Key John: Questions for Oral Answer — Questions to Ministers 
Key John: Questions for Oral Answer — Questions to Ministers 
[Volume:628;Page:388] 
4.  
JOHN KEY (National—Helensville) 
 to the  
Minister of Finance 
: Has he received any advice on the impact of lower nominal interest rates bank advertising and the banking price war on consumers’ desire to borrow and spend; if so does this behaviour concern him? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 Essentially in broad terms yes and yes. 
John Key 
: If lower mortgage interest rates are encouraging New Zealanders to borrow more for housing and consumption—something the Minister claims he is very worried about—why does he not think that zero percent interest rates on student loans will encourage students to borrow more? 
Hon Dr MICHAEL CULLEN 
: I certainly never said there would be no increased borrowing. I simply said that the original Treasury estimates were wrong and Treasury now agrees with that. 
John Key 
: Has the Minister reflected on the fact that in the same breath as lamenting that the average household debt to income ratio has now reached a whopping 143 percent he seems mysteriously comfortable about encouraging an even greater reliance on household debt by handing out money to students with no interest charged? 
Hon Dr MICHAEL CULLEN 
: One of the key differences is that what students can borrow for is severely limited. It covers course costs and fees and it relates to the remainder of living costs up to a maximum—which is scarcely generous I think—$150 a week whereas the borrowing being encouraged by the banks is for things like having holidays buying boats and doing things scarcely consistent with what I am sure the previous Governor of the Reserve Bank would have deemed desirable policy in this situation. 
John Key 
: Why is the Minister considering intervention in the housing market after the election to stop people borrowing so much when his student loan policy before the election was to drop interest rates to zero and in effect to tell students to pin their ears back and go for it? 
Hon Dr MICHAEL CULLEN 
: I am not considering anything at the moment. I have simply asked Treasury and the Reserve Bank to prepare a report. I have already received a lot of comment from those in the financial sector deploring the adolescent response from the member opposite. 
John Key 
: If interest-free loans are not an inducement for people to borrow more why did Thomas Banfield borrow money interest-free when he was studying repay it when it became interest-bearing and then re-borrow it when it became interest-free under Labour’s new zero percent interest-free programme? 
Hon Dr MICHAEL CULLEN 
: I just remind Mr Banfield that it is not interest-free yet. 
John Key 
: When the Minister said to Dr Brash a few moments ago in relation to Dr Brash’s question that he would consult the Inland Revenue Department and that he felt a Supplementary Order Paper coming has it dawned on him that the Supplementary Order Paper will not actually help him with future loan borrowers who will in effect just save the hassle of getting a refund cut out the middleman and put the money straight on deposit in the first place? 
Hon Dr MICHAEL CULLEN 
: There may well be some people who will do that. There will however continue to be large numbers of parents who will continue to support their young people at university and polytechnics. I realise that no National Party parents would do that because they loved relying on the nanny State when they were the ones sucking on the teat.