Lotu-Iiga Peseta Sam: Questions for Oral Answer — Questions to Ministers 
Lotu-Iiga Peseta Sam: Questions for Oral Answer — Questions to Ministers 
[Volume:668;Page:15238] 
2. 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
 to the  
Minister of Finance 
: What steps is the Government taking to tilt the economy towards exports and savings and away from borrowing and consumption? 
Hon BILL ENGLISH (Minister of Finance) 
: 
 The Government is taking several important steps. Firstly we have introduced significant tax reforms that reward work savings and investment and that discourage borrowing consumption and property speculation. Secondly we are getting the Government’s books in order so that the Government which is the least productive part of the economy reduces its call on resources from the rest of the economy and this will help in the long run to keep interest rates lower than they otherwise would be. Thirdly we are reviewing extensively the regulation that applies to the export sector. Fourthly we are pursuing free-trade agreements that will deliver significant benefits to New Zealand having recently signed agreements with Malaysia Hong Kong and ASEAN and we are in talks with India the Gulf States and the trans-Pacific partnership countries Korea and Russia. 
Peseta Sam Lotu-Iiga 
: What progress is being made in tilting the economy towards exports and savings? 
Hon BILL ENGLISH 
: There are some welcome signs of progress although there are some headwinds. For example households are being careful with their money they are not spending up significantly and they are reducing debt. There are signs that the housing market is at the least moving sideways and people are not rushing back into property speculation. On the other hand the high exchange rate against the US dollar is offsetting some of the benefits of the very high commodity prices. I note that the Governor of the Reserve Bank said yesterday that households and businesses are keeping spending low as they reduce debt and when this is combined with improved export and commodity prices it is reducing New Zealand’s current account deficit and external indebtedness which are chronic problems that have built up over the last 10 years under the previous Government. 
Peseta Sam Lotu-Iiga 
: What challenges does New Zealand face as the economy rebalances towards exports and savings? 
Hon BILL ENGLISH 
: I think there are a couple of challenges. One is obviously the high exchange rate against the US dollar although I might say that the exchange rate against the Australian dollar—and Australia is our biggest trading partner—is at its lowest in 15 years and this is considerably assisting our manufacturing exporters. I think the other big challenge is simply to get government in order. Government represents too big a call on the resources of the economy. Effectively waste in government is a tax on the export sector and because such a poor job was done of managing government in the last decade we have a big challenge to sort it out. 
Peseta Sam Lotu-Iiga 
: What are some of the costs and risks of currency intervention? 
Hon BILL ENGLISH 
: There has been some speculation about currency intervention. This Government is continuing the policy of the last Government—that is it supports the Reserve Bank having authority to intervene. The Reserve Bank has publicly set out the criteria that it thinks should apply before it intervenes. However we share the view of the Governor of the Reserve Bank that there is little evidence that currency intervention works other than in the short term. For instance large-scale intervention by the Bank of Japan and the Swiss National Bank in the last few months have had only a transitory effect. Most Governments and central banks share our caution about the considerable risks to taxpayers from extensive currency speculation. 
Hon David Parker 
: Has the Minister seen criticism of his rebalancing of the economy by borrowing for tax cuts and increasing Government debt and why does he deny that he is doing that given Fran O’Sullivan’s critique which asks: “is there any point borrowing more to fund tax cuts if taxpayers simply use the extra to retire personal debt?” 
Hon BILL ENGLISH 
: No I have seen almost no criticism of the Government’s plan to rebalance the economy and that is because almost all New Zealanders understand the need for it. They are doing exactly the same things themselves. We are being careful with spending; they are being careful with their spending. They are paying off debt; we are trying to constrain the rise in debt. They are focusing on being able to earn more and that is exactly what New Zealand as a nation needs to do. 
Hon David Parker 
: Why does the Minister not promote the fact that his rebalancing of the economy through income tax gives 42 percent of those cuts to the top 10 percent of earners in reality meaning that low and middle income earners pay a higher proportion of total taxes in New Zealand while high-income earners pay a lower proportion of total taxation? 
Hon BILL ENGLISH 
: I am not promoting that because it is not correct. In fact the Government cut tax rates across the board and produced extensive analysis after the Budget to show that the tax cuts were fair in the sense that all income groups got about the same change in their net after-tax income. No one has disagreed with the fundamental push of the tax changes which are to discourage consumption and excessive debt and housing speculation and encourage exports savings and investment.