Wilkinson Kate: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeWilkinson Kate: Questions for Oral Answer — Questions to Ministers[Sitting date: 18 March 2014. Volume:697;Page:16724. Text is incorporated into the Bound Volume.]2.Hon KATE WILKINSON (National—Waimakariri)to the Minister of Finance: How is the Government’s economic programme helping to control the cost of living for New Zealand families?Hon BILL ENGLISH (Minister of Finance):The Government’s sound economic policy and maintaining of conventional monetary policy in the hands of an independent Reserve Bank have helped to control the cost of living for New Zealand families and are critical to controlling the cost of living for New Zealand families as the economy progresses with sustained growth. For example the Government is working hard at getting back to surplus next year containing Government spending and ensuring that we avoid the mistakes of the last cycle where big increases in Government spending put pressure on inflation and therefore on interest rates and therefore on New Zealand households.Hon Kate Wilkinson: How will expected interest rate increases from 50-year lows affect families and what steps is the Government taking to prevent interest rates reaching the high levels of 6 years ago?Hon BILL ENGLISH: Given that interest rates have been at 50-year lows it was inevitable that they would increase at some stage back to what have been the more normal levels for the New Zealand economy over the last 30 years. With average floating mortgage rates having fallen to less than 6 percent from almost 11 percent in 2008 economists now expect that rates could rise by around 2 percentage points back to more normal levels. But they do not expect rates to increase to anywhere near the levels of 6 years ago. So although mortgage holders can expect some rise in costs savers will benefit from a bit more interest income and slightly higher interest rates now will head off the possibility of sharply rising interest rates later and for instance 10 percent first mortgage rates such as New Zealanders enjoyed under the previous Government.Hon Kate Wilkinson: How have Government measures in the electricity sector helped to restrict increases in power prices and in containing the overall cost of living for households particularly compared with price trends in previous years?Hon BILL ENGLISH: We need to keep in mind the proportion that electricity prices represent of New Zealand household costs. In the consumer price index the electricity sector represents 4 percent of the cost of living of households. Since 2008 the Government has made significant improvements to electricity generation and retailing sectors to increase competition. We have also invested heavily—following on from the previous Government—in transmission to improve the security of supply. These improvements helped to restrict price increases to around 3 percent in 2013. This compares with a 7 percent increase in electricity prices in 2006 a 6.5 percent increase in 2007 and an almost 8 percent increase in 2008. Overall electricity prices jumped 72 percent in the 9 years to 2008. Increased market competition is helping to slow down the rate of increase in prices. Consumers benefit from greater electricity market competition.Hon Kate Wilkinson: What reports has he seen on alternative approaches to monetary policy and economic management and what impact would they have on the cost of living for New Zealand families?Hon BILL ENGLISH: I have heard some confusing reports from some who believe that if the Reserve Bank does not put interest rates up then inflation rates would go higher and that somehow that reduces the cost of living for New Zealand households. That is pretty confusing—that we should change the Reserve Bank of New Zealand Act to allow for higher inflation as a way of cutting inflation in household costs. I am still waiting for an explanation for that ridiculous policy position held by the Labour Party.