Copeland Gordon: Questions for Oral Answer — Questions to Ministers 
Copeland Gordon: Questions for Oral Answer — Questions to Ministers 
[Volume:611;Page:8524] 
4.  
GORDON COPELAND (United Future) 
 to the  
Minister of Finance 
: Is he concerned with the apparent duality of our economy whereby one side of the ledger registers good health—robust growth lowering of unemployment and inflation—yet the other side exhibits clear signs of ill health with a widening trade deficit and a marked decline in foreign direct investment; if not why not? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 Yes. 
Gordon Copeland 
: Can the Minister explain the point of New Zealand having “one of the world’s most open regimes for foreign direct investment” when as Professor Peter Enderwick of the Waikato Management School points out New Zealand’s economic environment is beset by factors that have actively discouraged foreign direct investment such as Government intervention in key industries uncertainty over property rights and infrastructure constraints like roading and electricity? 
Hon Dr MICHAEL CULLEN 
: If New Zealand did not have reasonably strong inflows then I doubt that the New Zealand dollar would be up at the levels it is and the exporting sector would be doing rather better. We would not have a two-speed economy. 
David Parker 
: What factors are driving the deterioration in the current account? 
Hon Dr MICHAEL CULLEN 
: The primary circumstances are weak world demand and a relatively weak US dollar that has led to the New Zealand dollar going up against it. That of course leads to an increase in imports and a reduction in exports. 
Dr Don Brash 
: Is it not true that at a time when the export sector is under considerable pressure from the appreciation of the New Zealand dollar the Government should be doing everything possible to ease pressures on export industries and not burden them with increased compliance costs proposals to extend minimum holiday entitlements more complicated occupational safety and health requirements and taxes on methane emissions? 
Hon Dr MICHAEL CULLEN 
: I note that while the Government is concerned about the present position it is nothing like as bad as the situation that occurred in 1994-95 when the New Zealand dollar was allowed to rise to US70c. 
Sue Bradford 
: Is the Minister concerned about another kind of duality in the economy whereby on the one hand we have an apparent lowering of unemployment while on the other hand thousands of jobs are being lost at present in sectors like forestry clothing information technology and so on; and if he is concerned what is his Government doing about it? 
Hon Dr MICHAEL CULLEN 
: In any modern economy there are sectors that flourish a bit better than other sectors. The fact is that any job losses recently have been largely concentrated on a few relatively small sectors notably certain parts of the timber processing area that services the United States market—where there has been some very serious downturns. Generally speaking the labour market remains extremely buoyant. Indeed that is one of the reasons we have a large current account deficit. 
Gordon Copeland 
: What assurance can the Minister give that the Government is addressing the drop of more than US$1.5 billion in foreign direct investment in New Zealand over 2001 as reported by the UN-sponsored World Investment Report 2003? [ 
Interruption 
] 
Mr SPEAKER 
: Order! 
Hon Dr MICHAEL CULLEN 
: The Government’s growth and innovation framework and the associated sectoral strategies are very much designed to encourage large-scale investment within New Zealand but I do not think that that has been the major driving factor in terms of the present current account situation. As we have just recently seen in the galleries there is a good deal of imported goods within this economy. 
Dr Don Brash 
: Does the Minister recall criticising the Reserve Bank’s implementation of monetary policy in the mid-1990s when there was a similarly difficult tension between a very buoyant domestic economy and a high exchange rate putting great pressure on the export sector and is he finally willing to concede that situations of this kind are rarely caused by monetary policy and were not in the mid-1990s? 
Hon Dr MICHAEL CULLEN 
: No not entirely. Even though two-speed economies recur from time to time the skill of the driver can still be quite crucial. 
Gordon Copeland 
: Noting those answers is the Minister serious about addressing the significant trade deficit and fall-off in foreign direct investment—when he failed to mention or to confront those issues or problems during his recent speech in Singapore? 
Hon Dr MICHAEL CULLEN 
: I have had very strong feedback on the speech in Singapore from some rather unlikely sources and modesty forbids me from naming them.