1. AARON GILMORE (National) Link to this
to the Minister of Finance
What reports has he received on the economy?
Hon BILL ENGLISH (Minister of Finance) Link to this
The Westpac: McDermott Miller Consumer Confidence Index released yesterday shows an improvement in consumer confidence. It shows that the Budget tax cuts have generally exceeded expectations, and that a growing number of people believe they will be better off as a result of the changes. It is important, though, that despite growing consumer confidence, New Zealanders are choosing to save and pay down debt, rather than embark on another retail spending binge.
The GST - income tax switch initially sees an average family with two children about $25 a week better off, a typical average-wage worker about $15 a week better off, and a superannuitant couple about $11 a week better off. Even when the emissions trading scheme, a small rise in rents, and other forecast general inflation are taken into account, the benefits of the tax switch increase over time. That is because after-tax incomes are forecast to grow more quickly than price increases in the 4 years to 2014.
The benefits of the tax switch do increase over time. Taking into account all the forecast factors I have referred to, the benefit for an average two-child family increases to about $28 a week by October 2011, and then rises to about $41 a week by 2014. A typical wage earner is still about $15 a week better off in October 2011, rising to about $23 a week by 1 October 2014. Once the 170,000 new jobs forecast in the Budget are taken into account, total household disposable income from all sources, after tax, will increase by over 25 percent by 2014.
Hon David ParkerWhy did he break his promise to New Zealanders by borrowing for tax cuts, and was it to increase Government debt to justify his privatisation agenda?
No. As the Government pointed out at the time of the Budget, because we could not implement all the tax changes on 1 October 2010 there is about a $400 million cost that arises because of the timing difference, with the remainder of the package implemented on 1 April 2011. Over 4 years, though, the package is broadly fiscally neutral, and does not add to borrowing.
Has he seen the repeated statements by many of the main participants in the electricity industry that the electricity industry bill will increase electricity prices in New Zealand rather than reduce them, and is he willing to intervene?
The Government has been through a pretty thorough process reviewing the operation of the electricity market. There is a range of views about what impact it is going to have. The Government believes that the changes in the bill will lead to greater competition.
Yes, I have. In particular, I have seen a report from one individual who, when he was asked how he would use his tax cuts, said: “Pay down my mortgage and help my kids out a bit.” I can confirm that that quote came from Labour leader Phil Goff a day after the Budget. I can confirm that that is probably a view that most New Zealanders are taking—that they will use their tax cut to reduce their debt, and they will be pretty careful with their spending.