3. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance
What was net core Crown debt as a percentage of GDP as at 30 June 2008, and what is the most recent forecast of current levels?
Hon BILL ENGLISH (Minister of Finance) Link to this
At 30 June 2008, when the New Zealand economy had already been in recession for 6 months, net core Crown debt was 5.7 percent of GDP, but the signs were very worrying. By the time of the Pre-election Economic and Fiscal Update in October 2008, before Labour left office, forecasts showed net debt jumping to 26 percent of GDP by 2018-19, plus a decade of deficits. This was before the global financial crisis. By the time of the December 2008 update, the forecast had deteriorated further, with net debt soaring to about 50 percent of GDP, and never falling, as well as permanent deficits. Within a few weeks of taking office, this Government had to deal with a sharply deteriorating fiscal outlook, in the first place because of reckless Labour mismanagement, and, secondly, because of the global recession.
Mr SPEAKERThe member put down a question on notice that asked for the comparison between net core Crown debt as a percentage of GDP at 30 June 2008 and the most recent forecast of current levels. I let the Minister go on to explain the change in forecasts towards the end of 2008, because it was of relevance to the question. However, he failed to provide the most recent forecast of net core Crown debt, and instead went on to attack the Opposition. That was not in order, but I ask the Minister though to complete answering the question. Since it is a question on notice, I ask him to provide the House with an answer to the second part of the question.
Hon David Cunliffe Link to this
Having inherited close to zero net Crown debt on taking office, and having cancelled two rounds of personal tax cuts in Budget 2009, why does the Minister now believe it is fiscally prudent to borrow further to fund tax cuts in Budget 2010?
The member is just wrong about the situation the Government inherited. The Pre-election Economic and Fiscal Update in October 2008 showed net debt jumping to 26 percent of GDP, and 2 months later the forecast showed an increase to 50 percent of GDP.
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. I appreciate your assistance so far in this debate. As you pointed out earlier, this is a question on notice and the Opposition worked hard to make it entirely factual and unembellished. The Minister earlier said that net core Crown debt, by his reckoning, was 5 percent, or thereabouts, at the first date specified. The Minister cannot now, in reply to a supplementary question, extrapolate from that to a number in the 20s and be within the bounds of the primary answer. I ask you to draw him back to his original answer to the question on notice.
I think that on this occasion the member is drawing quite a fine bow. In terms of the nearly zero net Crown debt inherited, he asked why the Government is doing certain things, and the Minister has challenged that claim of near zero net Crown debt. The Minister has pointed out that the Pre-election Economic and Fiscal Update established that was not the situation. I think it is within the Minister’s rights to use that relevant information in answering the question. To stop him from using relevant information in answering the question would be unreasonable.
Hon David Cunliffe Link to this
Can the Minister explain how New Zealanders will be better off when they have to pick up the tab for high-income tax cuts at the same time that he is increasing GST and making all the basics more expensive?
As I have pointed out to the member, he should wait for the Budget to look at the balance of any proposed increase in GST and any proposed reduction in income tax. The Government has always said the package will be broadly fiscally neutral because we need to correct the mismanagement of his previous Labour Government where property speculation and borrowing got out of control, along with Government spending. This Government is focused on earning the money before we spend it.
David BennettWhat would have happened if the current Government had made no changes to the economic policies it inherited?
By the time this Government took office it was clear that debt and deficits were spiralling out of control. As I noted in the Budget last year, if there had been no policy change, net Crown debt would have hit 62 percent of GDP, and climbing, by 2023. This would have been disastrous for the economy, resulting in a credit ratings downgrade, higher interest rates for households, businesses, and taxpayers, and would have cost thousands of jobs. So when the Opposition spokesman on finance looks at himself in the mirror every morning, as I am sure he does, how can he honestly claim his party left the economy in good order?