Norman Russel: Questions for Oral Answer — Questions to MinistersText is incorporated into the Bound VolumeNorman Russel: Questions for Oral Answer — Questions to Ministers[Sitting date: 12 March 2014. Volume:697;Page:16545. Text is incorporated into the Bound Volume.]1.Dr RUSSEL NORMAN (Co-Leader—Green)to the Minister of Finance: How will the expected increases in the Official Cash Rate over the coming year affect New Zealand families and businesses?Hon BILL ENGLISH (Minister of Finance):That will depend somewhat on the circumstances of those families and businesses. For instance for those who have some of the over $100 billion on deposit in New Zealand banks it will mean slightly higher incomes. For others with mortgages it will mean slightly higher costs. We would need to remember though that this is against a background where interest rates have been at near 50-year lows for the past 3 years and they are likely to be on a gradual return to more normal levels. For all households and businesses any rise in interest rates signals growing momentum in the economy and therefore the prospect of more jobs and higher incomes.Dr Russel Norman: Has he seen the research conducted by Reserve Bank officials that found that when the official cash rate increases by 1 percent the unemployment rate increases by around 1.2 percent above what it would otherwise be which means 30000 fewer jobs in the economy?Hon BILL ENGLISH: No I have not seen that particular piece of research although I am sure that the Governor of the Reserve Bank has seen it. He has a job of targeting inflation and in the next few days he will tell us about just how he intends to do that in the context of a growing economy. He will also be publishing forecasts about unemployment and employment growth. If they are consistent with other market forecasts and Treasury forecasts they will show that even if interest rates rise somewhat there will continue to be strong growth in employment—as indicated by information from SEEK today showing record job ads—and also continued reductions in unemployment.Dr Russel Norman: I seek leave to table the relevant Reserve Bank paper from August 2011—An estimated small open economy model—Mr SPEAKER: Order! That has been adequately described. Leave is sought to table that particular publication from the Reserve Bank. Is there any objection? There is none. It can be tabled.Document by leave laid on the Table of the House.Dr Russel Norman: Does he understand that if interest rates rise this year then families will pay more for mortgages businesses will pay more to borrow and the exchange rate will rise above its already record level hurting our exporters all of which adds up to fewer jobs for New Zealanders?Hon BILL ENGLISH: It is possible that some or none of those things might happen. But the member seems to be in a roundabout way at least questioning the current monetary policy framework. New Zealand has learnt some hard lessons in the last 30 or 40 years. If there is one thing that erodes confidence erodes household wealth and erodes jobs it is high and persistent inflation. That is why there has been until recently a bipartisan consensus on a Reserve Bank framework that targets keeping inflation relatively low because we have learnt from experience that in the long run that is the best setting to promote growth.Tim Macindoe: How has the Government’s economic programme since 2008 helped to keep interest rates lower for longer for New Zealand families and businesses?Hon BILL ENGLISH: Looking back to 2008 it has not been that difficult to help keep interest rates lower for longer because we have had a recession and very low interest rates. But looking ahead it is quite a challenge. What we know is that as interest rates begin rising if the Government starts spending more rapidly and house prices continue to grow rapidly then interest rates could end up over 10 percent as they did as recently as 2008 under the stewardship of the previous Labour Government.Dr Russel Norman: With regard to the Government’s responsibility rather than the Reserve Bank’s responsibility is he aware that house prices rents and power prices accounted for a third of inflation in the past year so if the Government had stabilised the housing market and tackled rising power prices there would be no need for the Reserve Bank to increase interest rates?Hon BILL ENGLISH: The Government has tackled those issues and I must say without the support of the Green Party. We have had a couple of years of hard work getting on top of the regulation of our housing market. The Greens like a few other people in New Zealand do not like any new houses anywhere. That is one of the problems behind the fast-rising housing market. We have also worked hard on a more competitive electricity market but again the Greens have not supported that.Tim Macindoe: What policy prescriptions would push up interest rates and put pressure on New Zealand families and businesses?Hon BILL ENGLISH: Two in particular. One is the expensive emissions trading scheme supported by the Opposition parties. The emissions trading scheme which they have stopped talking about would add $500 a year to household electricity bills and that is before we get to the NZ Power proposal which would almost certainly push up power prices.Dr Russel Norman: With regard to the Government’s success in controlling house prices and electricity prices given that there has been a 44 percent increase in Auckland house prices during this Government and a 20 percent increase in power prices over the course of this Government does he consider that his policies have been successful in controlling inflationary pressures coming out of the housing market and the so-called electricity market?Hon BILL ENGLISH: The first point is that the rate of increase in both housing and electricity prices has been much lower than it was under the previous Labour-Green Government. Secondly yes we do believe our policies will have an effect. Of course particularly in respect of housing markets it takes some time to change the mind-set promoted by the Greens that all housing development is bad. The price of that approach is that New Zealanders pay far too much for their houses. Against the opposition of the Greens we are trying to change it.Dr Russel Norman: With regard to the Government policy—which is what question time is about— of skyrocketing housing prices which have gone up by 44 percent over the last 5 years and with regard to the Government policy of skyrocketing power prices which have gone up 20 percent is it not the Government’s failure to control inflation coming out of housing and electricity that is driving the Reserve Bank to push up interest