Key John: Questions for Oral Answer — Questions to Ministers 
Key John: Questions for Oral Answer — Questions to Ministers 
[Volume:627;Page:22175] 
6.  
JOHN KEY (National—Helensville) 
 to the  
Minister of Finance 
: Was any advice sought by him from Treasury on the student loan policy announced on 26 July; if so will he release that advice? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 The student loan policy is Labour Party policy not Government policy. As such Treasury does not give advice on that policy. Prior to the policy being adopted costings were done at my request in relation to the ongoing and uncompleted work referred to in the Budget documentation. I am aware that the information in relation to the Labour Party’s policy has been released to wide public acclaim. 
John Key 
: Will New Zealand as per the requirements of the Financial Reporting Act adopt the international accounting standards after 30 June 2007; if so what impacts will this have on the valuation of New Zealand’s net worth as a result of Labour’s proposal to change student loans? 
Hon Dr MICHAEL CULLEN 
: We are getting into tricky territory between the Labour Party and the Government here. Of course the Government has not produced estimates on that. I would assume that the impact on net worth would be negative. That shows the enormous danger of confusing an operating balance and net worth with the Government’s cash position. 
John Key 
: Can he confirm that New Zealand’s net worth will be reduced by approximately $1.7 billion or $400 per person after 30 June 2007 as a result of Labour’s proposal to change the student loan policy and what impact will this have on Labour’s Budget pledge to reduce net debt to zero by 2007? 
Hon Dr MICHAEL CULLEN 
: No I cannot confirm that at this point. If the member is confusing net worth with net debt and gross debt he is showing a gross misunderstanding of the accounting principles. 
Gordon Copeland 
: Did any of the costings or advice requested by the Minister on the student loans policy include projections of the effect that tax cuts such as the $3000 tax-free amount and the adjustments to the existing threshold proposed by United Future would have on disposable incomes and therefore on potential loan repayment rates? 
Hon Dr MICHAEL CULLEN 
: Absolutely not. The member of course has those costings. That runs into some billions of dollars a year which would lead to a substantial rise in the Government’s borrowing requirements high interest rates and therefore if interest were still being applied to student loans higher interest on student loans. 
John Key 
: Can the Minister confirm that New Zealand’s net worth would be reduced by a further 25c for every dollar of every new student loan written on top of the $1.7 billion it would be required to write off on the existing loans due to Labour’s proposal to change the student loans policy? 
Hon Dr MICHAEL CULLEN 
: No I have not sought advice from Treasury so I cannot confirm the numbers. 
Gordon Copeland 
: In light of the previous answer would it therefore surprise the Minister to know that most graduates would be better off under United Future’s tax reduction policy than under Labour’s zero rate student loan offer? 
Hon Dr MICHAEL CULLEN 
: Yes of course on that basis they would be much better off if we scrapped taxation altogether and simply funded all expenditure out of borrowing. 
John Key 
: I seek leave to table a letter I have written today to Kevin Brady the Auditor-General asking him to confirm that in fact under the Financial Reporting Act New Zealand will be required to adopt the international accounting standards that New Zealand will be required to calculate fair value on the student loan portfolio that that loss will be $1.7 billion and that there will be an ongoing liability to all New Zealanders that will see fair value for every dollar reduced by 30 percent. 
Document by leave laid on the Table of the House.