1. CHARLES CHAUVEL (Labour) Link to this
to the Minister of Finance
What are the main features of the Crown Financial Statements to the end of January 2008 released today?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
Today’s Crown accounts for the first 7 months of the financial year show the operating balance in deficit by $394 million, which is some $4.2 billion below forecast. This primarily reflects the lowering of forecast returns for the Crown financial institutions, as a result of the equities market disturbances in January, and a substantial revaluation of the Accident Compensation Corporation’s claims liability, a largely technical adjustment.
What will be the impact of the headline operating deficit on the Government’s ability to meet its obligations to New Zealanders?
Hon Dr MICHAEL CULLEN Link to this
Because the Government has resisted calls as recently as yesterday to squander the so-called surplus, we will be able to meet our obligations to New Zealanders. When times are hard, we will not have to cut superannuation as Bill English did on 1 April 1999. Every day in Government is about making choices, and we have made choices for the future and kept our eye on the long term.
Hon Bill EnglishWhat is the Minister’s response to the statement in the Monetary Policy Statement from the Reserve Bank that any tax cuts over and above the $1.5 billion he mentioned just a couple of months ago would have an inflationary effect; and does he intend to back down on his promise made just a couple of months ago that there would be tax cuts in excess of $1.5 billion?
Hon Dr MICHAEL CULLEN Link to this
I will be considering carefully what the Reserve Bank says, and will continue to take into account its views. Of course, it is making certain assumptions about a certain date and a specific fiscal year. But I do note, of course, that $11.5 billion in tax cuts was promised as recently as 16 months ago by Mr Key. But perhaps clarification will be issued, and an apology to the APN chief executive.
Hon Peter DunneDoes the Minister’s answer to the previous question, and his comments about Governments meeting their ongoing obligations, mean that the tax cut programme that he foreshadowed as being announced in this year’s Budget will continue?
Hon Dr MICHAEL CULLEN Link to this
Yes, there will be a programme. The exact nature of the works to be performed and the length of the programme are yet to be decided.
Jeanette Fitzsimons Link to this
If the Minister still believes, then, that tax cuts are affordable, despite the provision made for them being less than the deficit we have just heard of, will he be funding them by borrowing, by cutting services or, instead, by taxing pollution and waste as the Greens advocate?
Hon Dr MICHAEL CULLEN Link to this
It is important to note that although the operating surplus is actually in deficit for the first time for 15 years, the operating balance exclusive of gains and losses is still in very substantial surplus. As I have explained for some years, it is those measures that are more important. Operating surpluses reflect the movement in revaluations and the movement in gains and losses on Crown financial institutions. As the Superannuation Fund becomes larger, the volatility of the operating surplus will grow, as those unrealised gains and losses tend to become larger because of market fluctuations.
Hon Dr MICHAEL CULLEN Link to this
I have received many. When the operating balance hit $11.5 billion just 16 months ago, Mr Key told New Zealanders that they were being overtaxed by $2,875 per year, and that all of the operating surplus could be delivered back to them in tax cuts without cutting Government spending. I am awaiting Mr Key’s press statement announcing that the National Party policy is now one of tax increases. Given the events of this week, that is quite possible.