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: 10 April 2014. Volume:697;Page:17169. Text is incorporated into the Bound Volume.]2.Hon DAVID PARKER (Deputy Leader—Labour)to the Minister of Finance: Does he believe that the Government’s policies have reduced income inequality; if so does he agree with the IMF that rising inequality slows economic growth?Hon BILL ENGLISH (Minister of Finance):The evidence shows that inequality in New Zealand has been flat or slightly declining since the mid-2000s. We also believe that a number of the measures the Government took through the recession certainly prevented inequality from worsening at a time when the Government was very short of revenue. But I welcome the member’s interest in the IMF’s view because among its recent comments on New Zealand the IMF emphasised the importance of ongoing fiscal discipline to a sustainable economic recovery. Nowhere in the statement does the IMF refer to inequality and that is for a very good reason in respect of New Zealand—that inequality in New Zealand has not increased over the last 10 years.Hon David Parker: Well then do I take it that the Budget that is upcoming will reverse the 40 percent of the 2010 income tax cuts that went to the top 10 percent of income earners?Hon BILL ENGLISH: No. If the member bothered doing his homework he would have seen that at the time of the 2010 tax package we published detailed distributional impact measures which showed—Dr David Clark: Must be rubbish.Hon BILL ENGLISH: No. Those measures showed that the combination of income tax cuts and an increase in GST and effectively a billion-dollar increase in property taxes meant that that tax package was distributionally neutral.Hon David Parker: Is he so out of touch that he thinks that inequality is not getting worse when 74 percent of New Zealanders believe that the gap between rich and poor has increased under his Government or does he side with the 3 percent who think that the gap has narrowed?Hon BILL ENGLISH: That member may be a stranger to the facts but I am not. The measuring system of the previous Government which I understand was a Labour Government was such that regular reporting on inequality was carried out by highly qualified professionals. That is the information on which we relied for the statement that inequality in New Zealand has not got worse in the last few years.Grant Robertson: Everyone else is wrong.Hon BILL ENGLISH: I accept that some people believe that. The fact is it is not correct.Hon David Parker: I seek leave to table the results of the Herald-DigiPoll which showed that 74 percent of New Zealand—Mr SPEAKER: Order! The point has been made. The Herald-DigiPoll is available to all members.Hon David Parker: How can he justify being out of touch with the 74 percent of New Zealanders who say that inequality has increased when homeownership has declined to its lowest rate in 50 years under his watch?Hon BILL ENGLISH: I am not sure the member is correct about the homeownership figures but in any case we look for—Hon Dr Nick Smith: They got worse under Labour.Hon BILL ENGLISH: Well under Labour house prices doubled which probably did not help. But despite the severe damage Labour caused to the housing market we would like to see the Opposition parties support Government efforts to increase the supply of housing by helping us persuade councils to allow more new houses to be built more quickly.Louise Upston: What recent reports has he received from the IMF on the New Zealand economy?Hon BILL ENGLISH: The most recent report from the IMF did not refer to inequality as a constraint on growth for the very good reason that inequality in New Zealand has not worsened. It did note that New Zealand has broad-based economic growth and increasing business and consumer confidence. It said that the Government’s fiscal management and monetary policy has helped to deliver improved resilience against future shocks to the economy. It considers that the steps taken by the Government to alleviate housing supply bottlenecks will ease pressures in the housing market and in the long run I believe those steps will help to ease inequality in New Zealand because one of the biggest drivers of inequality is the high cost of housing.Hon David Parker: Does he deny that the current annual student turnover rate at decile 1 primary schools which is a shocking 52.8 percent per annum is a further symptom of rising inequality and is this further evidence supporting the findings of the OECD that inequality is having a major and negative impact on educational outcomes in New Zealand?Hon BILL ENGLISH: No I do not agree with all of that. The interesting thing about the OECD work is that it shows that economic inequality in New Zealand has among the lowest levels of impact because of our education system. Part of the reason for having public education—in fact the main reason—is to overcome the inequalities of birth and inequalities of opportunity. That is why this Government is so strongly focused on helping our system be more effective in overcoming economic inequality. Another reason there is high transience in those schools is that the State housing system does not meet the needs of those with serious housing need. That is why the Government is changing that policy next week.Hon David Parker: Why can the Minister not see that rising inequality under National goes against the egalitarian values that New Zealanders hold dear is making educational outcomes worse and is holding back economic growth?Hon BILL ENGLISH: There is a very simple reason we do not believe those things despite the fact that the member does and that is that the measures of inequality in New Zealand and the facts demonstrate that it has not got worse. That is not a political assertion or an ideological conviction; it is the facts as laid out in the annual report from the Ministry of Social Development which was set in place by the previous Government. On “Planet Labour” I know facts have very little impact but on Planet Earth and in New Zealand the facts matter.Louise Upston: What comments has the International Monetary Fund made previously about the New Zealand economy?Hon BILL ENGLISH: In the light of recent discussion about the history of the New Zealand economy I looked for the IMF reports from 1975. That seems to have been the focus of economic debate in the House but actually I could not find any. Instead I went to the 2008 IMF report where the IMF talked about a number of issues facing New Zealand including what it described in careful bureaucratic language as “rapidly appreciating house prices”. It noted that in response to rising inflation the official cash rate reached 8.25 percent and homeowners faced floating mortgage rates of 11 percent. The current account deficit was 8 percent. All of those numbers are about double what they are now and they are measures of the wreckage that the previous Labour Government did to the New Zealand economy.