2. AMY ADAMS (National—Selwyn) Link to this
to the Minister of Finance
What will be required to produce balanced growth in the economy over the next few years?
Hon BILL ENGLISH (Minister of Finance) Link to this
A change in policy to correct the economic mismanagement of the last 10 years will be required. Too much growth has been sourced from borrowing and Government spending, and too little from exports and productive investment. The Government is implementing a range of policies to tilt the playing field in favour of investment, saving, working, and exporting, so that we do not go round the same cycle of excessive borrowing and spending.
According to GDP statistics, the economy grew by 7 percent in the 5 years to March 2009. The tradable sector—that is, exports, tourism, and anything that competes with overseas production—fell by 10 percent, while the non-tradable sector grew by 15 percent. In particular, over the last 5 years Government administration grew by 32 percent, when the economy grew by 7 percent.
Hon David Cunliffe Link to this
Can the Minister explain how cutting research and development tax credits and New Zealand Trade and Enterprise programmes will promote exports and close the external imbalance?
That member and the previous Government spent hundreds of millions of dollars on programmes meant to encourage exports, yet they dropped by 10 percent through one of the strongest periods of growth that the world economy has ever seen.
Hon David Cunliffe Link to this
Can the Minister explain why it is a priority to increase GST to 15 percent in order to pay for cuts to the top tax rates, as was suggested in the media recently by the Treasury appointee to the tax review?
The tax review has been told to give us its best advice, and we expect to get that advice from it towards the end of this year, or early next year. Unlike the previous Government, we do not stand over our advisers and forbid particular thoughts.
We need to make sure that the Government does not continue to grow its spending at twice the rate of its revenue. There will be no repeat of the 32 percent increase in real Government administration costs that has occurred over the last 5 years. New Zealand’s productive base will benefit from there being increased skills and innovation, better regulation, and more productive infrastructure.
The proposed solutions I have heard from the Opposition are somewhat confused. On the one hand we have the Leader of the Opposition, Phil Goff, promising to spend more money on everything; on the other hand David Cunliffe was honest enough to acknowledge that the current account deficit had stayed high, savings performance had been poor, and productivity growth had been low under the previous Government. We can add that exports actually shrank, despite the expenditure of hundreds of millions of dollars to grow them.
Hon Jim AndertonAs the Minister seems to be very keen on budget cuts for Government departments and administration in general, can he tell the House how much the budget for Treasury—his own department—was cut this year?
As it happens, I have looked into that. The Treasury baseline will drop from $65 million last year to $60 million in 2 years’ time.