1. PESETA SAM LOTU-IIGA (National—Maungakiekie) Link to this
to the Minister of Finance
What progress has the Government made in getting its finances in order, reducing debt and returning to budget surplus sooner?
Hon BILL ENGLISH (Minister of Finance) Link to this
The Government has made significant progress after inheriting ever-increasing Government debt. In fact, across three Budgets we have achieved $45 billion of savings for the period up to 2015, compared with the spending track we inherited from the previous Government. The savings we made in Budget 2011 alone mean that we will borrow about $10 billion less over the next 4 years than we otherwise would have. This is particularly important in light of the growing volatility of international financial markets.
Peseta Sam Lotu-Iiga Link to this
How will the Government’s decisions to control debt and spending keep Crown debt to manageable levels?
The Government has made balanced decisions about this by being willing to incur some debt in supporting the economy through the recession, and in financing the Christchurch earthquake recovery. However, we do need to show a path back to surplus. Crown debt is now expected to peak at 29.6 percent of GDP and fall from about 2015 onwards. We will return to a healthy Budget surplus by 2014-15 at the latest.
Peseta Sam Lotu-Iiga Link to this
How did the latest fiscal and debt forecast compare with the forecast the Government inherited in 2008?
The Government inherited a dismal forecast in 2008. Treasury’s December 2008 update showed permanent deficits. Net Government debt, based on Labour’s policies, was forecast to grow to 50 percent of GDP by 2023 and keep rising after that. That would be a recipe for disaster in the current global environment, where financial markets are very touchy about lending to highly indebted small countries.
Peseta Sam Lotu-Iiga Link to this
What policies would put New Zealand’s relatively strong economic and fiscal position at risk?
That is a very good question. The kinds of policies that would do that would be promises of large extra Government spending that had to be financed by increasing taxes and borrowing more money, which I gather is what our political opponents are proposing.
Hon Heather RoyHow much longer would it take New Zealand to return to surplus if New Zealand had a tax-free threshold of $5,000, removed GST from fruit and vegetables, and continued the spending track of 2005-08; or would New Zealand return to surplus ever?
Under those assumptions, I could hazard a guess, and I think it would probably take something like another 5 or 6 years to get back to surplus. But calculations show that, even with the package recently released by the Labour Party, that would mean it would be borrowing about an extra $18 billion as a result of that big—
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. The Minister has no responsibility for Labour Party policy, and he certainly does not have responsibility for policies—
Mr SPEAKERThe member has made his point perfectly fairly. The Minister should not continue on the line of the last part of that answer.
Hon David ParkerI seek leave to table a table of the tax switch proposed by Labour showing that we reduce debt by another $7.7 billion—
It was prepared by Business and Economic Research Ltd and the Labour Party.
What steps has the Minister taken to ensure that Government spending will not absorb 97 percent of nominal GDP growth over the next 3 years, as it has done over the past 3 years?
That is a good question. We have taken two different sorts of approaches. One has been to constrain Government spending so that it grows significantly slower than expected GDP growth. The other has been to put in place policies such as significant tax change to help to encourage the growth of the economy, so that GDP rises faster.