Edmonds BarbaraDEBATE ON INVESTMENT STATEMENTBARBARA EDMONDS (Chairperson of the Finance and Expenditure Committee): I move That the House take note of the report of the Finance and Expenditure Committee on He Puna Hau Pātiki: 2022 Investment Statement. Before I go into the report back by the committee I wanted to quickly mihi to manuhiri Ngāi Tahu who were just in the House. I also wanted to tautoko our Labour Māori caucus—in particular Rino Tirikatene—and our Canterbury caucus for their considered kōrero on the previous bill the Canterbury Regional Council (Ngāi Tahu Representation) Bill. I also wish I was joining the celebrations because that was a pretty mean haka and waiata.It's a pleasure as the chair of the Finance and Expenditure Committee (FEC)—Chlöe Swarbrick: Great committee.BARBARA EDMONDS: —to report back to the House on He Puna Hau Pātiki: 2022 Investment Statement. I absolutely agree with the Green member; it is a great committee.At least every four years the Public Finance Act 1989 requires the Minister of Finance to present to the House an Investment Statement prepared by the Treasury. With recent changes to the Public Finance Act and the new Public Service Act 2020 the Investment Statement is actually one of four statutory reports. The other mandatory reports are the Long-term Fiscal Position a Long-term Insights Briefing and a Wellbeing Report.Now it would be quite cynical just to view these detailed reports as a mere tick-box exercise. They could probably sit in the book or magazine shelf in the lobby of 1 The Terrace or in any Minister of Finance's executive wing waiting room. However one cannot underestimate the importance of these four reports and I believe the Treasury summed it up well: that these reports are a reflection of the necessity of the public finance system in supporting New Zealanders' intergenerational wellbeing through a more modern agile and joined-up public system.In the light of the last two years it was clear in the almost three-hour hearing with the Treasury—including an hour with the Minister of Finance on 8 June—that the impact of the COVID-19 economic response and the intergenerational impacts was top of both the select committee's minds officials' and Ministers'.This is the Treasury's third Investment Statement. Unlike the two previous Investment Statements the 2022 Investment Statement focuses on the overall health of the balance sheet as well as the key differences and the new challenges since 2018. This approach reflects two considerations.One COVID-19 and long-term structural change. COVID-19 has been an unprecedented economic shock. Its effects—combined with other longstanding trends that are relevant for all Government assets such as low mutual interest rates and climate change—have driven the focus on the composition and strength of the balance sheet.The second consideration is the broader suite of stewardship responsibilities hence the four reports. Overall the Investment Statement concluded that the overall health of the Government's balance sheet remains strong. This is despite an increase in the scale risk and complexity of the balance sheet as a result of the COVID-19 response.To break it down for our non-FEC members or accountants like the member Hon David Bennett—who I wish well for his next chapter—the Government balance sheet shows what the Government owns: its assets; and what it owes: its liabilities; at one fixed point in time. The balance sheet also includes the physical infrastructure such as hospitals schools and roads that support public services.COVID-19 re-emphasised the importance of the balance sheet. The Government balance sheet was in good health prior to COVID. At the end of December 2019 net core Crown debt was 19 percent of GDP while net worth was $143.1 billion. The strength of the balance sheet therefore provided the Government with the options in how it chose to respond to the pandemic including the ability to provide significant financial support to the private sector and indirectly to households through policies such as the wage subsidy and the COVID-19 relief support payment.Therefore not unsurprisingly the Investment Statement claims that given the significant financial support to mitigate the impacts of COVID-19 what it has shown is that the net core Crown debt has increased to reflect this increase in spending. Caralee McLiesh who is the secretary of Treasury said as a result of the pandemic there has been a significant increase in debt: increasing from 19 percent of GDP prior to the pandemic to peaking around 40 percent of GDP—that's an old measure of new Crown debt—or 20 percent under the new net debt measure.At the same time both financial and non-financial assets have grown leading to higher net worth with New Zealand amongst the upper end of all OECD economies in net wealth. The sensitivity of the balance sheet to changes in interest rates has also increased; this reflects a change in the composition of debt resulting from the Reserve Bank of New Zealand's Large Scale Asset Purchase programme or LSAP.Members of the committee actually asked Treasury about whether the LSAP contributed to increased inequality and the Secretary of Treasury responded No" specifically on the LSAP programme and it would be incredibly challenging to attribute one particular policy to the outcomes they've seen.Chris Bishop: Wow come on.BARBARA EDMONDS: But what was interesting—what was interesting Mr Bishop—is that there was a slight narrowing of inequality throughout the pandemic. At the same time financial and non-financial assets such as equities in the New Zealand Superannuation Fund have grown leading to an increase in the Government's net worth.Future challenges referred into the Investment Statement also included public investment in infrastructure and climate change and the report back from the committee references the deficit and infrastructure investment. It says that there's evidence that New Zealand has an infrastructure gap and the Infrastructure Commission—which was established in 2019 to coordinate develop and promote an approach to infrastructure—was basically established to help improve New Zealanders' wellbeing.Now what I've noticed throughout the whole discussion that we had at select committee on this particular Investment Statement is just the importance of one making sure that we have strong economic books—or management—and then making sure that we address those future challenges.What I wanted to be able to reflect on is that throughout the discussion with Treasury it was really clear that New Zealand's balance sheet was well positioned to deal with the challenging global environment. We've seen since that unemployment is at a record low exports are up and our economic activity has continued to grow over the past year.We are carefully managing our spending and keeping debt under control and that was clearly seen between the two Investment Statements in 2018 and now in 2022. These strong fundamentals meant we were able to support New Zealanders through that tough period and now this tough period with a cost of living package fuel tax cuts increases to superannuation benefits and the minimum wage and the winter energy payment.We're also investing in critical services like health and that's so important given that the Investment Statement pointed out the infrastructure gap. We're also investing in school packages so some of the property packages that we're seeing—that has the double benefit of not only creating jobs but it also provides spending and benefits to our children so that the walls that they learn in are good are warm and are able to basically improve into modern learning systems.By keeping debt in check as the Investment Statement has shown we're making important investments in our future. We're delivering a resilient economy that provides security for all. And again if the Investment Statement isn't a good reflection of our balance sheet then also perhaps our triple A credit rating is—something few countries in the world were able to say during that period. There's also our books getting into surplus in 2024 and 2025—it's one year quicker than National did under the global financial crisis.So I'd like to thank our members of the Finance and Expenditure Committee for their work on—Chlöe Swarbrick: Great committee.BARBARA EDMONDS: A great committee. Of course I agree with the Greens' member. Another "Great committee".The Investment Statement has shown: basically if we hadn't managed the books earlier in the Government's term then we wouldn't have been able to effect the financial support packages that have helped our economy through COVID.The effectively managed assets and liabilities support the Government's ability both to deliver services that New Zealanders need today and to ensure we have sustainable and resilient public finances that will bolster living standards for future generations.I'd like to thank the Minister and the Treasury officials for their time on 8 June that was close to three hours of hearing time and I thank them for their time and their efforts. I also thank the Treasury for their post-hearings questions and I would like to conclude my report back to the House from the Finance and Expenditure Committee."