1. AMY ADAMS (National—Selwyn) Link to this
to the Minister of Finance
What reports has he received on the Government’s financial position?
Hon BILL ENGLISH (Minister of Finance) Link to this
Today Treasury released the Government’s financial statements for the year ended 30 June 2010. Compared with the previous year ended 30 June 2009, Government spending was about the same. Revenue was down, and both the operating deficit before gains and losses and the residual cash deficit were higher than in the previous year. Overall, the Government’s fiscal situation remains tight. It is important that we continue to take balanced and considered decisions to control future spending, get debt under control, and return the Budget to surplus.
How has the Government helped the economy to make the necessary adjustments in the aftermath of the recession?
The Government has provided significant support for New Zealanders to protect people from the sharpest edges of the recession. For example, based on the latest forecast, the Government’s annual cash balance was $2.1 billion in surplus in 2007-08, and in 2010-11 there will be a cash deficit of $13 billion. That is a $15 billion turn-round. This amounts to a very considerable fiscal stimulus, whereby effectively the Government is borrowing money from overseas lenders and pumping it into the economy in order to proceed with infrastructure investment, to maintain core Government services, and to continue with transfers to households, such as Working for Families, interest-free student loans, and early childhood education subsidies.
Hon David Cunliffe Link to this
When the Government’s books have deteriorated from a $2 billion surplus under Labour to a $13 billion deficit under him, how can he possibly afford another $14 billion in tax cuts for people who do not need them, when New Zealanders do not have jobs?
That is the opposite of what the Opposition usually argues, which is that the Government is not running big enough deficits, and that we should be running more jobs schemes and wasting more money on bureaucracy. The Government has taken a considered and balanced approach. We are running a $13 billion deficit this year, for the reasons that I outlined before. The tax package that we have implemented is intended to rebalance this economy so that we can have sustainable jobs, less debt, and more exports, savings, and investments.
How are households responding to the Government’s programme to encourage work, savings, and productive investment?
The early signs of rebalancing in the economy are encouraging when we look at the behaviour of households. This can be seen from official data showing movements in New Zealand families’ equity in their own homes. Between 2003 and 2008 households effectively borrowed about $7 billion against their houses, which was spent on consumption. This has been called equity withdrawal. There has now been a marked turn-round. Instead of households borrowing against their houses to go on overseas trips or buy second cars and flat-screen TVs, they are now paying down their debt, to the tune of about $5 billion. New Zealanders are now saving $5 billion, whereas previously they had been overspending by $7 billion. That is a dramatic turn-round.
What does this change in household savings behaviour mean for the nature of the current economic recovery?
We need to keep in mind the state that the previous Government left this economy in, which was an economy dependent on excessive Government spending and excessive borrowing. The impact of the global recession, the New Zealand recession, and Government policy means that New Zealanders are being very careful with their spending, to the extent that the ratio of private consumption as a share of the economy is actually dropping. So we are going to see a recovery in which people are careful with their spending and pay down debt, and in which the growth in the economy is driven by strong export prices. That kind of recovery will give us sustainable jobs, instead of the ones that were dependent on excessive Government spending and excessive debt.
Hon David Cunliffe Link to this
Can he confirm that his supposed rebalancing is occurring on the back of high unemployment, low or no wage growth, increasing prices, and a stalling economy—all of which are making it harder for ordinary Kiwi families to make ends meet?
I wish the member had cared about that when he was in Government, because the answer to the question is no. That member needs to remember that in the last year that he was in office—which was meant to be the best of times—real wage levels in New Zealand actually dropped, and that was before the global financial crisis. Inflation was 5.1 percent in 2008.
Hon David Cunliffe Link to this
When he told reporters this morning that the half-year Budget update in December is unlikely to contain positive growth, was that an admission, after telling New Zealanders for 2 years to tighten their belts and that they would get an aggressive recovery, that they will have to wait just a few years longer?
As I have pointed out in the answers to earlier questions, New Zealanders have decided to tighten their belts because they know that the fairyland economy that the previous Labour Government was running simply could not last. They know that we could not keep borrowing against our houses in order to fund overseas trips, and that we could not afford to keep paying higher taxes than are necessary to fund billions of dollars of wasteful Government spending under Labour. [ Interruption]
Rahui Katene
Mr SPEAKERI apologise to the honourable member, but the previous issue is dealt with. I have called Rahui Katene, and a little courtesy would be appreciated.
Is the Government’s financial position the reason why Housing New Zealand’s Linwood branch is telling whānau in Christchurch that it has no more tarpaulins to give out?