2. CRAIG FOSS (National—Tukituki) Link to this
to the Minister of Finance
Why is it so important that the Government rebalance the economy towards savings and exports?
Hon BILL ENGLISH (Minister of Finance) Link to this
New Zealand families and households expect an economy that generates new jobs, secure jobs, and higher incomes. We must rebalance the economy because we will not be able to provide new jobs and higher incomes if we continue with economic growth based on too much consumption, too much Government spending, and too much borrowing.
Stronger economic growth makes an enormous difference over medium periods of time. Had the economy grown at, say, 3 percent since 2005—just above the OECD average over the last 5 years—GDP would now be around 10 percent or $20 billion higher than it is, and Government finances would be around $6 billion per year better off. A few extra percentage points of growth are well worth it for everybody.
Hon David Cunliffe Link to this
If the Minister is so keen on rebalancing the economy in favour of savings and investment, why did his Government cut in half the KiwiSaver incentives and completely remove the research and development investment incentives?
I am pleased that the member now understands that the economy needs significant rebalancing. To respond to the particular questions, I say that the Government replaced the previous Government’s Fast Forward Fund, I think it was—which did not actually exist or pay for anything—with real money, which is financing real innovation and science.
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. The question was a very simple one to try to draw from the Minister the link between rebalancing in favour of savings and investment and the removal of two policies that did exactly that. The Minister did not address that question. He talked about a third policy, the Fast Forward Fund, which was not raised in the supplementary question, at all.
Mr SPEAKERI will allow the member to repeat his question, because of uncertainty about it, and I will listen very carefully to it.
Hon David Cunliffe Link to this
If he is so keen on rebalancing the economy in favour of savings and investment, why did his Government cut in half the KiwiSaver incentives and completely remove the research and development incentive policy?
Because we did not think either policy was appropriate in the circumstances of what, under his party’s management, was a very poorly performing New Zealand economy, which was then hit by the global financial crisis.
Most of the benefits of a growing economy that flow through to the Government accounts also apply to families and households. Average household income today in New Zealand is $75,000 before tax. Had the economy grown at 3 percent since 2005, rather than the half percent that it actually grew, the average household would be about $5,000 a year better off. But instead of 3 percent growth—a bit above the average for the OECD—under Labour we had half a percent growth, so we missed out on that benefit.
The Prime Minister outlined a comprehensive suite of policy in this House several weeks ago. In particular, he outlined plans for changing the balance of taxation. We would be interested to know whether on the Opposition’s bus tour it will campaign on reducing GST and increasing income tax.
Hon Sir Roger Douglas Link to this
Does the Minister agree that the Government needs to help rebalance the economy through private sector job creation; if so, is he concerned at the high rate of youth unemployment, at 26.5 percent, and especially Māori youth unemployment, at 39 percent; if so, what does he intend to do about it?
I agree with the member that private sector job creation is the key to a sustainable recovery. The Government is overstretched. It is already borrowing too much money and cannot afford to employ more people, even if it wants to improve its services. I share the member’s concern about youth unemployment. The Government has invested in a number of schemes to provide youth with the opportunity to stay connected to the workplace, but we will need private businesses to have the confidence to invest and employ 18 and 19-year-olds, who may not have a strong track record in the job market.