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Economy—Current Account Balance and Net International Investment Forecasts

Wednesday 5 October 2011 (advance copy) Hansard source (external site)

Cunliffe4. Hon DAVID CUNLIFFE (Labour—New Lynn) Link to this
to the Minister of Finance

What are the latest official forecasts for the current account balance and the net international investment position over the next four years under his Government’s policies?

EnglishHon BILL ENGLISH (Minister of Finance) Link to this

Probably the most recent official forecasts are the Reserve Bank forecasts released 3 weeks ago, which show the current account deficit for the next 3 years as minus 3.5, minus 4.6, and minus 5.4 percent, which means an average of about minus 4 percent over the next 3 years—less than half of the average between 2005 and 2008. The bank did not include projections of the net international investment position. However, that has improved from being 85 percent of GDP down to 70 percent of GDP over the past 2 years. It may move out again beyond 70 percent but—

CunliffeHon David Cunliffe Link to this

I raise a point of order, Mr Speaker. This was a perfectly straight question on notice. It was clearly about the next 4 years. The data is set out in the Government’s Budget and economic and financial update, and the Minister is not addressing the forward-looking question.

SmithMr SPEAKER Link to this

I think the question needs to be reasonable. I must confess that I was reasonably impressed with the amount of detail the Minister was seeking to give, because the question asked for the latest official forecasts, and the Minister of Finance was referring to some forecasts more recent—in other words, later—than the Budget data. That is what the question asked for, and it seems to me that the Minister of Finance was being pretty good in answering the question. I think he probably got out all the information he had. Does the member have a supplementary question?

CunliffeHon David Cunliffe Link to this

Is the Minister aware that the Government’s net international debt has tripled under his watch, and how does he relate that to Standard and Poor’s statement that it downgraded the Government’s rating because of “the nation’s weakening fiscal and external positions”?

EnglishHon BILL ENGLISH Link to this

Well, the Government inherited forecasts, given to this Government in, I think, November or December 2008, that showed ever-rising deficits—or 10 years of deficits, a decade of deficits, as outlined in the 2008 pre-election update—and ever-rising debt, reaching 60 percent of GDP and continuing to rise. We have managed, in the circumstances of a global recession and the earthquakes, to put a plan in place whereby Government debt peaks at 30 percent of GDP, because we will reach a surplus by 2014-15. So the outlook now is significantly better than it was back in 2008, despite the challenges we have had to face in between.

CunliffeHon David Cunliffe Link to this

In respect of his continual excuse about the international situation, is the Minister aware that less than one quarter of OECD countries have been downgraded in the last 3 years, and that New Zealand is in the company now of Greece, Ireland, Iceland, Spain, Portugal, Italy, and the United States; if so, why does he continue to try to blame international factors for the double downgrade?

EnglishHon BILL ENGLISH Link to this

I know there is a funny little world where Labour should still be in Government and the global recession never happened. But in the real world it is different—fortunately.

CunliffeHon David Cunliffe Link to this

I raise a point of order, Mr Speaker. Given that the question asked how he could reconcile his continual—

SmithMr SPEAKER Link to this

I want to spare the House the pain. I ask the member to please sit down. The member should go back and read his supplementary question. If he wants to get simple, straight answers, he should not ask questions like that. Does the member have a further supplementary question?

SmithMr SPEAKER Link to this

Is this a point of order?

SmithMr SPEAKER Link to this

I have ruled on the matter and there is nothing further. The member asked, if I remember correctly, as to when the Minister will stop using excuses about something. That is an opinion being inserted into a question. It is actually out of order, but I will not interfere all the time. If the member wants to raise points of order about Minister’s answers, for goodness’ sake, ask straight questions. Then I will help him. When he asks that sort of question, which is actually technically out of order, I cannot help him.

CunliffeHon David Cunliffe Link to this

When the straight—

SmithMr SPEAKER Link to this

Is this a new point of order?

SmithMr SPEAKER Link to this

Because I have dealt with that one. OK?

CunliffeHon David Cunliffe Link to this

I seek your guidance. When a straight question is asked about forward-looking data, the Minister quotes history and makes excuses.

SmithMr SPEAKER Link to this

The member will resume his seat straight away. If he is referring back to the primary question, I pointed out to him that he asked, in his question, for the latest official forecasts. The Reserve Bank is an official forecasting body of the Crown. So the Minister referred to the latest forecasts he had. I thought that was a pretty decent answer to the question. But the member has to curb his desire to inject political comment into his questions if I am to help him with answers.

AdamsAmy Adams Link to this

What have been the trends in New Zealand’s net international investment position over the past decade?

EnglishHon BILL ENGLISH Link to this

Between 2001 and 2008 in dollar terms our net international investment position almost doubled—that is, the amount of dollars we owed to the rest of the world went from $79 billion to $153 billion, and relative to GDP from 64 percent to 85 percent. Since then we have been working hard on the difficult job, I must say, of trying to influence household behaviour and change Government behaviour so that those international liabilities will stop rising. Actually, we have had some success. Having peaked at 85 percent of GDP, our net international liabilities have now reduced to 70 percent of GDP, which is still far too high by global standards, but at least we are headed in the right direction.