Norman Russel William: Questions for Oral Answer — Questions to Ministers 
Norman Russel William: Questions for Oral Answer — Questions to Ministers 
[Volume:672;Page:18690] 
2. 
Dr RUSSEL NORMAN (Co-Leader—Green) 
 to the  
Prime Minister 
: Does he stand by his pre-Budget statement: “The key sector which is not saving right now is the Government”; if so what steps has he taken to increase Government revenue? 
Rt Hon JOHN KEY (Prime Minister) 
: 
 Yes. To the second part of the question I say that our two tax packages have been broadly fiscally neutral so they do not count as increasing or decreasing Government revenue. However we have done two important things to increase Government revenue without raising taxes per se. The first was to cancel tax cuts in 2010 and 2011 planned by both Labour and National. This cancellation reduces our deficit by $1 billion a year and will result in $4.6 billion less borrowing over the forecast period. The second thing we did was give the Inland Revenue Department $120 million to chase down tax evaders which will result in more compliance and therefore more tax paid. The Minister of Revenue will have more to say about this in the Budget. 
Dr Russel Norman 
: Given that the net effect of his tax shift has been to add about $3 billion to the deficit over 2 years what responsibility does he take for the record deficit? 
Rt Hon JOHN KEY 
: The member is wrong in the assertion he makes. The tax package not only was fiscally neutral but actually added to revenue over time. 
Dr Russel Norman 
: Given the Prime Minister’s statement what is his estimation of the fiscal impact over 2 years of the tax shift in the last two Budgets? 
Rt Hon JOHN KEY 
: I do not have the exact number to hand but I can tell members that over the 4-year forecast period there will be an increase in net revenue of $1 billion. 
Dr Russel Norman 
: Is it not more fiscally responsible to consider some revenue-raising options in this Budget such as a temporary earthquake levy to pay for the rebuilding of Christchurch—a levy that would raise about $5 billion over 5 years—to avoid all the risks associated with increased borrowing? 
Rt Hon JOHN KEY 
: No. The reason for that is it is the view of the Government that a levy would slow down economic growth. As we know from basic economics adding more pressure on to the private sector reduces people’s incentives to work. I also note that I have taken a quick look at the levy being proposed by the Greens. Interestingly enough only one-quarter of New Zealanders would pay it. I strongly suggest that that is not equitable when it comes to paying for the earthquake. All New Zealanders should share in that cost. 
Dr Russel Norman 
: If it is the Prime Minister’s view that it is not equitable that a smaller number of people pay for the earthquake levy why is it equitable that most of the tax cuts were given to those with the highest incomes? 
Rt Hon JOHN KEY 
: If that was the case it might not have been equitable but two-thirds of the tax cuts went to the bottom two threshold bands. 
Dr Russel Norman 
: Does the Prime Minister share the concerns of many economic commentators that if there are big spending cuts in the Budget it could induce a double-dip recession as we saw following the 1991 Budget? 
Rt Hon JOHN KEY 
: Far from it. In fact Treasury which has obviously played an integral part in putting together the Budget has indicated that the Budget is likely to see very strong growth in real wages for New Zealanders which never happened under a Labour Government; very strong job growth; and a much stronger economic outlook for New Zealand. In other words Treasury’s analysis of the Budget is that it is a winner. 
John Boscawen 
: Does he accept that the real problem with the Government not saving is that Government expenditure as a percentage of GDP is now higher under his prime ministership than in any year under Helen Clark’s and does he have any plan to bring down Government expenditure to at least the level it was at under Helen Clark bad though that was? 
Rt Hon JOHN KEY 
: As a starting point the reason Government spending as a percentage of GDP has risen is that GDP has shrunk because of the impacts of the earthquake—or has at least stayed constant; it was very very modest growth—yet the cost of the packages we inherited and the spending programme we inherited from Labour rose. That is exactly what happened when Roger Douglas was the Minister of Finance in New Zealand and he knows it. Government spending as a percentage of GDP went up year after year because that is what happens when an economy is going through a rebalancing phase. 
John Boscawen 
: Does he know that GDP per capita in New Zealand is now lower than in 2004 7 years before the earthquake—that is New Zealanders are now poorer than they were in 2004 under Helen Clark—and what is the Government doing to reverse this? 
Rt Hon JOHN KEY 
: That is a snapshot in time. It is dependent on a number of factors. GDP per capita looks at the number of people in the country. There has been a substantial increase in the number of people living in New Zealand. Everyone acknowledges that in certain areas there have not been as big amounts of overtime and the like. I add that the member was not asking these questions when he was a Minister a month ago. 
John Boscawen 
: Can he confirm that the Government is borrowing more than $70 per week for every man woman and child in the country; if so does he consider this fiscally responsible? 
Rt Hon JOHN KEY 
: Yes I can confirm that it is fiscally responsible because as we will see on Thursday the Government has a very clear plan to get New Zealand back into surplus. 
Hon Members 
: Ha ha! 
Rt Hon JOHN KEY 
: Well the joke is on Labour members who last year started saying that they would reduce debt faster than National. This year they said it would be at about the same rate and now they do not have a clue what they are actually doing. But we will come back to that later. The reality is that we have had a global financial crisis and the Government is actually proud of the fact that it used its balance sheet and low levels of debt to get New Zealand through that recession. That is what the entire world was doing in 2009-10 and if we had not done that then more New Zealanders would have lost their jobs would have had an uncomfortable lifestyle and would have lost a lot of the support that they wanted. I am quite happy with what we have done but the time has come to get the books back in order. They will be back in order faster than people think.