What progress has the Government made in building a more competitive economy and getting on top of New Zealand’s longstanding reliance on foreign debt?
Substantial progress. Having inherited an economy in recession, we now have moderate growth. Having inherited forecasts of permanent deficits and ever-increasing Government debt, we now have a path back to surplus and to debt repayment. Having inherited current account deficits at record levels of 8 percent of GDP, these have now halved. Having inherited first-mortgage rates of over 10 percent, these are now 6 percent. We inherited a situation where households were spending $1.10 for every dollar that they earned, and in the next few months we will finally have positive savings in households for the first time in a decade.
How have these improvements been reflected in New Zealand’s net international investment position?
Our net international investment position is an important measure—in fact, probably the most important measure—of our liabilities to the rest of the world. We inherited net international liabilities of 85 percent of GDP, with forecasts of their increasing to 100 percent. In fact, today net international liabilities have reduced to 70 percent of GDP. This is a significant improvement, but we remain a highly indebted country and we must continue to make further improvements. It is now obvious that global markets have no appetite for debt, and irresponsible policies involving more borrowing would make our foreign debt position much worse.
Why is it important to build a competitive economy based on savings and productive investment rather than on Government borrowing and spending, which got out of control between 1999 and 2008?
I raise a point of order, Mr Speaker. That question was clearly out of order. It contained an unauthenticated alleged fact, which is clearly wrong given the fact that Government debt went—
The member was doing perfectly fine until the last point, when he got into debating the matter. What I am going to do is ask Peseta Sam Lotu-Iiga to repeat his question without the opinion in it. The Hon Trevor Mallard is correct. It is not consistent with the Standing Orders and it is inappropriate in a question to the member’s own Minister.
Why is it important to build a competitive economy based on savings and productive investment rather than on Government borrowing and spending, which was out of order in the last 10 years?
I raise a point of order, Mr Speaker. Although Government debt has got out of order in the last 3 years—
The member is now debating the issue. I ask the member to repeat his question without the opinion at the end of it. The question is perfectly understandable without the bit at the end that is causing the problem. If the member doubts whether he is entitled to insert opinions into the question, he should check Standing Order 371.
Why is it important to build a competitive economy based on savings and productive investments?
Because jobs and incomes that were based on excessive household borrowing and on excessive Government spending up to 2008 were not sustainable. If we want sustainable new jobs and higher incomes, we need to earn a living by selling more to the rest of the world. That is why the Government has changed the taxation system to encourage saving and discourage consumption and property speculation. That is why we have plans in place to stop Government borrowing rising and to start paying off debt and get the Government’s books back into surplus over the next 3 years. And in the face of a global recession and a substantial earthquake in Canterbury, that is not a bad achievement.
If the Government is really in a stronger position now than it was 3 years ago, as he claims, why does the Minister think it took until now for the ratings agencies to downgrade its credit rating; could it be due to 3 years of zero growth, burgeoning debt, and muddling through?
No; the reasons for the change in credit ratings, I think, have been discussed at some length. One reason is the product of a long-term build-up in New Zealand’s foreign liabilities, particularly under the stewardship of that Government in the mid-2000s. A second reason is the growing sense of crisis in world financial markets, which means that every country with high levels of debt is under the microscope.
How do the current Government’s policies contrast with New Zealand’s economic direction before the 2008 election?
The Government’s policies are focused on having a competitive economy that can deliver sustainable new jobs and sustainable higher incomes. We have had to change the direction from growth that was based on excessive borrowing and high levels of Government spending to growth that is based on earning a living from the rest of the world. And we are trying to do that at a time when the global economy is subject to a lot of uncertainty and volatility. I have to say, New Zealanders have shown a great deal of resilience, and I for one am proud of what they have achieved in the face of adversity.