Gilmore Aaron: Questions for Oral Answer — Questions to Ministers 
Gilmore Aaron: Questions for Oral Answer — Questions to Ministers 
[Volume:667;Page:14198] 
4. 
AARON GILMORE (National) 
 to the  
Minister of Finance 
: What reports has he received on New Zealand’s economic growth? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 The lift in growth is becoming apparent through the balance of payments statistics which show that both profits and imports are rising. Statistics New Zealand today published the balance of payments data for the June quarter 2010 which show the current account deficit for the year ended June of $5.6 billion or 3 percent of GDP. This compares with deficits averaging about 8 percent of GDP over the previous 5 years. Despite this lift in growth the outlook for the current account is improving. The Reserve Bank forecast shows the deficit averaging about 4 percent of GDP over the next 3 years or about half of the average of the recent past. 
Aaron Gilmore 
: What does today’s data reveal about external debt? 
Hon BILL ENGLISH 
: The news on New Zealand’s external debt is less encouraging. These liabilities have risen by almost 40 percent to $164 billion over the past 5 years which is something of a measure of the mismanagement of the economy. Net international liabilities are now 87 percent of GDP which is one of the higher ratios in the developed world. It is not apparent that New Zealand has acquired good-quality assets as a result of this big upsurge in debt owed overseas. One consequence is that the annualised balance on investment income is again more than $10 billion in deficit despite interest rates falling and that will be a permanent drag on New Zealand incomes. The data reinforced the need for New Zealand to tilt the economy towards savings exports and investment and away from excessive borrowing excessive debt and excessive Government spending increases which characterised the economic management until 2008. 
Aaron Gilmore 
: What steps is the Government taking to address New Zealand’s current account problems? 
Hon BILL ENGLISH 
: New Zealand needs to raise exports and save more. Government policy is aimed precisely at those needs. Next week on 1 October the tax system changes in ways that will encourage savings and productive investment and will discourage consumption and tax-driven speculation. Although the vast bulk of taxpayers will be better off the real gains will be in the longer term as the changes help to change the incentives in the economy. At the moment we also have the Savings Working Group undertaking some important thinking about how to further improve savings performance in New Zealand. 
Hon Sir Roger Douglas 
: Can the Minister explain how a reduction in productive employment in primary and manufacturing industries of 11 percent and 5 percent respectively offset by increases in public administration and social assistance employment of 21 percent and 26 percent respectively over the last 6 years helped grow the economy? 
Hon BILL ENGLISH 
: I agree with the member’s analysis. Too many of the new jobs that were created since about 2004 were essentially either funded by Government spending increases that turned out to be unsustainable or by excessive borrowing which equally turned out to be unsustainable. The number of jobs in the export sector of the economy actually shrank; in fact there have been no net new jobs in our export sector since 2002. That is why the Government needs to manage Government spending much more tightly and reduce back-office expenditure where it can. The Government must also make sure that resources move from the sheltered parts of the economy—essentially Government domestic housing and so on—into the export and trading part of the economy because in the next 10 years we have to earn it before we spend it. In the last 10 years we spent it well before we earned it. 
Aaron Gilmore 
: What alternative economic policies would lower growth and leave the economy poorly positioned for the future? 
Hon BILL ENGLISH 
: There is a steady stream of suggestions about different ways to manage the economy which includes increasing personal income taxes borrowing more fiddling with the GST system increasing Government spending irresponsibly and meddling with the Reserve Bank tool kit. All of those suggestions have come from the Opposition and they are the same policies that got New Zealand into trouble. That is why we are changing them.