5. Question No. 5—FinanceNICOLA WILLIS (Deputy Leader—National) to the Minister of FinanceQuestion No. 5—Finance5. NICOLA WILLIS (Deputy Leader—National) to the Minister of Finance: Does he agree with Treasury's statement in the Budget Economic and Fiscal Update 2023 that relative to the Half Year Update … interest rates are likely to stay higher for longer to manage inflationary pressure" and what impact does he expect this will have on mortgage holders?Hon GRANT ROBERTSON (Minister of Finance): In answer to the first part of the question I would note that the forecasts in the Budget Economic and Fiscal Update (BEFU) are Treasury's independent forecasts. But I would agree with the full quote from the Budget Economic and Fiscal Update which reads: "relative to the Half Year Update the unemployment rate is forecast to peak lower while interest rates are likely to stay higher for longer to manage inflationary pressure. Inflation has already begun moderating and the Treasury expects further moderation ahead with inflation falling to 4.5% by the end of 2023 and dropping inside the Reserve Bank's target band of 1-3% inflation by late-2024." In answer to the second part of the question the impact of the higher interest rates since the Treasury's previous set of forecasts in December 2022 will obviously depend on the specifics of any household's individual situation including for example the term of their mortgage and the reaction of their bank.Nicola Willis: Well has he considered the situation of a family with a $500000 mortgage who were paying $492 in interest a fortnight just two years ago and who when they re-fix their mortgage this week will find themselves paying $1258 in interest a fortnight—that is $765 more each fortnight—and did he think about them when he decided to put his foot down on the spending pedal yet again?Hon GRANT ROBERTSON: We gave considerable thought as we put the Budget together to the circumstances of all New Zealanders including those who the member references. It's the reason why the Budget acts as a disinflationary measure across the forecast period.Nicola Willis: Does he see a connection between historic levels of borrowing spending and money printing on his Government's watch and the fact that New Zealanders are now experiencing the sharpest increase in official interest rates in our history?Hon GRANT ROBERTSON: I often reflect upon the period of time during which New Zealand faced up to the COVID pandemic and both the Reserve Bank through its monetary policy and the Government through its fiscal policy supported New Zealanders to get through that period of time. During that period of time I was constantly asked by members opposite to spend more money. I also note that when the Reserve Bank began raising interest rates almost consistently in the first couple or three times they did it the Leader of the Opposition called for more spending during that period.Nicola Willis: Was Treasury correct to point out that in each of his past five Budgets he has blown his own operating allowance such that on average he spends $600 million more than he says he will and why is that Minister incapable of sticking to his own spending limit?Hon GRANT ROBERTSON: Two points in response to that. The first as the member knows is that the operating allowances are designed to enable us to achieve particular fiscal goals. We have been able to achieve those goals including keeping debt low and including our return to surplus. The second point I'd note for the member in respect of this year's Budget is that between the half-year economic update and when we delivered the Budget New Zealand had the second-biggest ever weather event or natural disaster that we have faced. I do note that the member asking the question has not explained to New Zealanders how her party would be paying for the recovery and the rebuild of those areas. We are standing with those regions. Yes it does cost a little bit more but it happens to be the right thing to do.Nicola Willis: Well isn't it correct that his Budget provided more cash for the Government's struggling landlord Kāinga Ora than it did for the entire national resilience plan?Hon GRANT ROBERTSON: If the member is standing up in front of the House today and saying not only will she not commit to building an additional 3000 public houses but she won't commit to completing the 4500 that are currently being built that is a pretty big thing for the member to say in this House. Mind you she might just be taking lessons from her leader about making up policy in public meetings.Nicola Willis: Does he accept Treasury's conclusion published last year that "government investment and consumption tends to have the largest effects on domestic demand and interest rates" while transfers and tax changes have less effect meaning that dollar for dollar tax relief is less inflationary than Government spending and why didn't he in his Budget reduce taxes and let New Zealanders keep more of what they earn?Hon GRANT ROBERTSON: I think the member needs to look very carefully at the design of the tax package that she is putting forward and ask herself in the environment that we're in right now if she really really thinks that giving the kind of tax cuts to the highest-income earners would not be inflationary and apart from anything else would be the wrong thing to do. In answer to the first part of her question I just invite the member to read past the executive summary of the BEFU where her quote came from to page 15 which shows real Government consumption declining over the forecast period."