Ngaro Alfred: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeNgaro Alfred: Oral Questions — Questions to Ministers[Sitting date: 09 September 2015. Volume:708;Page:6437. Text is incorporated into the Bound Volume.]2.ALFRED NGARO (National) to the Minister of Finance: How are household balance sheets supporting resilience in the New Zealand economy?Hon BILL ENGLISH (Minister of Finance): The resilience of the New Zealand economy is based on the resilience of New Zealand households. That can be measured by household debt relative to incomes and relative to assets. The aggregate debt of New Zealand households increased significantly between 2000 and 2008 because of uncontained house price rises and debt-funded consumption. Since then growth in household debt has been moderate despite continued growth in Auckland house prices. Household savings have increased markedly since 2006 and have been positive since 2010. The combined effect has been a reduction in the ratio of household debt to assets. More savings and moderate growth in debt mean that New Zealand households are well-positioned to manage through the current uncertainty.Alfred Ngaro: How can higher household debt affect macroeconomic vulnerability?Hon BILL ENGLISH: It is pleasing to see that since 2008 higher household incomes and moderate growth in household debt have resulted in stabilising the debt to income ratio after it rose by 50 percent from 2000 to 2008. So although household debt is increasing at moderate levels of around 5 percent per annum it is far below the debt increases of 16 percent per year in the mid-2000s. High household debt is associated with volatile consumption. High household debt can also produce a more volatile business cycle but it looks as if New Zealand’s households are running pretty well-balanced debt and asset ratios and that will help them to get through any softening in the economy.Mr SPEAKER: Order! Before I call the member there is a huge level of interjection coming from one particular member who has a primary question later that I am very interested in the answer to. So I am hoping that he is here to ask the question.Alfred Ngaro: How does the change in household debt to income ratios in New Zealand since 2008 compare with other countries?Hon BILL ENGLISH: Up to 2008 New Zealand had one of the more rapid increases in household debt to income—that is debt went up a lot faster than income—and now that has changed. Households in some countries have significantly reduced their debt—for instance in the UK and in the United States. Another measure of vulnerability is total debt to GDP. Between 2007 and 2014 this increased across all advanced countries including New Zealand and New Zealand’s increase was about the second-smallest in the last 7 years among advanced countries. According to Treasury in 2014 New Zealand had the second-lowest ratio of total debt to GDP among advanced economies—the second-lowest ratio of total debt to GDP.Hon David Cunliffe: I raise a point of order Mr Speaker. You have rightly surmised the level of frustration on the Opposition benches. I seek that you clarify your ruling of yesterday that both long questions and unduly long answers are out of order and clarify whether the Minister is coming close to your definition of an unduly long answer especially because it is arguable whether the Minister of Finance has any ministerial responsibility for the debt of individual households.Mr SPEAKER: If the member would only study the question it is around the resilience of the New Zealand economy so the Minister of Finance certainly has an interest in that. As I have mentioned on many occasions I will be the adjudicator as to the length of answers. I am conscious that some of the answers given to two supplementary questions are tending to be on the long side but I will be the adjudicator not the honourable member.Alfred Ngaro: How are lower interest rates and moderate debt growth resulting in more money in the pockets for New Zealand families?Hon BILL ENGLISH: Interest rates have dropped from a high of 11 percent to currently under 5 percent. At the same time since 2008 the average wage has increased by 22.5 percent so that means that the debt-servicing ratio in households has reduced. In 2008 households were spending on average 14 percent of their disposable income on servicing debt. Today they are spending 10 percent of disposable income on debt servicing. Their incomes have gone up their debt levels are stable and interest rates are a lot lower so they are better off.