Parker David: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeParker David: Questions for Oral Answer — Questions to Ministers[Sitting date: 29 May 2014. Volume:699;Page:18473. Text is incorporated into the Bound Volume.]2.Hon DAVID PARKER (Deputy Leader—Labour) to theMinister of Finance: Does he agree with the Productivity Commission regarding consumer prices that “when judged against average expenditure the price level in New Zealand appears relatively high”?Hon STEVEN JOYCE (Associate Minister of Finance) on behalf of theMinister of Finance: The report the member is citing including that particular quote is based on 2005 data. In fact I will quote from the same report. It says: “The most recent detailed data available on specific prices are for 2005 which were primarily used in the analysis.” I am very happy to discuss the poor quality of economic management we were experiencing as a country at that time. I think we can all agree that the cost of living rose very significantly in the 2000s and that is not surprising. That was when we had a Government that put the export sector into recession during a global boom; a Government that was on its way to lifting spending by 50 percent in 5 years sending interest rates to nearly 11 percent and the current account deficit to around 8 percent; and a Government that left consumer price inflation at more than 5 percent in 2008. So I agree that that was pretty shameful and I have to thank the member for his question.Hon David Parker: Given that his answer said that it was about 2005 has the Minister not read the report or does he not understand the difference between the rate of price growth and the level of prices and that in fact the report shows that the relative level of consumer goods has got worse from 17th worst in the world to in 2011—not 2005; 2011—11th worst in the world?Hon STEVEN JOYCE: That is exactly the point. If you read the report which I have it shows that through the 2000s prices went up dramatically. We know that. It was because inflation was going up faster than wages throughout that period. Since that time it has been improving with the CPI now significantly lower than wage increases including in the last 12 months and the last quarter. The reality is that if you were not a smoker the cost of living went up by absolutely nil.Hon David Parker: Is one of the reasons that New Zealand price levels have got worse relative to other countries’ that the standard supermarket price for 2 litres of milk in Australia is now around $2 yet it is $3.80 in New Zealand?Hon STEVEN JOYCE: I have free political advice for the member. I just would not run this line of argument because the record about cost inflation in New Zealand was caused and experienced by the previous Government. Actually prices relative to wages are improving under this Government. He can go on about that all day if he likes. Under this Government prices are going up slower than inflation. Under the previous Government prices were going up faster than people’s wages.Andrew Williams: Why is the Government doing nothing about rising power prices leaving many Kiwis particularly the seniors to struggle through a cold winter?Hon STEVEN JOYCE: The member is wrong. The Government has done a lot about the price of electricity including promoting a much more competitive electricity market. Electricity price rises are much lower and that is reflected in the overall cost of living increase which for the last year was 1.5 percent in the year to March for all Kiwi consumers—1.5 percent. Average wages over that period went up 3.2 percent. If we continue on the path we are going and see that for some more years then New Zealanders will experience a significant increase in their wages relative to prices. In relation to people on superannuation their incomes are linked to the average wage.Hon David Parker: In respect of electricity then why is it that when 60 percent of our electricity is hydro power made from public rivers which is the cheapest electricity to produce in the world cheaper than nuclear New Zealanders pay through the nose for it?Hon STEVEN JOYCE: Again I do not know why the member goes down this line because his record on power prices was abysmal. They went up far faster than they ever have in the more competitive market that this Government has created. New Zealanders know that which is why they are obviously endorsing the economic direction of thisGovernment versus the proposals of the Labour-Green-Dotcom-Internet-Mana Opposition prospect.Louise Upston: How does the cost of living under this Government compare with previous Governments and what is the outlook for wage growth and inflation?Hon STEVEN JOYCE: In the 9 years to December 2008 the average annual cost of living increase—the average—was 3.1 percent. That compares with an average cost of living increase of 2.1 percent since the Government came into office. That included the increase in GST which was compensated for with income tax reductions. In the year to March annual inflation was 1.5 percent and it was 0 percent in the March quarter for anyone who is not a smoker. As I said inflation in 2008 peaked at more than 5 percent. If we look ahead Budget forecasts show the average wage will rise to around $62300 by 2018 which is an increase of just under 14 percent and well ahead of expected inflation of 9.8 percent over the same period.Andrew Williams: What plan does the Government have to make the family supermarket bill each week less excessive given the increasingly high cost of food?Hon STEVEN JOYCE: I think the member needs to go and have a look at the actual cost inflation in New Zealand at the moment. Nobody is arguing that the costs are not there for households but in terms of the increase in costs it has literally gone up by 1.5 percent in the last year and by nil if you are not a smoker. If you are a smoker then that has gone up a bit but if you are not a smoker it is nil—Andrew Williams: What about food?Hon STEVEN JOYCE: Including food because inflation includes food—that is the way we measure it. It has gone up by absolutely nil in the last quarter.Hon David Parker: Why does he think it is fair that a loaf of Vogel’s bread a New Zealand brand costs around the equivalent of $3 a loaf in the UK yet the same loaf here costs around $4.99 or $5?Hon STEVEN JOYCE: The reality is New Zealand right now has a far healthier economy with better job growth and better job prospects than the UK. That is one reason for the UK really struggling at this point in time. Our cost of living increases are actually lower than the UK’s right now. That is the reality of it. For New Zealanders wages are going up faster than inflation. If the member wants to look at the reason why some prices are higher overall he needs to look no further than the 9 years of the Labour Government when the inflation of prices was out of control particularly in 2008.Hon David Parker: Is the Minister really so out of touch that he does not realise the report shows that prices in New Zealand relative to income have got worse relative to the rest of the world going from as I said earlier 17th worst in the world to 11th worst in the world now because New Zealanders are paying too much for the basics?Hon STEVEN JOYCE: The member needs to be reminded that this report relates to 2005 data. In fact it says in terms of comparisons: “The most recent detailed data available on specific prices are for 2005 which were primarily used in the analysis.” We know who the Government was in 2005. We know it did a particularly poor job of managing the New Zealand economy so I am really not sure why he is bringing this up today.Louise Upston: What policies has he seen that would increase the cost of living for hard-working New Zealand households?Hon STEVEN JOYCE: That is a very fair question because I think that one of the many difficulties for the Opposition is understanding cause and effect. There are a number of policies that would pile costs on households and businesses. For example a much larger and tougher emissions trading scheme would add around $500 a year to household power and fuel costs. A State-run monopoly electricity system would pushup electricity prices and lead to blackouts. An expensive capital gains tax on every New Zealand business and farm but only on a quarter of housing would also push up prices. Putting everybody in KiwiSaver and then declaring that you are going to cut their pay by 6 percent on a whim would make it more difficult for people to afford to live. Watering down the Reserve Bank of New Zealand Act to go soft on inflation would push up the cost of living. A big-spending big-borrowing Government to run everything from insurance to housing—that too would put up the cost of living.Hon David Parker: I raise a point of order Mr Speaker. I think he has left it so late to get to the punchline that the Speaker will not let him do so.Mr SPEAKER: That is not a point of order.