Foss Craig: Questions for Oral Answer — Questions to Ministers Questions to Members 
Foss Craig: Questions for Oral Answer — Questions to Ministers Questions to Members 
[Volume:669;Page:15992] 
1. 
CRAIG FOSS (National—Tukituki) 
 to the  
Minister of Finance 
: What reports has he received on the economy moving away from Government spending housing speculation and borrowing and towards savings and exporting? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 This morning the Reserve Bank issued its Monetary Policy Statement for December. It confirms what I have been saying about the economy in recent months. The near-term outlook for GDP growth has softened. Beyond this higher export volumes and the Canterbury earthquake repairs are expected to push growth above the Reserve Bank’s previous forecast. For example it now expects GDP to grow by 3.4 percent in the year to March 2012. It also expects inflation to remain subdued after a temporary one-off spike from the GST increase and forecasts continuing falls in unemployment. 
Craig Foss 
: What did the Reserve Bank’s forecast say about national savings? 
Hon BILL ENGLISH 
: It confirmed what I think we all know which is that New Zealand needs to lift its levels of national savings and it pointed to some encouraging early signs. It notes that the current account deficit is actually low by New Zealand’s recent standards. It predicts that the current account deficit will average around 3 percent of GDP over the next 3 years which is significantly better than the average of 8 percent between 2006 and 2008. It notes what we have all observed—that households are being cautious with their spending. They are saving more and they are paying down debt despite interest rates remaining very low. 
Hon David Cunliffe 
: In relation to the Reserve Bank’s forecast issued today can he confirm that it shows growth revised downwards by a full percent through mid-2011 unemployment tracking above 6 percent through 2011 and a $4 billion blowout in the fiscal deficit such that the economy is now tracking below the worst-case scenario in Budget 2010? 
Hon BILL ENGLISH 
: I do not think that any of that is news. For some time we have been discussing in the House the fact that the economy has been softer through the middle of this year. The forecasts for the year ending March 2011 are something like 0.5 or 0.75 percent lower than was expected at Budget time. That is correct and because people are saving more and spending less we are laying the platform for better growth later. 
Craig Foss 
: What did the Reserve Bank say about the role of the Government in helping to increase New Zealand’s national savings? 
Hon BILL ENGLISH 
: The Reserve Bank encourages the Government to get back to surplus a bit sooner than the current settings. It argues that faster elimination of the deficit would improve savings and ease pressures on interest rates and therefore on the exchange rate. That would have the benefit of reducing our dependence on international borrowing increase returns to exporters and assist the rebalancing of this economy which is under way but not at the speed that the Government would like to see. 
Hon David Cunliffe 
: When the Minister told the House yesterday that the deficit is set to grow to $11 billion this year can he confirm that this is more than $4 billion over the $6.9 billion forecast in Budget 2010? 
Hon BILL ENGLISH 
: It is expected to be larger than the Budget forecast in 2010 and the reasons for that have been outlined which are that the economy was flatter particularly in the first quarter of this financial year and we have also had one or two one-off expenses like the Canterbury earthquake. The member may think differently but I think that that expenditure was unavoidable. 
Craig Foss 
: What measures will the Government consider next year to reduce fiscal deficits and return to surplus? 
Hon BILL ENGLISH 
: We are committed to getting back to surplus no later than 2015-16. The Government will continue with the spending discipline that it has exerted for the last couple of years and those disciplines will continue to tighten on the public sector. Next week we will issue the Government’s first investment statement which will make public for the first time in a sensible way the size and ambition of the Government’s capital investment programme through to 2015 how it is to be funded and where efficiencies can be made. 
Hon David Cunliffe 
: Can the Minister confirm that for all seven quarters that he has been Minister of Finance real GDP per capita has so far gone backwards which is why New Zealand households have gone backwards and are struggling to make ends meet? 
Hon BILL ENGLISH 
: New Zealand households have not gone backwards. Some certainly have— 
Hon David Cunliffe 
: Oh yes they have. 
Hon BILL ENGLISH 
: Some have because people who relied on the previous Government’s debt-funded binge to secure their jobs were sorely disappointed. They have lost their jobs they have had income cuts and we are working very hard to rebuild their prospects. 
Hon Sir Roger Douglas 
: Does Treasury advice regarding the ownership of State-owned assets referred to by Treasury’s John Crawford include recommendations to expand public-private partnerships through partial sales of State-owned assets; if so would he consider such a proposal? 
Hon BILL ENGLISH 
: Treasury as far as I can recall has not made that particular recommendation. The Government’s position has been clear and that is no sales of assets in this term. If that position changes we will campaign on it. But I might say that that is relevant to a very small part of the Government’s balance sheet. The Government owns $235 billion worth of assets and if we can improve the management of all of those assets it will have a much more significant impact on taxpayers’ value than a few partial floats would. 
Hon Sir Roger Douglas 
: Given the Minister’s reply does he believe that the $94 billion overseen by the Crown Ownership Monitoring Unit is the best use of that capital for New Zealanders; if so why are the dividends paid out by the 17 State-owned enterprises it monitors showing an average return of 2 percent compared with 4.5 percent for private companies listed on the New Zealand Exchange? 
Hon BILL ENGLISH 
: I think that is a very good question. In recent years State-owned enterprises were allowed to retain much of their surplus cash. That has gone into an extensive investment programme and taxpayers have not yet benefited from that. We should be expecting significant increases in dividends from that significant increase in investment in recent years. The Government has published that information so that everyone can see what will be required to get better performance out of those assets and it is quite a lot.