1. DAVID BENNETT (National—Hamilton East) Link to this
to the Minister of Finance
What reports has he received on the Government’s financial position?
Mr SPEAKERI apologise to the Minister but it would be helpful if the House allowed the Minister to say one word before just a barrage of interjections.
Hon BILL ENGLISH (Minister of Finance) Link to this
I am pleased the House is so enthusiastic about the 3-monthly accounts. The accounts show that the impact of the Canterbury earthquake and lower-than-expected tax revenue contributed to a $3.7 billion operating deficit, which is about $2.2 billion higher than forecast. The lower tax take was due to largely subdued consumer spending as New Zealanders paid down debt and saved more. This in turn led to lower business profits, which impacted on corporate tax revenue. Although Treasury expects some of the lower tax take to reverse in coming months, the accounts reinforce the need for ongoing fiscal discipline.
It is taking many positive steps. In the past 2 years the Government has identified around $4 billion of low priority spending and redirected it from back-office bureaucracy to better front-line services. We have also committed to capping future new Budget spending at $1.1 billion. In some ways, though, restraint in the public sector is only just starting. The Government has set itself the task of getting back to surplus, which will take 4 or 5 years of disciplined spending constraint.
How does the Government’s approach to managing its finances compare with approaches in other countries?
I would describe the Government’s approach as moderate and balanced. A number of other deficit countries like us have taken a more aggressive approach to spending cuts. The UK is looking at cuts of up to 20 percent in departmental expenditure. I am advised that in France the Government is in the process of sacking 45,000 teachers. However, in New Zealand we have focused on longer-term change. We have been willing to run significant deficits as the economy gets on its feet, but over the next 4 or 5 years there will need to be strong spending constraint.
What kinds of policies would put New Zealand’s return to budget surplus at significant risk and burden hard-working New Zealanders with more debt?
Any policy that either allows wasteful and inefficient spending to continue or proposes more wasteful spending—such as a GST exemption on fruit and vegetables, or Labour’s persistent call to keep the Wellington bureaucracy growing as fast as it was under the previous Labour Government—would be reckless.