his leader promised $11.7 billion of tax cuts in 2006—then interest rates would have had to go through the roof as monetary policy tried to counteract that massive fiscal stimulus.
Hon Mark GoscheHon Dr MICHAEL CULLEN Link to this
Our approach has leant against domestic inflationary pressures, it has acted as a buffer in terms of the major shocks in the world economy, and has allowed us, as many international commentators have pointed out, to be one of the best-placed nations to face the challenges of an ageing population. We have also been able to redress National’s decade of underinvestment in infrastructure, and to address National’s long period of increasing poverty amongst children. When it left office, one-third of New Zealand’s kids were living in poverty.
Will the Minister answer the question I asked him before, which was this: why, in election year 2005, when the surplus was $6.2 billion, did he say he could afford tax cuts, but in 2006, the year after the election, when the surplus was $11.4 billion, he decided he could not afford tax cuts, and cancelled the ones he had promised?
Hon Dr MICHAEL CULLEN Link to this
The member now understands why I gave him the answer I did. It was not in 2006 that the second decision was made; it was in the 2007 Budget.
Why should the public believe anything this Minister says about lowering taxes, when the last time he promised to lower them was in 2005, which was election year, and then he went and cancelled that promise after the election?
Hon Dr MICHAEL CULLEN Link to this
I see that the member has now corrected himself and understands that in fact that change in policy was made in the 2007 Budget, not the 2006 Budget. His research is very poor, as per usual. The member will simply, in some famous words, have to wait and see, and he may well have to eat his words; and we do not confidently predict that he will.
Rt Hon Winston Peters Link to this
Could I ask the Minister of Finance, as Minister of Finance when he is preparing Government economic policy, does he consult his Cabinet colleagues and the Prime Minister or does he just make any old comment he likes in the hope that somehow his leader will adjust to it, one day?
Hon Dr MICHAEL CULLEN Link to this
I thank the member for his question, which gives me a chance to correct a rather common misimpression. Budgets under this Government are produced collectively and are signed off collectively by Cabinet, and are prepared in close consultation with the Prime Minister.
Does the Minister recall his statement last year: “If we were to clear the headroom for tax cuts, it would mean huge cuts in spending.”, and how is it that now that election year is coming, he believes he can have tax reductions without any huge cuts in spending?
Hon Dr MICHAEL CULLEN Link to this
I am sure the member is aware that in Budget 2006, Treasury was forecasting a cash deficit of $1.5 billion. I do not make up those estimates; they are arrived at by Treasury. Because growth has been stronger, because we have maintained record low unemployment, because we have maintained record high employment participation, tax revenue has been up and expenditure down, on forecast. That is a matter for celebration, although the member does not seem to realise it. Treasury is now saying that it believes it will be able to revise upwards its future revenue forecast. That creates headroom, without affecting the Government’s broad fiscal targets in terms of debt and the impact on the macroeconomy.
As he has now confirmed that the Labour Government believes there is headroom to deliver lower taxes without big spending cuts, why does he believe there is no headroom for National to deliver lower taxes without big spending cuts, or is he going to stick to his hysterical fear campaign?
Hon Dr MICHAEL CULLEN Link to this
That is because, just occasionally, I take the member at his word, and he said he has got to raise debt in order to afford his programme.
Heather RoyIs the Minister aware that the operating surplus announced today would be equivalent to an across-the-board tax rate of 20c in the dollar, keeping the 15 percent rate for low-income earners at around $8.8 billion; and why does his Government refuse, given these huge surpluses, to give hard-working Kiwis meaningful tax cuts?
Hon Dr MICHAEL CULLEN Link to this
What the member is saying is that the Government should have run a $6 billion cash deficit. That would have required increased borrowing, in 1 year alone, of $6 billion—an increase in our gross debt of about 16 percent in 1 year, requiring next year another nearly half a billion dollars of spending on just servicing that debt, with at least a further $6.5 billion of cash deficit. If that is what the member is saying, it is no wonder ACT is down to two members, one of whom spends nearly all his time dancing or doing something else.