3. CRAIG FOSS (National—Tukituki) Link to this
to the Minister of Finance
What challenges must New Zealand overcome to achieve balanced, sustainable economic growth?
Hon BILL ENGLISH (Minister of Finance) Link to this
One of our biggest challenges is that our net external liabilities—that is, the amount of money we owe to the rest of the world—increased by 60 percent in the 5 years ended March 2009. This was a product of some reckless economic management, and the by-product of an economy that relied on people spending too much and the Government spending too much. The situation is just beginning to improve.
Equity investment, or the ownership of assets in New Zealand by overseas people and of assets overseas by New Zealand people, is surprisingly balanced. As at March 2010, New Zealanders owned about $55 billion worth of equity investments offshore. This is lower than the $65 billion of equity that foreigners have invested here in New Zealand. Provided that this two-way investment is reasonably balanced and complies with investment rules both here and overseas, it can benefit our economy and overseas economies.
Although the position with assets is relatively balanced, unfortunately the situation with debt is very different. New Zealand’s offshore debt is more than three times what New Zealanders have lent abroad. In fact, the debt makes up almost all of our net foreign liabilities of $167 billion. It costs the Government and New Zealanders $10 billion per year just to service the $167 billion of debt we owe to the rest of the world.
Hon David Cunliffe Link to this
Kia ora. If the underlying imbalances in the economy are driven by a lack of saving, growing offshore debt, and an over-reliance on foreign capital, why did he slash KiwiSaver, defer pre-funding of New Zealand superannuation, and begin to liberalise the Overseas Investment Office rules?
The Government has taken a series of decisions designed to get on top of the reckless economic management of the last Government—
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. You have previously ruled that the Minister may refer to the actions of a previous Government if it is on point and tangential to his main point. He has begun his response to this very specific question about the policies of his Government by reference to the previous Government’s policy. I contend that that is outside your previous ruling on this matter, Mr Speaker.
Mr SPEAKERI can understand why the member has raised a point of order. I think we need to give the Minister a little opportunity to answer the question asked. If I rule out any comment on the actions of a previous Government, it makes it just about impossible. But the member will note that the Minister is not commenting on the Opposition’s current policies; that would be where I would absolutely draw the line.
Those decisions were made because Government finances were out of control when this Government came to power. They were out of control because of the reckless management of the Labour Government, and there is no sign that Labour has changed its attitude towards public money.
Government spending continuing to be out of control would not help the balance of our economy, nor would any actions that encouraged another housing boom, but, most important, New Zealanders are changing their habits. They are spending less, they are being more careful about their debt, and they made the very progressive move of voting the reckless Labour Government out of office.
Hon David Cunliffe Link to this
If the imbalances in the New Zealand economy require strong productivity growth for us to catch Australia by 2025, why did the Government cancel the research and development tax credit, cut economic development budgets, backtrack on mining, downgrade the cycleway, and drop the Job Summit, and why has it now lurched to cutting working conditions through the 90-day fire-at-will bill?
We did drop a lot of policies that Labour had spent a large amount of money on that simply did not work. The Government has got on with investing in infrastructure, cutting red tape, reducing taxes, increasing taxes on consumption and property, and making a real difference to the productivity—
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. In your previous ruling you helpfully clarified that it would depend on whether the Minister was referring to the policies of his Government or the previous Government, or to the Labour Party’s current policy, as to whether his answer was in or out of order. In his opening part of his reply he has referred to dropping a range of policies. Could we clarify, please, whether he is referring to the policies of the Opposition or to the policies—
I think we are starting to get into debating material. If the member reflects back on his question, he will see that he asked initially about issues of productivity—if productivity is important to the Government, why is the Government doing this? The Minister, in answering, is elucidating a number of what I presume to be the Government’s policies that he believes will have a positive impact on productivity. So I think he is answering the member’s question about the significance of productivity.
Dr Russel NormanDoes he stand by his comments that the family farm is a critical part of New Zealand’s economic future; if so, how does he expect family farmers to afford to buy rural land when they have to compete with overseas buyers with virtually unlimited funds?
The situation for people who own family farms is no different from what it has been for some time, with the exception that in the last 12 months there have been very few farm sales. Any people who own a farm in New Zealand today are welcome and able to buy the next-door farm, if they can afford it and if the bank will lend them the money. It turns out that they have not been willing to do that. It is also the case that some foreign investors are interested in buying farmland here, and that is always the case.