3. SIMON BRIDGES (National—Tauranga) Link to this
to the Minister of Finance
What signs are there that New Zealanders are saving more?
Hon BILL ENGLISH (Minister of Finance) Link to this
There is accumulating evidence that New Zealanders are lifting their savings rate and relying less on debt-funded consumption. For instance, since 2009 household equity has been rising. For the first time in 20 years, household debt-to-income ratios have been falling. Both Treasury and the Reserve Bank project positive household savings rates for the first time in over a decade, and that the balance of payments, which measures overall national savings, may have a current account surplus for the first time in almost 40 years. This is a huge improvement, although it will be temporarily boosted by insurance payments coming into the country.
Of course it is important, if only because debt-fuelled consumption of the sort that we saw in the last decade simply cannot be sustained. It has led to New Zealand having an external debt level that is amongst the highest levels in the world, and the fact that New Zealanders are starting to increase their savings will reduce our vulnerability to very high levels of external debt.
Hon David Cunliffe Link to this
Which of the following two commentators is wrong, according to the Minister: the OECD, which says this country is not rebalancing, or the Reserve Bank, which does not project positive household savings rates until at least 2013?
Both of those commentators have points of view that are worth listening to, but they are not always right. The fact is that this economy was so badly out of balance by the time that member’s Government was thrown out that in the face of a recession it is taking some time to begin rebalancing in the right way. I do not think there is any disagreement that we are headed in the right direction, but we would all like it to go faster.
Hon David Cunliffe Link to this
I raise a point of order, Mr Speaker. It was a very clear question on which of those two commentators—
Mr SPEAKERThe member asked for an opinion, and he got an opinion in reply. It was totally an opinion question, and he got an opinion in reply. The Minister is perfectly entitled to answer in that way.
The last 10 years was particularly poor for savings in New Zealand. Household debt ratios rose to about 160 percent of income, and New Zealand’s foreign debt liabilities almost doubled. That is one of the reasons that per capita GDP actually fell during Labour’s third term and has not risen since 2004. It is good to see that a lot of these excesses are being gradually reversed.
Hon David Cunliffe Link to this
Does the Minister consider it to be prudent, in light of the savings gap, to have cut contributions to KiwiSaver and the New Zealand Superannuation Fund, or would he like to repeat his earlier advice to the previous Labour Government not to run surpluses and pay down debt, and instead to give unaffordable tax cuts to people who do not need them?
Borrowing is not saving. If the Government goes out and borrows $2.5 billion off foreign lenders and puts it into the New Zealand Superannuation Fund account, that is not saving.
John BoscawenAre New Zealanders saving an extra $300 million a week to compensate for what his Government is borrowing, or is New Zealand each day becoming a more heavily indebted country?
In answer to the first part of the question, no, they are not. Secondly, we would expect that Government deficits will peak actually about now, and part of the focus of the Budget will be on showing a track back to surplus.
Now that New Zealand households have begun to save, it is time that the Government pulled its weight, because we can make the biggest difference to national savings by the Government lifting its savings. Up until now we have been willing to borrow in order to cushion New Zealanders from the impact of the recession, but now that economic growth is under way it is time for the Government to tighten its belt, reduce its deficit, and get back to surplus.