3. PESETA SAM LOTU-IIGA (National—Maungakiekie) Link to this
to the Minister of Finance
What reports has he received on what financial markets are signalling about New Zealand’s economic position?
Hon BILL ENGLISH (Minister of Finance) Link to this
Financial markets are signalling a growing aversion to continuing to lend to borrowers who have accumulated excess debt. Indebted countries are increasingly being sorted into the strong and the weak, with the weak facing significantly higher interest rates. In New Zealand, our longer-term interest rates have declined steadily over the past 2 years, indicating that we are regarded by the markets as being in a relatively strong position as one of the more creditworthy countries, with a sound fiscal plan.
There are any number of measures one could use, but interest rates have declined by large amounts across the board. Since August 2008, 5-year Government yields—[ Interruption]
Mr SPEAKERI apologise to the Minister. The Hon Trevor Mallard will get to his feet and withdraw and apologise for that kind of interjection, which he knows is totally out of order.
Hon Trevor MallardIt does not make the job very easy for the Speaker when I deal with one situation, and another one almost as bad crops up. I ask members to be a little more reasonable, please.
Interest rates have declined significantly across the board. The overnight cash rate has declined from 8 percent in August 2008 to 2.5 percent today, and floating mortgage rates have almost halved, down from 10.9 percent in 2008 to 5.9 percent today. It looks as if the trend towards lower interest rates for longer will be maintained, as long as we stick with our sensible plans.
Peseta Sam Lotu-Iiga Link to this
What benefits have lower interest rates brought to New Zealanders?
Lower interest rates encourage investment and, therefore, help to sustain growth, which will give us higher incomes and more jobs, but they also bring direct benefits to borrowers. A family with a floating $200,000 mortgage now pays about $10,000 a year, or $200 a week, less in interest than it did just 3 years ago.
Peseta Sam Lotu-Iiga Link to this
What are the policies that put New Zealanders’ financial stability most at risk?
What is becoming clear is that financial markets are becoming increasingly sensitive to both the debt levels countries have and whether they have control over those debt levels. The biggest danger is getting into a spiral of borrowing more money, which helps drive up interest rates, which makes it harder to service that debt and requires borrowing more money. So we would not expect that the world that has lent us so far $170 billion would welcome any economic plans that propose more debt.