English Bill: Financial Review Debate — In Committee 
English Bill: Financial Review Debate — In Committee 
[Volume:637;Page:7901] 
Hon BILL ENGLISH (Deputy Leader—National) 
: 
 One of the tasks that Treasury carries out with the funding that this House appropriates for it is fiscal policy. I wonder whether the Minister in the chair the Hon Dr Michael Cullen would be able to answer a few questions about Treasury advice on fiscal policy in some of the information that has been presented based on Treasury analysis in the last Reserve Bank Monetary Policy Statement. I am asking these questions of the Minister because he has developed an approach whereby he regards National’s fiscal policy as much more important than his own. His focus has been on what might have happened had National won the election and implemented the policies it campaigned on during that election campaign. 
That debate is legitimate enough but he is doing it as a way of avoiding an explanation of his own fiscal policy which is increasingly confused. The story up until a few weeks ago was that fiscal policy was tight and the measure of that was that the Government was running cash surpluses. But in the Monetary Policy Statement previous to this most recent March one the Governor of the Reserve Bank used for the first time the word “expansionary”. He was referring to the prospective period which is directly relevant to his forecasts for the next 3 years—roughly the time over which he is expected to manage inflation. The Reserve Bank Governor is always looking forward. 
So it is not a commentary on other parties’ fiscal policies it is about the Minister’s policies and whether he is willing to answer questions. A few weeks ago it was tight then he came to the select committee and said: “Yes it’s loose.” He could not really disagree with the Governor’s analysis that it was expansionary but since then the Reserve Bank has laid out in significant detail just how expansionary the policy is. He has used the Treasury analysis of fiscal impulse. This actually is rocket science I have to say. Calculating the fiscal impulse is a bit harder than understanding what the surplus means. Nevertheless the picture is quite clear. The picture Treasury has painted is 3 years of positive fiscal impulse which means that over the next 3 years monetary policy will be considerably looser than it has been. 
The Governor of the Reserve Bank has put this in his document but not because the Opposition thinks he should—it is up to him; he is independent. He has outlined it in great detail because it matters to his job of setting interest rates. The Minister of Finance needs to deal with this proposition because he has not done so so far. His fiscal policy is significantly looser over the forecast period and that will have the effect because the Governor of the Reserve Bank has said so of keeping interest rates higher for longer. Maybe it did not cause him to put up interest rates just the other day; maybe it did—I do not know. The Reserve Bank Governor makes those decisions. But the fact that he has drawn so much attention to it tells us that it matters to him. 
When he is sitting down to decide the interest rates that New Zealand households will be paying not just on mortgages but on other forms of financing such as overdrafts credit card debt hire purchase interest-free offers from Harvey Norman and all the other debt—the overnight cash rate affects all of them not just the current obsession with housing—can Dr Cullen explain why he believes that his big spending plans are not fiscally expansionary but that any tax cut would be? Can he explain whether he agrees with the Reserve Bank analysis based on the analysis of his own officials? His own officials supply the data in the raw material. Does he agree with it? Does he agree with the Governor of the Reserve Bank who says his policy is expansionary? Does he agree with the Treasury assessment that the next 3 years 2007-09 will see significantly looser fiscal policy as measured by figure 5.15 the fiscal impulse calculations in the Monetary Policy Statement? Can he tell us whether it is sustainable to have core Government expenditure growing at almost twice the rate of nominal GDP—not real GDP but nominal GDP—as table 5.2 total core spending and selected components 2005-07 shows? 
Does he believe it is sustainable? I want him to just answer that question. Given that the Government is now on about sustainability where nominal GDP—[ 
Interruption 
] Oh he is going to ask me some questions. That is fine. I am happy to sit in the chair as Minister of Finance and answer those questions. That table shows that nominal GDP over 2005-07 has grown at 9 percent and expenditure has grown at 17 percent.