Gilmore Aaron: Questions for Oral Answer — Questions to Ministers Questions to Members 
Gilmore Aaron: Questions for Oral Answer — Questions to Ministers Questions to Members 
[Volume:669;Page:15723] 
1. 
AARON GILMORE (National) 
 to the  
Minister of Finance 
: What does he believe will be the main features of the economic recovery under the Government’s programme to encourage more savings and investment? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 I think it is now obvious that the economic conditions in the years leading up to 2008 were not normal because we saw excessive consumption and housing speculation and borrowing to finance both. Looking ahead New Zealand’s economic growth will need to be considerably different from the growth that occurred during those years. It will need to be based on savings and investment and led by the earning side of our economy especially the export sector. That is why the Government’s economic policy programme is designed to encourage savings investment exports and new jobs. 
Aaron Gilmore 
: What were the features of the economy’s performance before the 2008 recession? 
Hon BILL ENGLISH 
: In retrospect— 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. It is a pretty simple one—that is the question asked about the features of something that occurred before the Minister was responsible. He was not asked about any reports he had; he was asked about something that he has no responsibility for. 
Mr SPEAKER 
: With respect the Minister of Finance does have a reporting responsibility on what the features were. He should not pass too much comment on them but he definitely has a reporting responsibility on what the features were. 
Hon Trevor Mallard 
: I raise a point of order Mr Speaker. If in fact he had been asked that I would not have taken a point of order but he was not. 
Mr SPEAKER 
: I believe the Minister was asked what the features were of—[ 
Interruption 
] He has a reporting responsibility on the economy prior to his time as the Minister of Finance but he should not be passing too much judgment on the policies of the time. He certainly does have a reporting responsibility on the features of the economy. 
Hon BILL ENGLISH 
: I did not plan to pass any judgment. In retrospect it is clear that the 5 years to March 2008 were an unusual period. The growth in private consumption was about 4.5 percent a year which is almost twice its long-run average. House prices doubled and credit—that is mortgages credit cards and other forms of credit—grew by 83 percent in the 5 years to 2008. By the end of that period households were borrowing $10 billion a year to finance consumption and we had record balance of payment deficits. 
Aaron Gilmore 
: What trends have been evident in the New Zealand economy since 2008? 
Hon BILL ENGLISH 
: Since 2008 fortunately those trends have reversed. Households have become strongly averse to debt. They have lifted their savings and are trying to restore their balance sheets. The housing market and credit demand have stalled; in fact credit growth is close to zero. The banks realise that they were overextended with too much foreign borrowing and the balance of payments has dramatically improved. The policy challenge now is to lock in the long-term benefits of this sharp correction. 
Hon David Cunliffe 
: If households have lifted their savings why is the New Zealand Institute of Economic Research forecasting national savings to collapse to minus 1.2 percent in 2015 compared with a positive 5.2 percent in 2004? 
Hon BILL ENGLISH 
: I have no idea why the New Zealand Institute of Economic Research is forecasting that. The forecasting is I think a bit of a mystery even to the forecasters who are doing it. What is pretty clear is that New Zealanders are saving more now and not spending. That is one of the reasons that the economic recovery is a bit flatter than was expected but that is a good thing. New Zealand needs to have more savings. 
Te Ururoa Flavell 
: Has the Minister seen mention in the report of the Welfare Working Group of a recent review of social services in Masterton that found that many Pakeha preferred Maori-provided services because they offer a more family-based approach and will he respond to this finding by seeking to encourage more investment and subsequent long-term savings in the Whanau Ora approach? 
Hon BILL ENGLISH 
: We are a Government that prefers people including those who use social services to be able to exercise some kind of choice. I am interested to hear that in Masterton a number of Pakeha families prefer Maori providers because they do a better job. It may well be that as many Maori families prefer non-Maori providers because they believe the same thing. Either way we want to foster that kind of choice and of course the development of Whanau Ora means there will be considerably more choice for families in need of social support. That is a good thing. 
Hon David Cunliffe 
: Can he confirm that Standard and Poor’s projects that the current account deficit will grow to an average of 5.9 percent over the next 3 years and that Treasury forecasts it to rise to 7.3 percent in 2014; and does he share Standard and Poor’s disappointment that his policies have failed to make any structural difference to this situation? 
Hon BILL ENGLISH 
: No I do not share those points of view. There has been a considerable change since the record current account deficits that the previous Government left behind and that change is driven largely by changes in the behaviour of New Zealand households which are saving more and spending less. The Government’s tax package is designed to push in the same direction and lock in long term the benefits of those changes in behaviour and that policy has been effectively endorsed by voters at the recent Mana by-election. 
Aaron Gilmore 
: Mr Speaker—[ 
Interruption 
] 
Mr SPEAKER 
: I have called Aaron Gilmore. 
Aaron Gilmore 
: What economic trends can we reasonably expect in New Zealand in the years ahead? 
Hon BILL ENGLISH 
: We can expect that the economy will grow by about 2.5 percent to 3 percent a year over the next 2 or 3 years. I believe we will see more savings. I think we will see much less growth in credit and we will certainly see a much better-run Government and much better-run public services. The Government simply cannot afford to grow at the rapid rate that it did and the new jobs are more likely to be in the export-orientated part of our economy rather than jobs in other non-tradable sectors such as domestic construction. 
Hon David Cunliffe 
: With unemployment staying high at above 6 percent with tax revenue down by $1.1 billion and business tax collapsing by 22 percent with real wages falling and the gap with Australia widening and with Standard and Poor’s now giving him a clear fail in the latest report will he now admit that the so-called recovery is not happening and that his policies are not working; and will he hand over his portfolio to Steven Joyce as everybody expects? 
Mr SPEAKER 
: If the Minister can discern a question in that he is welcome to answer it. 
Hon BILL ENGLISH 
: No the member is wrong. If anyone believed him Labour would have had a substantial majority at the Mana by-election; instead it almost lost it.