7. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance
Does he stand by his statement that our total external debt “is clearly New Zealand’s single biggest vulnerability”?
Hon BILL ENGLISH (Minister of Finance) Link to this
Yes, and I will explain that just for the benefit of the member, who seems to want to make a significant problem worse. Last year the OECD said that New Zealand had “one of the OECD’s highest levels of foreign debt, the result of sustained and sometimes large current account deficits that reflect a long period of unbalanced growth”. By the time this Government was elected, simply servicing that external debt was costing over $13 billion, which was more than $6,000 per household, per year. That is one reason why New Zealand was placed on negative credit watch following the global crisis. We just escaped a downgrade, a sharp lift in interest rates, and a deepening of the recession, because of the responsible approach taken in last year’s Budget.
Hon David Cunliffe Link to this
When will the Minister make it clear to New Zealanders that of the total external debt, by far the majority is private debt rather than Crown debt; therefore, why is it that his solution to that problem is to cut, cut, cut needed programmes from the Government Budget rather than to address the private external debt at its core?
We have made it clear that a fair chunk of it is private debt. As it happens, over the next 4 or 5 years the growth in New Zealand’s external debt, which is currently $170 billion, will be largely driven by increases in Government borrowing, and it is forecast to reach $250 billion. That is why we want to manage Government expenditure. The member has a different view on that: he thinks that that is a low number, and therefore it does not matter if the Government runs up debt. We happen to disagree with him, and we are happy to debate the issue.
Amy AdamsAlmost all of the Government’s policies will lead to New Zealand being less exposed to this vulnerability. These include limiting the growth of Government debt and getting the Government’s books back into surplus; being responsible with new spending; restructuring the taxation system to deal with the underlying imbalance in the economy by encouraging savings, investment, and enterprise rather than encouraging borrowing, consumption, and property speculation; and investing in worthwhile infrastructure. Next month’s Budget will report progress on all of these fronts.
Hon David Cunliffe Link to this
If those are the Minister’s priorities, does he agree with Exporter magazine that the Government has shown apathy on the exchange rate, has low marks for adding value, is at the bottom of the class for abolishing market development grants, and that its focus on “ ‘digging exports out of the ground and growing more sheep’ will not make us a wealthy nation”?
No, I do not agree with that assessment. Last week I met with a large group of chief executives from our largest companies, and I have to say that their approach was much more constructive than that, as we worked through a programme of work to deal with the kinds of issues that the member has raised.
In the House the Opposition has often quoted the Australian Labor Government and its policies. The Opposition may be interested to know that yesterday Federal Treasurer Swann indicated that his Budget is committed to reducing the deficit and accumulated debt, operating within strict rules that limit new spending growth to 2 percent, delivering tax cuts, and continuing to fund worthwhile infrastructure. I must say that that all sounds very familiar. Our own Budget may well be fairly similar to that of the Australian Labor Government, and both those Budgets will be quite different from the approach outlined by the New Zealand Labour Party.
Mr SPEAKERBefore I call the next supplementary question, I ask both front benches, please, to be a little more reasonable with their interjections. I found it hard to hear the Minister during that answer.
Hon David Cunliffe Link to this
Can the Minister confirm that in suspending contributions to the New Zealand Superannuation Fund, giving tax breaks to polluters to continue polluting, cutting investment in research and development, and borrowing to give tax cuts to his rich mates, it is his Government that is mortgaging New Zealand’s future?
I am sure the member will be happy to outline in detail his plans to increase more rapidly the burden of debt that—
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. It is a well-established convention in the House that a Minister, particularly a Minister of Finance just before a Budget, cannot cover for his own lack of policy by inviting the Opposition to write it for him.