7. Hon BILL ENGLISH (Deputy Leader—National) Link to this
to the Minister of Finance
What are the forecast finance costs for the Government in 2008, and what were the actual finance costs in 2007?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
Economic and fiscal forecasts, including finance costs, are based on financial years, not calendar years. Therefore, there are no actual figures for 2007 or forecast figures for 2008. But to assist the member and the House, I shall give figures that are at a point in time: the gross sovereign issue debt at 30 June 2007 was $30.9 billion, and it is forecast to be $33.3 billion at 30 June 2008.
Can the Minister confirm that the cost of servicing the Government’s debt will be about half a billion dollars more for the fiscal year 2008 than it was for 2007, and does not this confirm the facts elucidated yesterday that the Government is borrowing more money when he is giving speeches saying that borrowing is a very bad idea?
Hon Dr MICHAEL CULLEN Link to this
Yes and no. I shall explain the “no” for the member—but I am sure he could find it out if he looked a bit harder. The Government for some years has been following a very consistent and constant bond issuance programme of about $2.5 billion per year. The reason for that is to smooth it over the forecast period in order to avoid market disruption, and to avoid variable maturation dates, and so to achieve, actually, reduced long-term borrowing costs bya constant programme. But, of course, the repayments reflecting past borrowings come in lumps. In the current year there is practically no bond repayment, and therefore the gross sovereign issue debt rises. On the other hand, the Government has more cash on hand, so the net position is not affected. So gross finance costs rise, but on the other hand the Government’s finance income also increases.
Does not that simply underline the fact that the Government is borrowing $2.7 billion this year, and it is spending an extra half a billion dollars of taxpayers’ money on servicing that debt; why does he not put that in his speeches, instead of carrying on as if he has never borrowed a cent?
Hon Dr MICHAEL CULLEN Link to this
I have just explained to the member that the Government, in order to actually reduce its long-term borrowing costs, has a constant borrowing programme. Repayments are variable. On the current forecast, for example, in a couple of years’ time the outstanding gross sovereign issue debt will be significantly lower than it is forecast to be at 30 June this year. The money we hold in cash is not actually being kept underneath the mattress where it is not earning any interest; it is actually earning interest at the same time. It is put into the short-term money market.
Given that the Government is borrowing $2.7 billion this financial year, what is it borrowing it for: its proposed tax cuts, its spending increases, infrastructure spending, or investing on the money market—which one?
Hon Dr MICHAEL CULLEN Link to this
I am tempted to say it is so that we can build a brick wall that that member can keep hitting his head against. I have just explained that we are borrowing a constant amount each year, because that reduces our long-term debt-servicing costs. We are borrowing because we have, apart from anything else, debt repayments to make from time to time, and, secondly, it has never been the Government’s policy to fund all expenditure, in terms of investment, out of current income.
Hon Dr MICHAEL CULLEN Link to this
That is not a new announcement. If the member looks at every Budget I have presented, he will see that, over the forecast period, we have projected going into cash deficits. There is nothing new. It is just that he has never bothered reading the Budget documentation before.
Rt Hon Winston Peters Link to this
If we are borrowing to roll over debt—adduced debt at that—over a period of years, then are we, in fact, increasing our borrowings or reducing them?
Hon Dr MICHAEL CULLEN Link to this
Reducing them. Indeed, we have reduced the Government’s gross debt from over 30 percent of GDP to under 19 percent of GDP at the present time. We have moved into a net asset positive position for the first time in New Zealand’s history. Had we put out $11.5 billion of tax cuts, as Mr Key called for less than 18 months ago, Mr English would be asking how come the Government’s borrowing position had gone up by $15 billion during the current year.
Given that the Minister could not answer the question about what he is borrowing for, why does he not read page 40 of his half-year update, where Treasury states that he is “increasing borrowings to meet the cash shortfall”; and does that cash shortfall arise from promising too much spending, from infrastructure spending, or from trying to store up cash for his tax cuts next year?
