3. DAVID BENNETT (National—Hamilton East) Link to this
to the Minister of Finance
What did publication of the Crown’s accounts for the year to 30 June 2009 reveal?
Hon BILL ENGLISH (Minister of Finance) Link to this
The Crown accounts confirm that the Government’s financial position has deteriorated significantly in the past year. In the year ended 30 June 2009, there will be an operating deficit of $10.5 billion, and cash deficits over the next 4 years will average between $10 billion and $12 billion. We will have to borrow an average of $250 million per week every week for the next 4 years to deal with these cash deficits.
The sharp increase in debt is driven by the big increases in expenditure under the previous Government, and by a decrease in revenue because of the recession. The Government’s finance costs will more than double. Currently, about $2.5 billion a year is spent on servicing debt. Over the next 4 years that sum will rise to $5 billion—just to service the debt. That $2.5 billion represents more than what the Government currently spends on the police and corrections services in total.
Hon David Cunliffe Link to this
What does the Minister say to the hard-working New Zealanders who are seeing prices for gas, electricity, and food increase while their weekly wage has not moved at all?
Those hard-working New Zealanders and a number of New Zealanders who have lost their jobs are paying the price for two things: one is the global recession and the other is 10 years of mismanagement under the previous Government.
Hon David Cunliffe Link to this
In respect of the Minister’s primary answer, can he confirm that at the start of the financial year in question—June 2008—New Zealand had zero net debt, half the gross debt it had in 1999, the world’s lowest unemployment rate, and 8 years of unstinting economic growth; and, in the words of Winston Churchill, will he stop telling lies about us before we—
Mr SPEAKERThe member must withdraw that last part, because the implication was very clear that he was accusing the Minister of telling lies. He knows that he cannot do that. I ask him to withdraw that last part of the question from the record.
At 30 June 2008 the New Zealand economy was in recession—before the rest of the globe. Government spending was growing at more than twice the rate of the economy, and, despite Labour’s protestations, we still had $35 billion worth of debt. Through those 10 years, the previous Government did not pay off any debt.
It is pretty important that people understand what actually happened in the last 10 years. Gross sovereign debt at 31 December 2008 was $40 billion, which was $3 billion higher than when Labour took over in 1999. Along the way, of course, we had accumulated some fantastic assets, like KiwiRail.
Apart from the poor shape of the Crown’s finances, what other economic challenges did the Government inherit?
There was, of course, a recession, which began in New Zealand at the beginning of 2008, well before it began in the rest of the world; an unexpected extra liability of $1 billion to be paid by the Government into the accident compensation earners account; an export sector that had been in recession for 5 years; and Government spending that was out of control.
Hon Jim AndertonIf things are so bad, having been disastrously handled by the previous Government, why did the Minister of Finance say on Radio New Zealand National that the reason New Zealand had come through the recession better than most countries was the good state of the Government accounts?