Hayes Joanne: Oral Questions — Questions to MinistersText is incorporated into the Bound VolumeHayes Joanne: Oral Questions — Questions to Ministers[Sitting date: 18 February 2015. Volume:703;Page:1678. Text is incorporated into the Bound Volume.]2.JOANNE HAYES (National) to the Minister of Finance: What recent reports has he received about the latest trends in savings levels by New Zealanders?Hon BILL ENGLISH (Minister of Finance): I have seen a Statistics New Zealand report from 30 January that shows New Zealand households had positive savings for 5 consecutive years to March 2014. This has not happened since the early 1990s. The figures show that before 2010 household savings had been negative in all but 1 year since 1995. Household savings have totalled $11.6 billion over the last 5 years a major turn-around on the $15.5 billion of borrowing—or what economist call dissaving—over the 5 previous years. This is the result of the resilience of our households and Government policy that is encouraging savings and a rebalancing of the economy.Joanne Hayes: Over the past 6 years what steps has the Government taken as part of its economic plan to encourage households to save more and to reduce borrowing and consumption?Hon BILL ENGLISH: One step was to encourage the Leader of the Opposition to pay his bills—[Interruption]Mr SPEAKER: Order! If the member would just address the question that has been asked without referring to—[Interruption]—Order!Hon BILL ENGLISH: The Government has taken a number of other steps to rebalance the economy as well. One of those measures was a comprehensive tax package in 2010. This included across-the-board reductions in tax on savings and work alongside an increase in tax on consumption and property investment. We have also continued to provide subsidies to the KiwiSaver scheme as implemented by the previous Labour Government which give New Zealanders additional avenues to save and invest and in particular the Government share offer programme gave New Zealanders the opportunity through KiwiSaver and directly to invest in what they believe are sound long-term investments.Joanne Hayes: What role do fiscal savings as part of the Government’s wider programme of economic reform have in rebalancing the economy?Hon BILL ENGLISH: Fiscal restraint removes pressure from the economy for higher interest rates and higher inflation and helps keep the cost of living increases low. The Government operating deficit has shrunk significantly from 9 percent of GDP in 2010 half of which went into supporting the people of Christchurch after the earthquakes. This has helped contribute to overall national savings which Statistic New Zealand calculates are around $14.2 billion. Along with the Government’s programme of microeconomic reform through the Business Growth Agenda this is creating conditions where businesses are investing and current signs for increases in real business investment are encouraging.Joanne Hayes: What are the economic benefits of a strong national savings rate?Hon BILL ENGLISH: New Zealand has a track record of relatively low national savings and we are not quite sure why that is even now but higher savings tend to help keep inflation and interest rates lower. For instance better savings will be contributing at least to mortgage rates that are still just above 50-year lows. Higher savings enable domestically sourced investment and that is helping drive New Zealand’s solid economic growth. For instance there were 80000 more jobs last year paying wages that on average are growing faster than the cost of living.Dr Russel Norman: Has the Minister seen reports that the savings of New Zealanders held in trust by the Superannuation Fund are at risk from the fund’s investments in fossil fuels—reports such as the recent speech by the head of the OECD which referred to fossil fuel reserves as “stranded assets”?Hon BILL ENGLISH: No I have not seen those reports but the New Zealand Superannuation Fund has ethical investment guidelines. According to all the monitoring of its decisions it complies with those guidelines.Dr Russel Norman: Has he seen reports from the International Energy Agency the World Bank the OECD and the United Nations warning that at least two-thirds of discovered fossil fuels will have to stay in the ground to avoid catastrophic climate change wiping much of the current value off the fossil fuel sector; and will he hence discuss possible divestment options with the New Zealand Superannuation Fund as a result?Hon BILL ENGLISH: No I have not seen those reports but it is possible that the Intelligence and Security Committee will scrutinise those at its first meeting with its new membership. We do not share the same anxiety as the Greens about the use of fossil fuels but we would expect the Superannuation Fund to take into account the risks to future profits for the companies in which it invests.Dr Russel Norman: Did he see the recent warning from the Governor of the Bank of England who said that the vast majority of fossil fuel reserves are unburnable if global temperature rises are to be limited to below 2 degrees Celsius and hence will he heed his call for investors such as the Superannuation Fund to begin divesting from the riskiest coal companies as the Norwegian fund has done recently?Hon BILL ENGLISH: It is ironic that Norway might be disinvesting when the main source of its sovereign wealth fund is of course endless oil out of the North Sea. So that position seems somewhat contradictory. We would expect again the Superannuation Fund to take account of the real risks. The fund can do a certain amount of speculation about the impact of climate change—no doubt that is built into some kind of probabilities that it calculates about the risks of the investments that it has. But the Government does not intend to direct it in any way around fossil fuels.Dr Russel Norman: Does he believe that it is ethical for the Superannuation Fund to be investing over $676 million in fossil fuel companies effectively taking a bet that the world will take no action to avoid catastrophic climate change?Hon BILL ENGLISH: Yes I do in just the same way that it is ethical for that member to pull up at a petrol pump and fill his car up to keep it going for the week. Fossil fuels are just part of our way of life. The Greens do not like them but continue to use them. The Superannuation Fund should take into account any future risks it sees. I have to say that the risks of fluctuation in prices of fossil fuels seem to be much greater and more immediate than the long-term impacts of climate change with 50 and 60 percent reductions in the prices recently. We would certainly expect the Superannuation Fund to be taking account of that in its investment decisions.