English Bill: Financial Review Debate — In Committee 
English Bill: Financial Review Debate — In Committee 
[Volume:653;Page:2424] 
Hon BILL ENGLISH (Minister of Finance) 
: 
 Reviewing the 2007-08 financial year in the financial review debate which is the Committee stage of the Appropriation (2007/08 Financial Review) Bill gives us an opportunity to assess just where New Zealand started from in trying to deal with the global recession. The fact is that when the National came into Government in late 2008 the economy had already been in recession for about three quarters—that is three 2008 quarters. The most pervasive problems though that the Government inherited were probably the twin chronic deficits. 
The first of those was a fiscal deficit which occurs when Government expenditure exceeds its revenue. The Pre-election Economic and Fiscal Update issued about 6 weeks before the November election showed even then before the global recession had struck that the previous Government was projecting 10 years of deficits. That was off the back of 6 or 7 years when the economy had been growing strongly. Unfortunately since the 2005 election in Labour’s scandal-ridden misdirected and hopeless last term in Government expenditure got out of control. The Government was already projecting deficits then the global recession came along in the latter part of 2008 leaving the incumbent Government with a significant fiscal problem. But that was not the only deficit. 
The other deficit was the balance of payments deficit. It is interesting that in the light of recent events no doubt many good things that were not said while he was Minister of Finance will now be said about Dr Cullen. One of the things he claimed when he came into office with the Labour Government in 1999 was that the current account deficit was far too big. At that time it was about 4 or 5 percent of GDP. That has demonstrated that New Zealanders were not saving enough. We were reliant on overseas borrowing. Well after 9 years of growth— 
Craig Foss 
: Long years. 
Hon BILL ENGLISH 
:—after 9 long years of what were probably the best economic conditions that we will see perhaps for two generations—I used to say one generation but maybe it is two generations—we ended up with a current account deficit that was twice as large as it was when Labour came into Government. That indicates pretty clearly that the growth we had during the first decade of this century was largely founded on borrowing and largely drove consumption. It is pretty clear now that in the next 10 years growth will have to be founded on savings and will be driven by exports. Those are the twin chronic deficits. The Labour Party ought not to forget that. 
One of Labour’s problems is that it still regards the result of the election as an aberration. Labour members think that one day they will wake up and suddenly they will be back in Government. They still cannot understand that their economic mismanagement was one of the many reasons that the previous Labour Government was voted out of office. I tell members opposite that until they apologise for leaving twin deficits—a fiscal deficit on the Government’s accounts and a current account deficit on the nation’s accounts—no one will listen to them. I ask how they can make any credible contribution to the economic debate when they will not accept that their 10 years of misdirected economic management left this economy much more vulnerable to the global recession than it should have been. 
The review of the accounts through to 2008 that we are doing today is almost irrelevant to the current economic debate because the economy has shifted so far in the 9 months since the end of that financial year. But these accounts do show the state of the economy as the previous Government left it. Members of the previous Government are inclined to say that they left it with record low unemployment. In fact the unemployment rate was rising consistently through 2008. In fact it rose by about 30 percent. I do not remember those members discussing that much during the election campaign. Unemployment was already on the rise that rise has continued and it is putting fiscal pressure on the Government’s accounts because the numbers are going up pretty consistently week by week. 
The game plan that the Government has been outlining for the last 3 or 4 months must focus on those twin deficits. It must get Government expenditure under control because so much money was being wasted. I must say that one thing I can thank members opposite for is that they made it easy for the Government to make savings because so much money was being wasted.