English Bill: General Debate 
English Bill: General Debate 
[Volume:652;Page:1406] 
Hon BILL ENGLISH (Minister of Finance) 
: 
 I move  
That the House take note of miscellaneous business 
. Today Opposition members indicated in select committees and public statements that they are more concerned about whether macroeconomic forecasters are kept busy revising weekly their forecasts than they are about whether people who have real jobs get to keep them. 
Although the forecasts about the economy will unfold as economic events unfold I want to cast our minds back to the economy that this current Government inherited. It is gospel among Labour Party members that they left everything in fine form. I will quickly run through a few pieces of information that indicate that before the world financial crisis occurred the New Zealand economy had very significant challenges. This Government has the job of dealing with both the effects of coordinated recession in our trading markets and the accumulated problems resulting from a decade of misdirected economic policy. 
First we were left with twin deficits. There were cash deficits on the Government’s books. The 2008 Budget showed that the swing from surplus to deficit occurred well before the world financial crisis not after it or as a result of it. Under the previous Labour Government large surpluses disappeared. In the 2008 Budget its members forecast cash deficits of $3.5 billion on average for the next 4 years. In the pre-election update those cash deficits blew out from $3.5 billion a year to $6 billion per year—in the pre-election update not the post-election update. The second deficit that we were left with was the balance of payments deficit. Despite a decade of rhetoric from the previous Minister of Finance about how he was going to fix it we ended up in 2008 with about the largest balance of payments deficit that we had had for two decades. In fact it was around 8 or 9 percent of GDP for the last few years of the previous Government despite all the rhetoric about setting about to fix it. 
The balance of payments deficit sums up the vulnerability of the New Zealand economy to its foreign liabilities. The previous Government actually left the New Zealand economy vulnerable to exactly the kind of shock that has now occurred. The balance of payments problem is not something that happened after the world financial crisis or after the election of this Government; it was already well locked in and embedded and is the product of 9 years of misdirected policy. If we want final proof of that by the time of the election the New Zealand economy had been in recession for 9 months; it had already been in recession for 9 months. It was a recession driven by adjustments that had to follow growth that was based on debt high inflation and very high interest rates because of unbalanced economic policy. So the New Zealand economy was left vulnerable to exactly the kind of shock that has occurred. 
Here are some more indications of it. In the 9 years ended September 2008 New Zealand’s overseas debt more than doubled. What is our biggest problem now? The ability to finance and maintain that stock of debt. The New Zealand banking sector had its net foreign liabilities grow by five times. The Labour Government inherited a banking sector with about $15 billion of foreign liabilities and it left us with a banking sector with foreign liabilities of $75 billion. That again is the vulnerability that this Government will have to manage for the New Zealand economy. 
What about unemployment? Labour members believe that unemployment kept dropping until the day they left office and started rising on 9 November. Well they are wrong. Unemployment rose by almost 30 percent through 2008.