Robertson Grant: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeRobertson Grant: Oral Questions — Questions to Ministers[Sitting date: 09 September 2015. Volume:708;Page:6437. Text is incorporated into the Bound Volume.]3.GRANT ROBERTSON (Labour—Wellington Central) to the Minister of Finance: Does he agree with the Prime Minister’s statement that a rising exchange rate “is a sign of confidence in New Zealand”?Hon BILL ENGLISH (Minister of Finance): Yes. When the economy is doing well relative to other countries the exchange rate is typically higher. It should not be a surprise that when dairy prices have dropped so sharply people’s view of prospects for the New Zealand economy in the near term have weakened. That is one of the reasons the exchange rate has fallen. But we are pleased it has because it acts as an automatic stabiliser. It means that exporters can now be more competitive.Grant Robertson: In light of that answer with the dollar having dropped 20c against the United States dollar since that statement was made in April is the falling dollar a sign of a lowering of confidence in New Zealand?Hon BILL ENGLISH: I think I answered that question before. It is not at all a surprise. It may be a surprise to the member but not a surprise to anyone else that when our national income has dropped then the view of our near-term economic prospects has moderated. There is no doubt about that and that is one of the reasons the exchange rate has dropped. But of course it would be worse if dairy prices dropped and the exchange rate stayed up. Then we would be in a real mess. [Interruption]Mr SPEAKER: Order! [Interruption] Order! I know the member is responding to interjections but it is not helpful.Grant Robertson: Does he agree with John Key in 2015 who said that the high exchange rate of 81c to the United States dollar was “a point of celebration” or the 2008 John Key who said an exchange rate of that level could not be sustained in New Zealand?Hon BILL ENGLISH: What we all agree on is that New Zealand exporters did amazingly well to be competitive at 81c because in 2008 in the outflow of the economic wreckage left by the Labour Government no one thought it was possible to compete at 81c. But we found out by backing New Zealand businesses and fixing the damage that Labour did that we could compete.Grant Robertson: Does 2015 Bill English with the NZ$1 at US62c agree with 2012 Bill English when the NZ$1 was at US81c that “A 20 percent devaluation of the New Zealand currency would cut the standard of living of every New Zealand household by 20 percent.”?Hon BILL ENGLISH: Yes and I will explain why. In 2012 I shared the view that everyone in the world did that a big drop in the exchange rate would lead to high inflation eroding the real value of household incomes. It turns out that like everyone else I was wrong. We have a remarkably stable low-inflation environment where New Zealanders are getting real increases in their incomes. We have yet to see how the drop in the exchange rate will flow through but the indications are that it will be not nearly as strongly as we might have expected just 3 or 4 years ago.Grant Robertson: Does 2015 Bill English agree with 2013 Bill English who said when the NZ$1 was above US80c that those calling for a lower exchange rate “want to cut the real wages of workers”; if so with the NZ$1 at 62c is he now celebrating the real wages of workers being cut?Mr SPEAKER: The Hon Bill English—either of those two supplementary questions.Hon BILL ENGLISH: I know that listening to the answer is work compared with asking the question but I just answered that question before. In 2012 and 2013 everyone expected that a big drop in the exchange rate would lead to a rapid increase in inflation eroding the purchasing power of New Zealand households. That does not appear to have been the case. We have yet to see whether it might become the case with a big drop in the exchange rate but the low inflation that seems persistent around the world indicates that it works differently from how we thought.Grant Robertson: Is it not the case that he is actually just spinning like a top about the exchange rate in a desperate attempt to find something positive to say about an economy that the ANZ bank has described as running at stall speed?Hon BILL ENGLISH: I think the member has put his finger on an important issue and that is that although the Labour Party is always trying to find something negative to say about the economy we are simply explaining how the economy is and which Government policies support the resilience of New Zealand households to deal with it. I know that the member believes that by having an opinion that the economy is going down the tubes he can drive it down and that would suit him. We do not agree with that approach.David Seymour: Where would the exchange rate be and what options would the Reserve Bank Governor have today had he been “given more tools” and spent the last year trying to print money to lower the exchange rate as some would suggest?Hon BILL ENGLISH: It is difficult to speculate on some of the mad hypothetical policies we have heard in the past. But I suspect it would probably be about 42c against the US dollar.