1. CRAIG FOSS (National—Tukituki) Link to this
to the Minister of Finance
What recent developments have occurred that may boost the New Zealand economy?
Hon BILL ENGLISH (Minister of Finance) Link to this
This morning the Reserve Bank reduced the official cash rate by 50 basis points, to, now, 3 percent. Two major banks have already reduced their lending rates by a similar amount. This is the lowest level since the official cash rate was introduced 10 years ago. Along with tax cuts on 1 April, this move will provide significant stimulus to the economy and assist in protecting people from the sharpest edge of recession.
Prior to the Reserve Bank forecasts today, which confirm that the economic outlook is consistent with the pessimistic views of Treasury before Christmas, I saw one comment from Dr Cullen in September. He was quoted as saying that the worst was over now and he was very confident the economy would start to pick up in December.
Hon Dr Michael Cullen Link to this
I raise a point of order, Mr Speaker. You may recall your ruling previously, that Ministers are not responsible for any comments they made before the election. It is hard to see, therefore, how they can be responsible for comments that I made before the election—even less so.
Hon Rodney HideI am certain it is obvious, and I am certain the Minister of Finance would not want to be responsible for those comments. He was not claiming responsibility for the comment. What he was asked was whether there were any reports that he had seen. This is a report that he has seen. It is a particularly nonsensical one, but he has seen it, none the less.
Hon Dr Michael Cullen Link to this
I have a feeling that we must make sure we have very even approaches to some of these matters, after your recent ruling. If we were to ask whether the Minister of Finance has seen comments that “New Zealand does not have a debt problem.”, made by him and Mr Key before the election; and, if so, whether he agrees with that comment, you would not rule that question out of order?
Mr SPEAKERI am very happy to rule on this matter because I think the matter is quite clear and I do not want to take more time in the House. The Minister has responsibility in that area, there is no question about that, and therefore he is able to comment on reports relating to that area. That is the crucial issue: it relates to his area of responsibility. I invite the Minister to continue his reply.
I am aware that Dr Cullen does not want to take responsibility for comments he made, but in September he was quoted as saying, in respect of the outlook for the economy: “The worst is over now.” and that he was “very confident” that the economy would start to pick up in the December quarter. Sadly, those predictions were premature at best. However, Dr Cullen was correct in one important respect: we have had the election since then and, in that respect, the worst is over.
Hon David Cunliffe Link to this
Does he agree with the New Zealand Herald and the Wall Street Journal that his Prime Minister, John Key, is taking a unique approach to this recession that is “cavalier”, and “at odds with the rescue policies being carried out in Washington, Tokyo and Canberra.”?
I think the Wall Street Journal has misunderstood the Government’s strategy. In fact, I am told its journalists decided what the story was before they got here. The fact is that the Government is following a two-pronged strategy. The first is to provide stimulus to the economy in the short term—to protect people from the sharp edge of recession. The second is to deal with New Zealand’s chronic longer-term economic problems so that we can get this economy in top gear as it comes out of the recession.
Hon David Cunliffe Link to this
To that end, has the Minister read on page 10 of the Reserve Bank’s report today that the aggregate stimulus in the G20 is around 10 percent of GDP? How does that compare with the Government’s 5 percent of GDP, of which 4.5 percent, by the Minister’s earlier admission, came from the previous Labour Government, and 0.5 percent from this National Government, just like the Wall Street Journal said, when 10 percent is the average around the world?
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. I seek clarification through you of the Minister. Is he accusing me of misleading the House—
Yes, the use of an aggregate stimulus measure is not appropriate for New Zealand, because that includes countries that are spending trillions on rescuing their banks. On a normal measure of stimulus, New Zealand is similar to other countries, and along with dropping interest rates the tax cuts will put cash in people’s pockets, which will help protect this economy from the worst edges of recession.