Does he stand by his statement on 18 December 2008, a month after the general election, that “I want to stress that New Zealand starts from a reasonable position in dealing with the uncertainty of our economic outlook”?
In respect of the relative level of public debt at the time, yes, I do. But that was really the only economic indicator that was positive. The Government had at the time produced a Budget forecasting rising unemployment, inflation over 5 percent, a decade of deficits, and private debt in New Zealand out of control, as well as a housing bubble and a failing export sector.
What did he mean when he also said on 18 December 2008, after the election and after the global financial crisis had hit, that “In New Zealand we have room to respond. This is the rainy day the Government has been saving up for.”; and did it relate to the previous Government paying off debt, even when criticised by him for doing so?
What I meant was exactly what the statement referred to, and that is that at the time Government debt was relatively low, although I might say that the Government did not actually pay off debt. The economy grew and, relative to the economy, the debt stayed flat. I point out to the member that a headline at the time stated: “Treasury books a sea of red ink”. That was after the Government’s Budget. Another headline stated: “Economic update shows growth in all the wrong places”. [ Interruption] If Labour does not understand what a mess it left the economy in, then it does not understand the economy.
I raise a point of order, Mr Speaker. My question was very straight. The answer did not require the nastiness at the end of it about the previous Labour Government.
I listened very carefully to the question, and I listened very carefully to the answer. The member’s colleagues interjected very robustly on what the Minister was saying. The Minister was giving a very reasoned answer to the member’s question, and the member’s colleagues gave a barrage of interjections. The Minister picked up on those interjections and responded, and he is at liberty to do that. I cannot insist that the Minister behave in an exemplary fashion if the member’s own colleagues let fly a barrage of interjections. It has to work fairly on both sides.
Was the Governor of the Reserve Bank, Alan Bollard, correct when he said in 2008 that New Zealand has “enjoyed a decade of growth, the longest period of economic growth since post - World War II era. Inflation has been low, averaging 2.2 percent since 1998.”; if not, why does he believe that Dr Bollard is correct now when he says that inflation would be around 2 percent in 2012-13?
I disagree with the Governor of the Reserve Bank’s assessment of the economy at that time. In fact, inflation was over 5 percent—that is a matter of fact—the Government’s books were heading into the red, the export sector had been shrinking for 5 years, Government spending was out of control, and unemployment was heading up. And that was before the global financial crisis.
I have seen this one from the Press from 7 October 2008. Under the headline: “Grim numbers” it talks about a cash deficit of $5.9 billion that financial year, and $30 billion over 4 years; house prices down by 11 percent by March, the consumer price index at 4.5 percent; debt ballooning to 24.5 percent of GDP by 2012; tax revenues down $3.1 billion; and the current account deficit at $14.5 billion—which was pretty much close to a record. That is what was said at the time. Treasury books were a sea of red ink—grim numbers.
Was the Governor of the Reserve Bank correct when he said: “The international financial crisis actually played little role in the early part of New Zealand’s economic recession. Rather, it was drought, falling house prices and higher petrol prices that dragged New Zealand GDP growth negative over the first three quarters of 2008.”, and has he put in place policies to control drought, higher petrol prices, and falling house prices; if not, why not?
The Government has put in place policies to ensure that this economy is more resilient and will grow more strongly. That means avoiding the excesses that occurred in this economy from 2005 onwards, when bad policy and mismanagement by the Labour Government meant that our export sector shrank to the point where there were no more jobs in it in 2010 than there were in 2000. That was a disgrace.
Was the International Monetary Fund correct when it stated soon after the election of 2008 that “New Zealand is in a better position than most advanced countries to face the global storm, given its sound macroeconomic policies, including a flexible exchange rate, low level of public debt, flexible labour markets, and a healthy banking sector.”; if so, what has the Government done in the last 18 months to turn our economy into such a mess?
If the member is quoting the International Monetary Fund on those sound macro policies, why is the Labour Party now adopting policies designed to destroy all those sound settings? The Labour Party cannot have it both ways. The fact is that this economy was in recession from the beginning of 2008, it was left in a mess by the previous Government, and we are turning it round.
