Parker David: Questions for Oral Answer — Questions to Ministers 
Parker David: Questions for Oral Answer — Questions to Ministers 
[Volume:677;Page:401] 
5. 
Hon DAVID PARKER (Labour) 
 to the  
Minister of Finance 
: What is Treasury’s projection for New Zealand’s current account balance for the next four years? 
Hon STEVEN JOYCE (Associate Minister of Finance)  
on behalf of the Minister of Finance: As a percentage of GDP the forecast current account deficit is 3.6 5.4 6.4 and 6.9 percent for each of the March years 2013 to 2016. The main contribution to this is a short to medium term lift in imports due to the Canterbury rebuild. This impact is expected to make up almost a third of the forecast current account deficit in the year to March 2016. Other factors include a Treasury expectation that export prices will come off record highs a forecast increase in business investment and an increase in consumer confidence. It is worth nothing that even a 2016 forecast deficit currently would remain significantly lower than the 8.9 percent peak it hit in 2008.  
Hon David Parker 
: Does the Pre-election Economic and Fiscal Update in fact show that even excluding the Canterbury rebuild the current account deficit will increase to 5.2 percent of GDP or $13 billion in 2016? 
Hon STEVEN JOYCE 
: As I said in the answer to the primary question the Pre-election Economic and Fiscal Update does predict the deficit to increase for a number of reasons and the Canterbury rebuild is the biggest but not the only one although I must say that it is reasonably amusing to suggest that suddenly Mr Parker is much more focused on the Treasury predictions today after bagging the Treasury predictions yesterday. 
Hon David Parker 
: In other words is the Minister confirming that under the National Government’s economic settings Treasury projects that the current account deficit will get worse every year of the forecast period rising to $17 billion in 2016? 
Hon STEVEN JOYCE 
: In relative terms that is Treasury’s prediction. The Government is actually more optimistic than that. But the member makes the mistake of starting from a very low position. This Government has actually contributed to improving it from the very bad position that the previous Government left it in. Between 2005 and 2008 the current account deficit averaged more than 8 percent of GDP each year as Government spending grew out of control consumers went on a borrowing binge and the productive parts of the economy were squeezed out by red tape and new costs. It has now got down to less than 2 percent in 2010 and it is expected to rise back from that as a result of the factors I mentioned in the primary answer. 
Simon Bridges 
: What reports has he seen on the current account balance? 
Hon STEVEN JOYCE 
: As I alluded to in the previous answer the balance of payments has undergone a dramatic improvement in recent years falling to less than 2 percent in 2010 before rising slightly to its current level of around 4 percent. This is mainly because New Zealanders have started saving more and borrowing less. It is also as a result of improved economic policies particularly around red tape and not adding new costs to business. Of course we know that that is what happened to the export sector under the previous Government when the internationally competitive parts of our economy went into recession in 2005 because of the policies of that Government and we have been in the process of reversing them. 
Hon David Parker 
: Can the Minister confirm that the growing current account deficit will be paid for by a combination of New Zealand borrowing more money from overseas and the sale of more New Zealand - owned assets to foreign buyers? 
Hon STEVEN JOYCE 
: The answer to the second part of the question is no; the answer to the first part of the question is interesting because actually again we have a situation where New Zealand’s net international liabilities have dropped significantly since this Government has come into office. They dropped to 69 percent in the year to March 2011. They peaked at 85 percent of GDP in March 2009 just after Labour left office and ahead of National’s first Budget. So we have improved the net international liabilities position. Treasury has some predictions going out that suggest it will come back up a bit but it is nothing like what happened under the previous Labour Government which that member was part of. 
Hon David Parker 
: If the growing current account deficit will not be paid for by a combination of more borrowing from overseas and the sale of New Zealand - owned assets how will it be paid for? 
Hon STEVEN JOYCE 
: The current account deficit and the international liabilities position are two of the things that will be impacted by improved savings by New Zealanders which I am pleased to see has occurred. That means that you can have— 
Hon David Parker 
: That doesn’t help pay for the current account deficit. 
Hon STEVEN JOYCE 
: Well the savings of New Zealanders are very important in terms of New Zealand’s net international liabilities and also the export performance of New Zealand businesses. And in answer to an earlier question today I pointed out that the investment by companies in New Zealand investments that are going to grow exports is picking up as a result of this Government’s interventions. 
Mr SPEAKER 
: In fairness before I go to the next question the member did ask how the current account deficit would be funded after the outcomes of savings and exports. That question is perfectly capable of being answered because the Government must have some idea of how it plans to fund the current account deficit. And I believe that the House does deserve the answer. 
Hon STEVEN JOYCE 
: The point I was making was that the Government does not accept that Treasury’s projections in this matter are final and the Government is working hard to improve the export performance of the New Zealand economy so that the current account balance does not go out to the extent that Treasury’s projections expect. 
Mr SPEAKER 
: Order! Forgive me but it would be a miracle in my time if the Government succeeded in turning round projections from 6 percent of GDP to zero percent of GDP. Therefore a current account deficit does have to be financed. I believe the member deserves that part of the question answered. The question was very simple and very clear. It contained no accusations about bad policy or anything like that. It just asked how it was to be financed. The Minister described how the Government plans to try to minimise the current account deficit and that is fine but that is not actually what the question asked. 
Hon STEVEN JOYCE 
: Obviously to the extent that it is not met—in other words the foreign accounts are not in balance—then international liabilities do rise and that is the point I suspect the member was making. The point that I was making was we did not necessarily accept that those projections as provided by Treasury are likely to occur particularly if we improve the settings around the export sector of the New Zealand economy. That was the point I was making and I think it is an entirely fair point in the context of the current account balance and the international liabilities. 
Hon David Cunliffe 
: Is this a point of order or a speech? 
Hon STEVEN JOYCE 
: I was responding to the question. 
Mr SPEAKER 
: I thank the Minister. 
Simon Bridges 
: What steps has the Government taken to rebalance the economy towards savings and exports? 
Hon STEVEN JOYCE 
: The Government has taken several steps to rebalance the economy towards savings investment and exports. As the member knows we reformed the tax system increasing taxes on consumption and property investment while lowering the tax rates on working and saving. We have set a faster return to surplus in 2014-15—one of the most important contributions the Government can make to lifting national savings and one that the Opposition rejects. We have kept a lid on the costs of doing business by getting on top of fast-rising costs like ACC costs which are due to reduce in the next couple of months and we are providing investment opportunities through the mixed-ownership model which will help Kiwi investors diversify their growing pool of savings away from property and finance companies. It is just a pity that Opposition members do not sometimes listen to orthodox economic policies that balance the— 
Mr SPEAKER 
: Order! The question was from the Minister’s own colleague. He does not need to bring the Opposition into that.