Hon Dr MICHAEL CULLEN Link to this
I invite the member to read page 40 again. It applies over the 4-year period. Every 4-year forecast has shown movement into cash deficit and, therefore, borrowing. The Government, I repeat, has never argued that we should in a normal year cover all expenditure, including capital investment, out of current income. What National has argued is that we should be borrowing for the Superannuation Fund and borrowing for tax cuts.
Why did the Minister say in his speech that any reference to borrowing is always associated with tax cuts when someone else says it, but when he talks about borrowing it is, apparently, normal management of the Government’s books?
Hon Dr MICHAEL CULLEN Link to this
Because although the member thinks he is very clever, right next to him sits the man—[ Interruption]
Madam SPEAKERIt is impossible to hear. Members say “Answer the question.” We will hear the answer in silence so that we can all hear the answer. [ Interruption] The member will leave the Chamber if he interrupts when the question is being answered.
Hon Dr MICHAEL CULLEN Link to this
Because Mr Key has argued that gross debt should be lifted to 25 percent of GDP, with an increase long term of borrowing costs of $700 million a year—[ Interruption]—and he has yet to mention any major item of spending, other than tax cuts, to explain the need for an increase in borrowing.
I am sorry, Mr English, but you heard me explicitly say that courtesy would be shown—that the answer would be heard in silence so that all could hear it. You deliberately interrupted when the Minister was speaking. I am very sorry to say it, but I gave my ruling.
Gerry BrownleeI raise a point of order, Madam Speaker. Mr English was responding to material that Dr Cullen was putting to Parliament under the veil of absolute silence, and with apparently no contest, that was totally wrong. You cannot expect us to sit here quietly in any circumstances and allow the Minister of Finance, the Deputy Prime Minister, free range to say something completely false about us and a position taken by members on this side of the House.
No, I am sorry, Mr Brownlee. I very rarely ask members to hear questions and/or answers in silence. That comes only after a period when it has been very difficult for members to hear. All members in the Chamber are entitled to hear the answers and the questions. I made that ruling because it was impossible to hear the particular answer, because of the shouting that was taking place. Members are entitled to hear that answer. If they do not agree with it, there are other supplementary questions—there are other ways to make the interventions. My ruling was done in that context, and therefore I stand by it as a warning to members that all members are entitled to hear questions and answers.
I raise a point of order, Madam Speaker. I accept your ruling and I will leave the Chamber, but I just want to say that I think we are getting into a bit of difficulty here with the arbitrary selection of particular exchanges that have to be heard in silence. It was the method in this House under previous Speakers that questions were asked in silence, and answers were subject to reasonable interjection. That has now changed to the situation where barracking is allowed during questions. Every time I ask a question I get consistent barracking from a noisy group of members opposite. Madam Speaker, you have this practice now of intervening in particular exchanges. There was no particular tension to the exchange between me and Dr Cullen. Other exchanges today have been so noisy that members could not hear the answer. My suggestion would be that we revert to a predictable and simple rule such as the one we used to have.
Hon Dr MICHAEL CULLEN Link to this
Speaking to the point of order, the problem with that suggestion, Madam Speaker, is that you have—quite rightly, in my view—reverted to the former rulings, which obtained for many, many years in this House. The difficulty was, of course, that it was a one-sided exchange. The members opposite got to ask their questions in complete silence, then Ministers were greeted by a barrage of noise the moment they rose to their feet. That is not exactly fighting on a level playing field.
I think that was actually the difficulty with that rule. The other thing is that members on the front benches face each. I also look at the members at the back who are about to leap to their feet to say they cannot hear what is being said. As Speaker, I have to take account of the interests of all members in the House, not only those who sit on the two front benches.
Hon Dr MICHAEL CULLEN Link to this
I seek leave to table Mr Key’s statement that National supports “a notional debt of GDP to around about 25 percent, so that’s gross debt.”
I raise a point of order, Madam Speaker. The deputy leader of the National Party has, obviously, accepted your ruling and has left the House. I note, though, that immediately following question time we have the Budget Policy Statement. Mr English is also our finance spokesperson. It would be appreciated if you could consider allowing his reintroduction to the House in time to participate in that debate.