Bennett David: Questions for Oral Answer — Questions to Ministers 
Bennett David: Questions for Oral Answer — Questions to Ministers 
[Volume:658;Page:7622] 
1. DAVID BENNETT (National—Hamilton East) 
 to the  
Minister of Finance 
: What reports has he received on New Zealand’s fiscal and economic challenges? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 This afternoon Treasury released long-term fiscal projections to 2050 as required under the Public Finance Act. These show that the Government’s operating balance and Budget will be in pretty much continuous deficit for the foreseeable future. Global recession and significant increases in Government spending in recent years have contributed along with the effects of an ageing population. This Government has decided to maintain public services and focus on growing the economy in order to deal with these challenges. 
David Bennett 
: How would stronger economic growth improve the long-term outlook? 
Hon BILL ENGLISH 
: The Government’s revenue base ultimately rests on New Zealand’s capacity to earn rather than on any particular set of tax rates. We have decided to shelter the economy through the rough edges of recession over the past year but this is not a long-term option. Improving economy-wide productivity gives by far the most beneficial contribution to the trade-offs New Zealand faces in the future. 
Hon David Cunliffe 
: If he is so concerned about the long-term fiscal outlook including the challenges of providing sustainable superannuation why did he stop pre-funding the New Zealand Superannuation Fund and will he concede that by doing so he has made the problem worse and pushed a huge burden on to our kids? 
Hon BILL ENGLISH 
: No I certainly do not accept that. As I have explained in the House many times the reason the Government stopped making contributions to the fund is that we would have had to borrow all the money to contribute to that fund and at the time New Zealand was somewhere near the outer bounds of the amount of money it could borrow without affecting our credit rating and making debt more expensive for everybody. 
Hon David Cunliffe 
: If the Minister is so concerned about the long-term fiscal outlook is he concerned that by failing to make polluters properly pay and by giving generous subsidies for companies like Rio Tinto his emissions trading scheme loads even further debt on to future generations? 
Hon BILL ENGLISH 
: As my colleague has pointed out the effect of the Government’s moderate and balanced emissions trading system is actually less than that of the previous Government over the next 10 years. In the long-term context the Government gets to make all sorts of decisions that have to balance the long-term interests of New Zealanders with the short-term impacts of a recession or the shorter-term impacts of an emissions trading system. We are happy with the balanced decisions we have made. 
David Bennett 
: How much will taxes have to rise to keep public finances under control? 
Hon BILL ENGLISH 
: It is important to keep in mind that the information Treasury has published today is a set of theoretical projections. They show that in the absence of any other policy change stabilising public debt would require tax collection to be around 10 percent higher than under current policy. That is around a $5 billion annual tax increase in today’s terms and clearly not where this Government wants to head. We want to constrain Government spending to effective public services focus on growth in the economy and make sure we have the most efficient tax system that we can. 
David Bennett 
: Why has the outlook deteriorated relative to the previous set of projections in 2006? 
Hon BILL ENGLISH 
: Part of the benefits of this long-term report is that we get to see how the outlook changes over time. Back in 2006 Treasury’s similar projections showed that the Government would probably be in surplus for the next 25 years. Just 3 years later we find ourselves in persistent deficits with at least 8 years until surpluses. This is a product of probably two things that have happened since then. One is the global recession which of course has had quite a big impact on Government revenues. The other has been the large increase in Government spending over the last 3 or 4 years under the previous Government.