3. CHARLES CHAUVEL (Labour) Link to this
to the Minister of Finance
What is New Zealand’s national debt, and how does it compare with other OECD countries?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
I thank the member for his excellent question. It was such a good question that the National Party tried to adjourn the House for the general election to avoid it being asked—only a minute ago. As at 31 March 2008 New Zealand’s national debt, as measured by a negative net international investment position, was 86 percent of GDP. Only Iceland had a higher level of national debt on such a measure, and with the decline of the value of the New Zealand dollar we can expect to see New Zealand’s national debt increasing as a percentage of GDP.
Can the Minister explain the consequences of this high national debt and what the Government is doing to address this problem?
Hon Dr MICHAEL CULLEN Link to this
New Zealand’s high national debt reflects a very long period of very low savings by New Zealanders, and that means we have structurally high interest rates, which increase the cost of living for New Zealanders and the cost of capital for New Zealand businesses. Irrespective of the stage of the monetary policy cycle, we have structurally high interest rates in New Zealand. To tackle that high level of indebtedness, this Government has introduced KiwiSaver, which is leading to a major shift in the savings pattern of New Zealanders—some 750,000 New Zealanders have now joined KiwiSaver. We have also introduced a task force on strengthening the capital markets, to build stronger capital markets for New Zealand’s future.
Hon Bill EnglishCan the Minister explain why, when Government gross sovereign issue debt was 30 percent, he said it was prudent; when it was 27 percent he said it was prudent; when it was 25 percent he said it was prudent; when it got under 20 percent he said it was prudent; but when someone says it might be 22 percent, he says that is hilariously, ridiculously reckless?
Hon Dr MICHAEL CULLEN Link to this
It is clear that the member does not understand this—as he does not understand Working for Families, which is “communism by stealth”, we learnt from Mr Key not so very long ago. What, of course, this Government has not done is to borrow for tax cuts, which Mr English is promising to do. The last time we saw a Government promise to lift debt in order to pay for the groceries was under Mr Key’s self-professed adolescent hero Sir Robert Muldoon.
I raise a point of order, Madam Speaker. I asked a very specific question related to a series, actually, of statements made in Budgets—which are documents tabled in this House, so the Minister would know about them—about why he said debt was prudent at 29 percent, at 27 percent, and at 24 percent, but was reckless at 22 percent. It was quite a specific question, and he did not even bother to try to address it.
Madam SPEAKERHon Dr MICHAEL CULLEN Link to this
I am proud of the fact that we have under-promised and outperformed on every occasion. That member continues to over-promise and underperform.
Hon Jim AndertonIs there any difference between an ordinary person who sells his or her house to pay off the mortgage and ends up with nowhere to live, and a country that sells all its assets to pay for tax cuts and then, after the assets are all sold, cannot afford to continue the tax cuts because there are no further assets left to sell?
Hon Dr MICHAEL CULLEN Link to this
No, essentially not. When assets are sold, then, of course, the future revenue stream is also foregone, which is the answer to the question that Mr Copeland was trying to raise previously. It is extraordinary that Mr English should have mused about the desire—
Hon Dr Nick SmithHon Dr MICHAEL CULLEN Link to this
Who bought back Air New Zealand is this Minister of Finance; the member seems to have forgotten that. In fact, I am the Minister of Finance who bought back Air New Zealand, bought back New Zealand rail, and helped to set up Kiwibank—and those members over there dribbled with envy and spite about that reassertion of the role of the Government in New Zealand’s sovereignty.
I seek leave to table the list of 17 State assets sold by Labour when Michael Cullen and Helen Clark were in Cabinet.
Hon Dr MICHAEL CULLEN Link to this
I have seen a report that argues that even though New Zealand has the second-highest national debt in the OECD, it does not have a debt problem. The report calls for more borrowing and high deficits, and it foreshadows the sale of Government assets. Of course, in respect of that last part, National did not count on resistance; hence the forced confession outside the National Party caucus room today. What New Zealand needs is not that kind of programme but more savings and more investment that is funded out of our own savings. It does not need National’s one big new idea, after nearly 9 years in Opposition, for economic growth: more borrowing. That is the one idea it has thought up in nearly 9 years.