Macindoe Tim: Oral Questions — Questions to Ministers Questions to MembersText is incorporated into the Bound VolumeMacindoe Tim: Oral Questions — Questions to Ministers Questions to Members[Sitting date: 05 May 2015. Volume:705;Page:3133. Text is incorporated into the Bound Volume.]2.TIM MACINDOE (National—Hamilton West) to the Minister of Finance: What reports has he received on low inflation in New Zealand and how does that benefit households and businesses?Hon BILL ENGLISH (Minister of Finance): As the published figures have shown New Zealand is experiencing very low inflation—or more accurately in the last 6 months actually we have had deflation. Usually in an economy growing at 3 percent inflation is rising not falling. However it is good news for New Zealand households and businesses which can expect to see interest rates and inflation stay lower for longer than they expected and this is likely to help to reduce unemployment and sustain real wage growth.Tim Macindoe: What impact does lower than expected inflation have on Government revenue?Hon BILL ENGLISH: Very low inflation and lower interest rates and lower commodity prices mean that growth in the dollar value of what New Zealand produces each year is a bit lower than expected. Treasury now expects that the dollar value of what we produce each year over the next 4 years will be around $15 billion less than forecast in Budget 2014 even though the economy will actually grow slightly faster than we expected in Budget 2014. This poses some real challenges for Government revenue because it means less PAYE less company tax and less GST. In total Treasury expects the Government will collect $4.5 billion less tax revenue over the next 4 years than it expected at the last Budget.Grant Robertson: In light of that question and answer is it in fact correct that “lower than expected inflation” actually means lower Government expenditure as well?Hon BILL ENGLISH: As it turns out the inflation impact on Government expenditure is considerably less than the impact on spending and the impact on tax revenue. That member had better figure it out because his other members are always advocating more spending when he is advocating bigger surpluses.Tim Macindoe: How is lower revenue having an impact on the Government’s ability to return the books to surplus in 2014-15?Hon BILL ENGLISH: Back in December Treasury forecast that the deficit for the 2014-15 year would be around $570 million which is just 0.2 percent of GDP. It is fair to say that the forecast for the 2014-15 year has deteriorated a little since December so we expect the Budget to forecast a slightly bigger deficit for 2014-15 and a slightly smaller surplus for 2015-16. So while progress is slower than expected we remain on track to achieve surpluses and to start repaying debt.Tim Macindoe: What steps has the Government taken to get on top of spending and return the books to balance?Hon BILL ENGLISH: The Government has been very thoughtful about its new spending and very thoughtful about what drives existing spending. If you want a measure of that in the last six Budgets the total annual cost of new initiatives has been just under $3 billion. By comparison the last six Budgets of the previous Government totalled $20 billion of extra costs—$20 billion as opposed to $3 billion. But despite the fact that we have had very constrained spending we have been delivering better public services with better results for New Zealanders.