Key John: Questions for Oral Answer — Questions to Ministers Questions to Members 
Key John: Questions for Oral Answer — Questions to Ministers Questions to Members 
[Volume:641;Page:11253] 
1. JOHN KEY (Leader of the Opposition) 
 to the  
Prime Minister 
: Does she have confidence in the Minister of Finance; if so why? 
Hon Dr MICHAEL CULLEN (Deputy Prime Minister) 
 on behalf of the 
 Prime Minister 
: Yes because he is still a hard-working and conscientious Minister. 
John Key 
: Does she agree with her Minister of Finance that targeting inflation through the operation of monetary policy may adversely affect the New Zealand economy—a view that he admits is probably at odds with the Reserve Bank; if so like him is she proposing a higher inflation environment for New Zealand? 
Hon Dr MICHAEL CULLEN 
: If that were the Minister of Finance’s view I would be most surprised and I would disagree with it but as it is not I do not. 
John Key 
: Has she asked the Minister of Finance why he no longer thinks that the current inflation targeting undertaken by the Reserve Bank works—a statement he made last Thursday in a speech to Ernst and Young; if so why did he sign the policy targets agreement with the Reserve Bank only 3 months earlier totally unchanged? 
Hon Dr MICHAEL CULLEN 
: What the Minister of Finance said last Thursday—and I recall it quite well—was that the consensus view for a long time had been that monetary policy could have no impact on the long run rate of economic growth and the Minister of Finance expressed reservations about that consensus based on the fact that very long periods with an overvalued exchange rate could affect the confidence of the exporting sector to invest in future growth. 
John Key 
: Does the Prime Minister support her Minister of Finance’s other musings which included amongst other things the introduction of a mortgage levy or the invoking of section 12? 
Hon Dr MICHAEL CULLEN 
: The Prime Minister has already ruled out a mortgage levy. The section 12 issue has certainly receded further into the distance given changes to the exchange rate over recent times. But what the Prime Minister certainly did do was that when the New Zealand dollar was dropping she did not support the Leader of the Opposition in calling for the New Zealand dollar to rise to US83c and thereby do immense damage to the exporting sector. 
Rt Hon Winston Peters 
: Does the Prime Minister think it is about time that we re-examined the workings of the Reserve Bank of New Zealand Act which has produced today in New Zealand internationally the most volatile currency in the world and one that is doing such incredible damage to our exports in an export-dependent economy? 
Hon Dr MICHAEL CULLEN 
: There are a number of matters there. First exports have risen quite strongly over the last year despite the high dollar particularly in some of the newer technology areas. The Finance and Expenditure Committee is looking at the operation of monetary policy not so much at the issue around the Reserve Bank of New Zealand Act itself. The Government fully supports the committee in undertaking that work and believes that a number of interesting and significant submissions have been made to the select committee. 
John Key 
: Does the Prime Minister think that the Minister of Finance understands just how much of the borrowings that are used in the New Zealand economy come from offshore? 
Hon Dr MICHAEL CULLEN 
: Yes; that is why he introduced KiwiSaver. 
Rt Hon Winston Peters 
: Does the Prime Minister think it is now the time to consider more seriously the importance of exporters over currency traders paper shufflers and junk bond dealers? 
Gerry Brownlee 
: I raise a point of order Madam Speaker. I wish no disrespect to the member but it was very difficult to hear his question. I do not know whether it is the sound system but that question was almost impossible to hear. 
Madam SPEAKER 
: I certainly heard it I must say. Could the member repeat the question for the member. 
Rt Hon Winston Peters 
: Does the Prime Minister think it is now the time to reconsider the importance of exporters in respect of our economy over the interests of currency traders paper shufflers and junk bond dealers? 
Hon Dr MICHAEL CULLEN 
: I think it is appropriate that in consideration of economic policy the interests of the tradable sector both those exporting and those competing against imports rank very high in consideration—certainly more important than the interests of consumption. 
John Key 
: If the Prime Minister thinks that the Minister of Finance understands the reliance that New Zealand has on foreign borrowings why does she think that the Minister of Finance made a statement in his speech on Thursday when the New Zealand dollar was at extreme volatility and had fallen 12c in the last 4 days including that day calling for the exchange rate to fall even further—a thing that caused enormous issues around the financial markets forcing up the 90-day bank bills and causing a potential credit crunch in New Zealand? 
Hon Dr MICHAEL CULLEN 
: I tell the member three things. Firstly since that statement was made the New Zealand dollar has stabilised at around US69c. Secondly the New Zealand sharemarket has stabilised. Thirdly the Treasury bill issues today were oversubscribed six times. 
Rt Hon Winston Peters 
: Has the Prime Minister received any reports as to the effects of political parties that have not supported savings strategies within New Zealand in either 1997 or in the last two efforts by the current Government; and what does she make of those who now complain about the dependence on foreign borrowings? 
Hon Dr MICHAEL CULLEN 
: I am aware that the National Party opposed KiwiSaver in its original form and opposed the additions to KiwiSaver that its spokesperson on finance has said that savings are not important and that its leader has consistently called for the dollar to go up higher. 
John Key 
: In the Prime Minister’s opinion why would the Minister the Finance make such a stupid statement as that of last Thursday calling for the exchange rate to fall even further and faster at a time when there was a global credit crunch that saw $400 billion being pumped into the global liquidity in the markets; and was he aware that at the time he was making that statement the New Zealand banks were very concerned about their ability to source credit and in fact were meeting on just that topic? 
Hon Dr MICHAEL CULLEN 
: The Minister of Finance did not say some of the things that the member said he did. What the Minister of Finance actually said was that the New Zealand dollar was still at that time—and is still right now—at the upper end of its normal range over the economic cycle at around US70c. In that situation it is quite likely that the equilibrium rate of the dollar is below where it currently sits. If the member thinks otherwise I suggest he looks at the graphs. 
Jeanette Fitzsimons 
: Is the Prime Minister surprised to find that inflation and borrowing are out of control when successive Governments have encouraged increasingly fast throughput of scarce resources and energy have measured the quantity only of GDP and never its quality and have taxed “goods” like work and enterprise rather than “bads” like waste and pollution; and when will she ask her Minister of Finance to respect the limits of a finite planet? 
Hon Dr MICHAEL CULLEN 
: There are a number of misstatements in that question. Firstly inflation is not out of control in New Zealand. It is actually well under the 3 percent limit at the present time. Domestically generated inflation has been running at around 4 percent per annum for the last 3 years. Although outside the band that is scarcely kind of Zimbabwean in terms of the size of inflation. I think they are running at 100000 percent per annum at the moment and rising rapidly day by day. Secondly it is not possible to generate sufficient Government revenue simply by taxing naughty things or things that we do not like. It is also necessary to tax all consumption goods and to tax every possible source of earnings within the economy. The member comes from a party that tends to support higher Government spending. It is not possible to generate something like $60 billion a year simply out of taxing waste streams and non-renewable resources. 
John Key 
: I seek leave to table the speech made by Dr Michael Cullen last Thursday to Ernst and Young. 
Document by leave laid on the Table of the House.