3. Question No. 3—Prime MinisterCHRISTOPHER LUXON (Leader of the Opposition) to the Prime MinisterQuestion No. 3—Prime Minister3. CHRISTOPHER LUXON (Leader of the Opposition) to the Prime Minister: Does she stand by her statement that We've been a Government focused on doing what we can to ensure that Kiwis' wages are increasing including relative to the cost of living"; if so does she accept that inflation is rising faster than wages so real incomes are falling?Rt Hon JACINDA ARDERN (Prime Minister): I stand by my statement. We've been focused on tackling the cost of living since we came into office. This includes of course average ordinary-time wages rising by 14.5 percent; increases to income support Working for Families childcare assistance and the accommodation supplement; the introduction of the winter energy payment; and Best Start. We've raised the minimum wage by over a third from $15.75 in 2017 to $21.20 and overseen the increase of wages for nurses police officers and teachers to name a few. We've introduced the Ka Ora Ka Ako free and healthy school lunch programmes to over 200000 students reduced education costs for parents by removing school donations for deciles 1 to 7 and expanded free and low-cost doctors visits to children under 14. Volatile global energy prices and yes supply chain disruption mean that inflation will exceed wage growth in the 2022 financial year. This is why we also removed 25c of fuel excise duty and instituted half-price public transport fares. This contrasts with the Leader of the Opposition who plans to double the cost of public transport remove free public transport for superannuitants increase petrol prices cancel public holidays and provide tax cuts for those earning $180000.Christopher Luxon: Does she accept that higher levels of Government spending in a constrained economy means interest rates will need to go higher than otherwise to contain inflation; if not why not?Rt Hon JACINDA ARDERN: Well firstly I would like to draw out that the spending of this Government relative to the last has broadly been in line if you compare as a percentage of GDP. We spent less than 2020 and 2021 as a percentage of GDP than National did in 2009 and 2010. We've also taken on similar amounts of debt if you compare this period to the period of the global financial crisis. I would also reflect the Secretary to the Treasury who has pointed out that in terms of inflationary impact from Government spending it all depends of course on what that Government spending is on.Christopher Luxon: Is it her view that Government policies have no impact on inflation or interest rates at all; if so why?Rt Hon JACINDA ARDERN: As I've said it all depends on what that spending is going towards. And as I've already pointed out whether you look as a percentage of GDP the spending that this Government has invested in our economy which has been to support in a targeted way New Zealanders through this crisis we have been very cautious in the way that we have done that. It is a bit rich to be lectured by the other side of the House who want to spend a billion dollars cutting tax at the top income bracket of $180000 or more and also giving back tax breaks as well to investors. Untargeted tax cuts would have the impact of being inflationary.David Seymour: If it's the case that her Government's spending has not stoked inflation in New Zealand can she explain to the public why meat poultry and eggs are reported by Statistics New Zealand today to have inflated in price faster than the average increase in prices across the country when those things are produced almost entirely within New Zealand and not influenced by offshore effects?Rt Hon JACINDA ARDERN: Well in terms of offshore demand and offshore prices they will be because of what's happening in the export market. Again I would point to the fact that yes we have overall seen an increase in food prices. There are two factors at play: external factors which all countries are being hit by at present but the New Zealand market also has some factors that are unique to us. We do not have enough competition in the New Zealand grocery market. That is something that we as a Government and as a country need to address and we've already set out our plans on how we intend to do so.Christopher Luxon: Does she agree with CoreLogic economist Kelvin Davidson that "anyone with a mortgage is paying more and there could be another at least one percent onto most mortgage rates over the next three to six months" and if so what will another 1 percent mean for the typical Kiwi mortgage holder?Rt Hon JACINDA ARDERN: Of course what we have seen in our interest rates in New Zealand is that we have had historic lows and that even with the official cash rate (OCR) adjustment that we have seen the Reserve Bank announce today that would bring us back to a point that's less than what we were even seeing in 2017 and at the point of the election. It has been historically low. We do however have concerns over whether or not we might have families who are overleveraged in the market because they may have purchased at a time during historically low interest rates. That is something that we've been very mindful of and making sure that we look at what's happening in our housing market to ensure that those families have all of the support and best advice possible when making those significant purchasing decisions so that they can weather changes in interest rates.Christopher Luxon: Does she accept that rising interest rates which mean a family with an $800000 mortgage are now paying over $12000 a year more in interest than 12 months ago will make the cost of living crisis much worse for thousands of Kiwi families already struggling with record inflation and falling real incomes?Rt Hon JACINDA ARDERN: Again I would point to the member that the OCR was 1.75 at the time when National last left office and we are talking about a historically low period when it comes to interest rates in this country. I'd be interested in hearing what the member is possibly proposing in this space. Obviously the Reserve Bank are using the tools available to them as has been tradition in New Zealand for a long time.Christopher Luxon: Have the policies that she promised over a year ago would "tilt the market in favour of first-home buyers" worked and if so why has the share of houses being sold to first-time home buyers just hit a 4½-year low?Rt Hon JACINDA ARDERN: I can tell you what won't tip the market towards first-home buyers and that's stripping out all of the changes that we have made when it comes to deductibility for investors. That member proposes giving back a billion dollars towards those who are speculators in our market and those on incomes over $180000. I can tell you that certainly won't help first-home buyers.Christopher Luxon: What role does she believe the Government has if any to avoid policies that push interest rates higher than they otherwise need to go?Rt Hon JACINDA ARDERN: Of course we have a role to play in making sure that all of the economic indicators that are important to our economic wellbeing as a nation are heading in the right direction. In terms of growth we are back to pre-COVID levels. We have low unemployment. We have low debt relative to other countries. All of that matters for our economic wellbeing as a nation. But of course the cost of living matters too which is why if you have an eye to inflation what you don't do is have untargeted tax cuts which will have an inflationary impact. There are other ways to help New Zealanders. That's why our 1 April changes target the majority of families through the family tax credit superannuitants through increases in superannuation and those on Government support. That is how you support New Zealanders through these tough times."