McClay Todd: Questions for Oral Answer — Questions to Ministers 
Text is incorporated into the Bound Volume 
McClay Todd: Questions for Oral Answer — Questions to Ministers 
[Sitting date: 18 July 2012. Volume:681;Page:3618. Text is incorporated into the Bound Volume.] 
2. 
TODD McCLAY (National—Rotorua) 
 to the  
Minister of Finance 
: How have New Zealand interest rates performed over recent years and what impact is this having on the economy? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 In the last week 10-year Government bond rates have fallen to a record low of 3.38 percent compared with 5.75 percent 3 years ago. This reflects a general fall in global interest rates. New Zealand 10-year bond rates have maintained around a 2 percentage point margin over US interest rates and that has been reasonably consistent over recent years. Of course part of the reason for these lower interest rates is poor growth performance across the developed world. The Government also believes that its policies have contributed to sound economic fundamentals such as setting a path back to surplus. These rates are enabling households and businesses to save more and to pay off their debt. 
Todd McClay 
: What impact are low interest rates having on New Zealand households? 
Hon BILL ENGLISH 
: The latest Reserve Bank figures show that the average residential floating mortgage rate is around 5.9 percent. This compares with almost 11 percent in late 2008. For a family with a $200000 mortgage that is a saving of around $200 a week or $10000 a year. Lower interest rates are helping households to reduce their debt and increase their savings. As a result total household debt has fallen from just over 155 percent of disposable income 3 years ago to 140 percent of disposable income now. This is positive but New Zealand household debt levels have a long way to go to get to reasonable levels. 
Todd McClay 
: How are low interest rates impacting New Zealand businesses? 
Hon BILL ENGLISH 
: Interest rates on corporate debt issues have generally fallen in line with lower interest rates overall. The average business lending rate has fallen to 6.04 percent as at May 2012 compared with 9.4 percent in late 2008. As with households this is helping businesses to repay their debt strengthen their balance sheets and get through difficult trading conditions which for some businesses have now lasted 3 or 4 years. For those businesses that are doing better it is helping to give them the confidence to invest and grow employ new staff and provide more jobs. 
Hon David Parker 
: Does the Reserve Bank increase the official cash rate to restrain demand when economic activity is strong and reduce interest rates when economic activity slows; if so why is he so proud of low interest rates which are the result of an economy that under his watch is barely growing? 
Hon BILL ENGLISH 
: New Zealand actually has moderate growth. It is not a matter of whether—[ 
Interruption 
] These are simply the facts and the facts are pretty straightforward. Partly because of subdued economic growth around the globe interest rates are low. It happens that that is useful for New Zealand households because in the last 10 years they ran up record household debt to very high levels. Low interest rates are helping them to reduce that debt and I would have thought that the member would be pleased about that.