English Bill: Questions for Oral Answer — Questions to Ministers 
English Bill: Questions for Oral Answer — Questions to Ministers 
[Volume:638;Page:8737] 
3.  
Hon BILL ENGLISH (Deputy Leader—National) 
 to the  
Minister of Finance 
: Does he agree with the OECD’s assessment of his fiscal policy that “exercising greater restraint now could avoid a longer and possibly more painful macroeconomic adjustment process.”? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 It would in fact be helpful to give the full quotation: “Greater fiscal neutrality is likely to be unpopular given public pressure for tax cuts and/or additional public spending that would reduce the projected budget surplus. Nonetheless exercising greater restraint now could avoid a longer and possibly more painful macroeconomic adjustment process.” As Mr Key last year said that there was room for $11 billion a year of tax cuts perhaps Mr English if he is so keen on the OECD report could give a copy to Mr Key. 
Hon Bill English 
: Has he seen the statement made by Dr Bollard Reserve Bank governor that the official cash rate review on 26 April this year stated: “As we noted in March demand is being fuelled by a buoyant housing market increases in government expenditure a rising terms of trade ongoing net immigration and a robust labour market”; and does the Minister agree or disagree with the reference to Government expenditure in that statement? 
Hon Dr MICHAEL CULLEN 
: I have slightly more up to date information. When that is released very soon it will show that Government spending is running at below the forecast level. The Government is running a substantial cash surplus in the current year. In other words the Government is taking more demand out of the economy than it is putting into the economy. Last year I was attacked almost daily by the members opposite—Mr Key nods his head in agreement—for doing precisely that.  
Hon Bill English 
: Is it now the Minister’s position that his plans for significant new spending in the next two Budgets are having no impact on inflation and thereby on interest rates; and does that mean he disagrees with a further statement made by the Governor of the Reserve Bank: “Strengthening domestic demand is being supported by a resurgence in the housing market and an expansionary fiscal policy.”; and why does the Minister believe that his spending makes no difference when everyone else knows it does make a difference? 
Hon Dr MICHAEL CULLEN 
: What is crucial is the balance between spending and revenue; and this Government will continue to run a tighter fiscal policy than the National Party which the member belongs to promised at the last election and continues to promise day by day as every spokesperson opposite issues press statements calling for increases in Government spending in his or her area—like Mr Power only in the last few days. 
Hon Bill English 
: When is the Minister going to stop fighting the 2005 election and actually account to the country for his economic management under which surges in Government spending are contributing to higher inflation higher interest rates and a higher exchange rate? 
Hon Dr MICHAEL CULLEN 
: I will get over the 2005 election much sooner than that member will get over the bitterness of losing in 2002 which affects his attitude to any sensible suggestions about running this economy. That is the man who sabotaged the talks around monetary policy because he is so bitter about 2002. 
Hon Bill English 
: How is it that someone who is supposed to be the Minister of Finance blames the Opposition spokesman on finance for current economic conditions and has also decided to flick off the central issue of the day—which is the way the Reserve Bank is managing inflation—to an inquiry by parliamentary backbenchers; and what is it that Doug Woolerton and Hone Harawira know that Treasury and the Reserve Bank do not? 
Hon Dr MICHAEL CULLEN 
: I am fascinated that the member describes monetary policy as the central issue of the day when only yesterday he said there was nothing wrong with the framework for monetary policy. 
Hon Bill English 
: Given the emphasis by the Governor of the Reserve Bank on the impact of Government spending plans on inflation and therefore on interest rates paid by New Zealand families will the Minister support an inquiry by the Finance and Expenditure Committee into the effect of the Government’s spending plans on inflation and interest rates and into the difficulty that the Governor of the Reserve Bank has in managing that? 
Hon Dr MICHAEL CULLEN 
: I have already written to the chairperson of the Finance and Expenditure Committee suggesting that an inquiry would be a good idea but the member of course keeps citing potential cuts in the corporate tax rate as being a large part of the increase in Government spending. If there are any such cuts in the Budget I look forward to Mr English leading his troops into voting “No” for tax rate cuts. 
Hon Bill English 
: Why should New Zealand families and businesses listen to Dr Alan Bollard’s message to tighten their belts or else he will raise interest rates and to the Minister’s own message to them telling them to save more and consume less when the Minister has no plans to tighten the Government’s belt; and why should the Government not carry its share of the burden in the fight against inflation? 
Hon Dr MICHAEL CULLEN 
: The Government for the last 3 years has been running very very large surpluses. I have lost count of the number of press statements from members opposite attacking that Government fiscal policy. The Government will continue to run a fiscal policy that meets our long-term fiscal objectives of reducing Government debt to no more than about 20 percent of GDP. This is one of the tightest fiscal policies in the world. 
Hon Bill English 
: Can the Minister confirm that he is just telling Parliament and New Zealand that he has no intention whatsoever of adapting the Government’s plans to the reality of the current economic circumstances which are putting people out of jobs in the export sector and pushing families into 15 percent and 20 percent increases in their interest rate outgoings because he has decided that what he does makes no difference to the economy and that he is right and everyone else is wrong? 
Hon Dr MICHAEL CULLEN 
: The member seems not to read his own press statements. Mr English over the last 2 or 3 weeks has said that the only thing wrong with monetary policy was that Dr Bollard did not increase interest rates earlier and higher than he has done. That is what Mr English said and that is why he just confirmed in the House a minute ago that if there are tax rate cuts in the Budget he will vote against them. 
Hon Bill English 
: When will the Minister take the responsibility that goes with his job exercise some judgment about the current economic circumstances and pull those levers that he can including a cut in Government spending and stop trying to play games over monetary policy—over which he has no influence at all? 
Hon Dr MICHAEL CULLEN 
: When the member sees the Budget he will realise that I have pulled a number of levers. One of them will open up a trapdoor down which he will fall.