Was the Minister, in making his statement on 18 December 2008, concerned at the huge surge in public spending, from 29 percent of GDP to 34.7 percent of GDP, that occurred between 2004 and 2008 as the Labour Government abandoned all fiscal restraint; if so, what measures are being taken to wind back spending?
Yes, we were concerned about that. The primary action the Government has taken is that it has reprioritised $4 billion of that spending from the excessive back-office bureaucracy to effective front-line services, and it has put in place an annual limit of $1.1 billion of new spending. That is bringing much more fiscal discipline and much better stewardship of taxpayers’ money to the Government sector.
Was the International Monetary Fund correct when it said just after the election in 2008, when commenting on the global financial crisis, that the average advanced country was starting with debt of about 80 percent of GDP but that New Zealand’s gross debt was around 20 percent and that, in net terms, it had positive financial assets; and after the many examples I have given today—from the Governor of the Reserve Bank to the International Monetary Fund—is the Minister saying that these leading economists are wrong, and why does he continue to say that he inherited a mess when, quite plainly, he did not?
I have let the House know about all the measures of the mess the economy was in. Government debt was relatively low but the last Budget of the Labour Government resulted in this headline: “Treasury books a sea of red ink”. In the 2008 Budget, before the global financial crisis, the Cullen Government delivered 10 years of deficits. That is what it forecast. So even the one thing that was in better condition, Labour was in the process of wrecking.
Does the Minister agree that Labour’s last term in Government demonstrates the urgent need for a taxpayers’ bill of rights that caps per capita Government spending so that a desperate and dying Government cannot attempt to buy itself another term and would, instead, be forced to go back to taxpayers and seek their authorisation for further increases in Government spending; if not, why not?
There is no doubt that the experience of those years has meant that this Government has had to tighten up, very considerably, on what was sloppy and ineffective and, in some cases, negligent management of public resources. A taxpayers’ bill of rights would be one way to bring more fiscal discipline to Governments, and we are willing to discuss whether that would be effective.
Has the Government estimated the cost to the taxpayer of the interest rate premium the Government is paying as a result of the Minister’s loss of credibility as Minister of Finance because of his housing scandal?
I rule that question out of order because the member has made an allegation that is totally inappropriate. The member cannot make that kind of allegation against another member of this House. The Standing Orders are very clear on that.
I raise a point of order, Mr Speaker. Are you ruling that there was no housing scandal?
I rule that it is inappropriate for a member in this House to claim in a supplementary question that there was a housing scandal. If the member looks at the Standing Orders—probably Standing Order 371—he will see that questions must not contain expressions of opinion in respect of that kind of thing. Whether it was a scandal is an expression of opinion, and questions should not make that kind of allegation. I think the member is quite lucky I did not let the Minister loose, because the Minister might have dumped pretty severely on the questioner. [ Interruption] Interjections should at least be humorous and, above all, not nasty. There is no need for nasty interjections in this House. If members want to get nasty, they should get out of the House. While I am Speaker I have no—[ Interruption] There should be no comments. I do not want to hear nasty interjections.
What were some of the other significant economic problems facing New Zealand around the time of the 2008 general election?
I will give just a few indications of the problems this country had. Government spending had been growing at more than twice the rate of the economy, and at the same time the export sector had been in recession from 2003 to 2005. Over that period there were no net new jobs in agriculture, forestry, or manufacturing. By the end of 2008 inflation was at 5 percent, which was the highest annual rate for two decades. Real after-tax wages were falling, which left families worse off. A month later Treasury forecasts painted a very bleak picture of the Government’s books—never-ending deficits and ever-soaring debt.
If the previous Minister of Finance was so hopelessly incompetent to mismanage the books in that way, why did the National Government appoint him to chair the country’s largest State-owned enterprise?
I think he was actually not too bad, up to the point where that member became an Associate Minister of Finance.
I raise a point of order, Mr Speaker. That was a misrepresentation, and I want to give a clarification under the Standing Orders. I was not an Associate Minister of Finance in the year to which the Minister was referring.