rates which all New Zealanders will have to bear the brunt of?Hon BILL ENGLISH: No I do not believe that is the case. The Government has been working for several years to ensure a more competitive electricity market and to ensure a more flexible market in housing supply so that as demand grows prices do not go up. It is notable that Labour and the Greens have opposed every measure the Government took in that respect. If there is one thing that would certainly push up inflation and interest rates it is a big-spending Government with an expensive emissions trading scheme that would put power bills up by $500 per household per year.Dr Russel Norman: Does the Minister realise that ordinary New Zealand families are being hit three different ways by the Government’s policies: firstly they are paying too much for housing and for electricity because of the Government’s policies; secondly they are about to see their mortgage payments rise as a result of the failure of the Government to control house prices and electricity prices; and thirdly on top of that there will be 30000 fewer jobs as a result of the interest rate rises?Hon BILL ENGLISH: No I do not accept any of that. The Government has had to work very hard to undo the damage the previous Government did to electricity prices—Hon Simon Bridges: 72 percent.Hon BILL ENGLISH: —which went up 72 percent in 9 years and undo the damage that the Greens and their fellow travellers have done to the housing market where they have forced regulation that ensures house prices go up. I admit that we could have perhaps unilaterally taken over local council planning functions but we have not quite done that. Instead we have worked with local councils to fix the damage done by the Greens and others who are opposed to all new housing development which is why we have one of the most expensive housing markets in the developed world.Dr Russel Norman: Aside from spreading misinformation about the Greens does the Government have any actual policy given that over the last 5 years—[Interruption]Mr SPEAKER: Order! The member has a right to ask his question. I cannot hear it. It would be helpful if the member would just address the question without the initial comments.Dr Russel Norman: I raise a point of order Mr Speaker. Every question during this question time you have allowed the Minister to attack Green Party policy when the questions were nothing about that. The one time I introduce it into my question you tell me that I am not allowed to say it—Mr SPEAKER: Order! If the member carries on like that we will move immediately to question No. 2. I did not rule the member’s question out of order; I simply pointed out that he had a right to have his question heard. I could not hear it. I believe the member was himself struggling to get his question out. I pointed out to the member that the way he started his question led to the disorder. I invite the member now to ask his question; otherwise we will proceed to question No. 2.Dr Russel Norman: Aside from spreading misinformation about the Greens’ policy does the Government have any actual policy to control inflation coming out of the housing market and the electricity market given that over 5 years house prices in Auckland have gone up by 44 percent and electricity prices have gone up by 20 percent as a result of the policies of this Government?Hon BILL ENGLISH: I think the last point the member made is the one where he is most obviously wrong. The Government has worked very hard to undo the damage done by the previous Labour Government to the electricity market and we have slowed the rate of increase considerably. The Opposition policy of a single buyer and an emissions trading system would certainly force prices up fast. In respect of the housing market I welcome the Greens’ new-found support for the idea of building more new houses because up until now like the Labour Party it has opposed all policy measures designed to enable New Zealanders to get better-priced houses.Grant Robertson: I raise a point of order Mr Speaker. As the Deputy Prime Minister has done throughout all of his answers today he has breached the Standing Orders. He is misrepresenting policies of parties that he has no responsibility for.Mr SPEAKER: That is very much a debating matter. The answers have been addressing the question. As I warned the member as he rose to ask his question the way he asked the question meant that he was likely to get a very robust reply.Hon David Parker: I raise a point of order Mr Speaker. I ask whether it is fair to sit Russel Norman down and criticise the form of his question right at the start of a question retaliating to similar jibes from the National Party three or four times and then for you to not stand up and stop the Deputy Prime Minister doing exactly the same in reverse.Mr SPEAKER: I have listened very carefully to the answers. I think they have fairly addressed the question. If I thought for one minute they did not I would address the matter. My job here is to attempt to be as fair as possible to all members in this House and I will continue to attempt to do that.Dr Russel Norman: With regard to the Minister’s claim that the NZ Power policy would push up prices has the Minister seen the report from Infometrics commissioned by Business New Zealand which says that the Green Party’s and Labour Party’s NZ Power proposals would cut power prices for families by 13 percent and add $200 million a year to the economy which means it would create at least 2000 jobs?Hon BILL ENGLISH: I simply disagree with it. There is one place that this policy has been tried. That is in the province of Ontario and it has led to the utterly predictable result of blackouts and higher prices. That is why we will not be adopting that policy. Secondly the emissions trading system which the Greens have stopped talking about will add $500 per household per year to their power bills.Dr Russel Norman: Will the Minister stand up tomorrow and explain to New Zealanders why his policies have pushed up housing prices and power prices which have put pressure on the Reserve Bank to increase interest rates and why it is that ordinary New Zealand families will have to pay more for their mortgages and more for their power prices because of his failed Government policy?Hon BILL ENGLISH: No. If I had the opportunity I would explain to them how Government policy has enabled interest rates to stay lower for longer—in fact at 50-year lows for longer—and I would also explain to them the risks of a big-spending Labour-Green Government which would certainly push up interest rates much further than it needed to like it did last time when first mortgage rates reached 10-plus percent in 2008.