Cosgrove Clayton: Questions for Oral Answer — Questions to Ministers 
Cosgrove Clayton: Questions for Oral Answer — Questions to Ministers 
[Volume:626;Page:21201] 
4.  
CLAYTON COSGROVE (Labour—Waimakariri) 
 to the  
Minister of Finance 
: What is his reaction to this morning’s announcement by the Governor of the Reserve Bank? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 I note the governor’s view that the balance of inflation risks remains on the upside and that a further tightening in monetary policy may still be necessary. This reinforces the OECD assessment last month that any additional fiscal stimulus beyond that already planned could put the projected soft economic landing at risk and would need to be offset by higher interest rates. 
Clayton Cosgrove 
: What implications does the Reserve Bank announcement carry for fiscal policy? 
Hon Dr MICHAEL CULLEN 
: A significant loosening of fiscal policy by way of either substantial tax cuts or increased spending will produce exactly the sort of “upside surprise” in the inflation outlook that the Reserve Bank warns it will be watching for closely. This reinforces my message of recent weeks. Tax cuts result in higher interest rates unless fully offset by cuts to spending. 
John Key 
: Why do we have the highest interest rates in the developed world under the Minister’s financial leadership? 
Hon Dr MICHAEL CULLEN 
: Firstly because we have had just about the highest growth rate in the developed world over the last 3 or 4 years which means that we are at the top of the cycle and facing capacity constraints and secondly because New Zealanders have a poor savings record. This Government has announced a major initiative. The National Party wants to destroy both that initiative and the Government’s own savings by making unsupportable tax cuts. 
Clayton Cosgrove 
: What if any budgetary implications does the Reserve Bank announcement carry? 
Hon Dr MICHAEL CULLEN 
: I think that it reinforces the need for all parties to produce alternative budgets and to explain to the public and the bank how their policy platforms will be paid off without setting off an inflationary spiral. National failed to produce one at the last election and I suspect that we will not see one at this election either because National members came out of their caucus on Tuesday looking very glum as they began to understand the real numbers. 
John Key 
: Does the Minister agree with comments made by the Governor of the Reserve Bank Alan Bollard today that he considers a material fiscal impulse to be the amount of 1 percent or more noting that Working for Families has a fiscal impulse of 0.7 percent; if he does not agree with Alan Bollard in that regard can he tell the people of New Zealand what he considers to be a material impact of fiscal impulse? 
Hon Dr MICHAEL CULLEN 
: This year’s Budget has a fiscal impulse of more than 1 percent of GDP. That is why if any party wants to add any additional fiscal impulse it will have to find savings. Secondly 1 percent of GDP is about $1.5 billion. The member has already denied that his tax cuts will be anything like that size and if that is true the great majority of working New Zealanders will be horribly disappointed by the promised miserable size of the tax cuts that National is planning.