1. Hon PHIL GOFF (Leader of the Opposition) Link to this
to the Prime Minister
Does he agree with his Minister of Finance’s comment: “we do not want to saddle future generations with the cost of short term policies”?
Hon BILL ENGLISHHas the Prime Minister seen reports that the New Zealand Superannuation Fund has grown by 33 percent since March, and does the excuse for cutting contributions made by his Minister of Finance—that it was losing billions of dollars—now ring a little hollow?
I note that the recovery in performance of the Superannuation Fund reflects the recovery in sharemarkets and managed funds across the world. They are getting somewhere back towards where they started. But the important reason the Government suspended contributions to the Superannuation Fund was that the Government simply did not have the cash to put into it. Current Budget projections indicate that it will be 10 years before the New Zealand Government has a surplus.
Will the Prime Minister now admit, in light of the $4.1 billion that the fund has made over the last 6 months, that Labour was right in stating that the best time to invest was when the market was at the bottom, and that contributions to the Superannuation Fund should continue?
No; the fund was set up to take Government surpluses and invest them to support future superannuation obligations. The fact is the Government does not have surpluses. It is going to have deficits in the region of $10 billion to $12 billion over the next few years, and it will be 10 years before the Government will have surpluses again.
Chris TremainThe comment about not saddling future generations with the cost of short-term policies was made in the context of the Government’s need to borrow significant amounts of money to maintain public services and to invest in infrastructure. We believe that the Government has set a reasonable limit to that debt, and that any proposals to borrow more money than the current Government is already borrowing are reckless.
Mr SPEAKERBefore I call the honourable Leader of the Opposition, I ask members of the House to be a little more reasonable in their interjections. The question is one being asked by the honourable Leader of the Opposition. I would have thought that hearing the answer would be of interest to the Opposition. That unacceptable level of interjection should stop.
Does the Prime Minister concede that the pre-funding of superannuation meant not only that there was greater certainty that current entitlements could be met even as the number of people in retirement was due to double, but also that investment in the Superannuation Fund provides a net benefit rather than a cost to the taxpayer?
No, the mathematics of this are pretty simple. This Government has decided it is willing to borrow to save entitlements and maintain public services, but it is not willing to borrow to invest in world equity markets. That is a prudent way of doing business.
Hon Sir Roger Douglas Link to this
Is the Prime Minister convinced that future taxpayers are getting good value for the $400 million the Government is borrowing each week, and, given that this is equivalent to building up $9,500 of debt each year for each employed person in New Zealand, might it not be appropriate for his Government to do what any normal person would do in this situation and start cutting back on spending and not saddle future generations with the cost of short-term policies?
The questioner points out the costs of extensive borrowing. The Government is currently borrowing $400 million per week, and over the next 4 years it will borrow about $40 billion, thereby doubling public debt. That is why propositions to borrow more, for any reason, are reckless.
Does the Prime Minister agree that there are two ways of addressing the future doubling of the number of people in retirement in New Zealand: first, by increasing the age of retirement; and, second, by pre-funding the future liability created by the ageing population?
The current Government supports the institution of the Superannuation Fund. We have used the provisions in the legislation that were designed explicitly for these circumstances—that is, where the Government does not have surplus cash to put into the fund we can suspend the contributions and make sure that that is a transparent process. That is what we have done.
I seek leave of the House to table a statement made by Mr John Key that makes precisely the point I just asked the Prime Minister about, which the Acting Prime Minister disagreed with. The statement is from Agenda on 13 April 2008.
We have just had a question about one item on Labour’s list, which is the recommendation that the Government should borrow $2 billion extra per year to put into the Superannuation Fund. Adding up Labour’s other promises it comes to about $6 billion a year on top of existing borrowing. By any measure, that is reckless.
Does the Prime Minister accept that pre-funding for the liability for superannuation created by the ageing population is not about spending for consumption but about investing in an asset for the future and can be justified on that basis; if not, why not?
The member is making a few assumptions. The fact is that the Superannuation Fund return over the years it has existed so far does not match what would have happened if people had put the money in the bank. So pre-funding is no guarantee that the country will be better off. With the member’s current proposition, in the future there would be a bigger fund but there would also be significantly bigger debt, so the country would be no better off.
I seek leave of the House to table a statement made by Mr John Key that makes a statement very similar to the question I asked the Prime Minister, which the Acting Prime Minister disagreed with. It is from Agenda on 13 April 2008.
Jeanette Fitzsimons Link to this
Does the Prime Minister agree with the Green Party, the Intergovernmental Panel on Climate Change, the G-20, Sir Nicholas Stern, the World Bank, and many others that we should not saddle future generations with the long-term costs of climate change, which were described today by Barack Obama as “catastrophic”?
The Government is moving to put in place an emissions trading scheme, which I have to say is further than many other countries have gone—in fact, it is further than any other country has gone. We believe that we have made pragmatic decisions that balance our responsibilities to the environment with our responsibilities to the economy and New Zealanders today who face the cost of climate change.
Jeanette Fitzsimons Link to this
If the watered-down emissions trading scheme is to save taxpayers $100 million, reduce costs to heavy industry and to households, and let off farming for a further 2 years, can the Prime Minister explain to the House just who will be paying for New Zealand to meet its international obligations?
The scheme represents a balance between the proportion of the liability that the Government will meet, the proportion that will be met by New Zealanders who pay for their electricity bills and fill up their cars with petrol, and the proportion paid by agriculture and industry. We believe we have made a balanced decision, and I point out to the member that New Zealand has gone further with its emissions trading scheme than any other country on earth.
Jeanette Fitzsimons Link to this
With that statement, is the Prime Minister admitting that because agriculture, industry, and households will pay less, taxpayers will actually pay more under his emissions trading scheme than they would have under the existing law; if not, will he answer my previous question?
As the member knows, calculating the cost of this scheme depends on whether we count the next couple of years, when taxpayers will be paying more than they would have under the existing scheme, or whether we take the next 50 years when it will be very uncertain. But the Government has made clear its view that in the long run this scheme should be fiscally neutral—that is, not a mechanism for raising taxes on the New Zealand public. The previous scheme was going to raise taxes on the New Zealand public.