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Economic Growth—Consideration of Policy Options

Thursday 15 September 2011 Hansard source (external site)

Douglas4. Hon Sir ROGER DOUGLAS (ACT) Link to this
to the Minister of Finance

Does the Government ask when considering policy options whether the policy will improve New Zealand’s growth prospects or make them worse; if not, why not?

EnglishHon BILL ENGLISH (Minister of Finance) Link to this

Yes. Overall, that is a very important consideration, although I have to say that it is not the only factor that the Government considers.

DouglasHon Sir Roger Douglas Link to this

In light of the fact that between 2008 and 2011 extra Government spending consumed 98 percent of New Zealand’s $16 billion increase in nominal GDP, what factors led the Minister to undertake that increase in spending, and did he believe that that spending would improve economic prospects?

EnglishHon BILL ENGLISH Link to this

In the first place, that is a trend the Government is certainly planning to turn round. That process began in Budget 2011 and will continue. The Government is too big a proportion of the economy. The increase in Government spending was consistent with the Government’s policy objectives, which were to protect the most vulnerable through the recession, to continue to invest in front-line services, and to embark on a very significant infrastructure investment programme.

RoyHon Heather Roy Link to this

How can businesses expect to survive when the Government swallows up just about all of any increased growth that takes place in the economy?

EnglishHon BILL ENGLISH Link to this

In the situation of a fairly significant global downturn and also a New Zealand economy that was distorted by rampant housing inflation and huge increases in Government spending, that is what actually happened. The Government has set out its plans to reverse that trend, because it is important in this economy that people and resources move to the tradable sector, where we can earn higher incomes by selling products to the rest of the world, and out of the non-tradable sector, which has been characterised over the last 10 years by excessive debt and very low productivity.

RoyHon Heather Roy Link to this

What advice did the Government seek and receive on the impact on economic growth and on small businesses when it refused to reinstate youth rates, locking young people out of work and preventing businesses from hiring extra staff?

EnglishHon BILL ENGLISH Link to this

Over the last few years, that advice has been, I think, similar to the consensus that developed in the last 10 years that higher pay rates for young people would not affect their employment prospects. It has probably become a bit more apparent in the last couple of years that that advice maybe was not realistic.