6. Question No. 6—FinanceNICOLA WILLIS (Deputy Leader—National) (remote) to the Minister of FinanceQuestion No. 6—Finance6. NICOLA WILLIS (Deputy Leader—National) (remote) to the Minister of Finance: Does he agree with Treasury that inflation is being driven by strong domestic demand"; and if so does he believe his plans to spend an additional $38 billion over the next four years is adding upward or downward pressure on inflation?Hon GRANT ROBERTSON (Minister of Finance): I agree with the full quote that the member has selected from which is: "As outlined in the economic forecast inflation is expected to peak in the first half of the 2022 calendar year. Inflation has been driven by strong domestic demand pushing up against constrained supply and has been compounded by global supply disruption and the Russian invasion of Ukraine." In response to the second part of the member's question as Government spending reduces from 35.4 percent of GDP in 2021-22 to 31.6 percent of GDP in 2022-23 the Treasury's fiscal impulse model turns negative.Nicola Willis: Does he agree with Reserve Bank Governor Adrian Orr that "higher than otherwise Government spending would mean all other things equal higher than otherwise inflation pressures" and does he agree with the Reserve Bank's assessment that current levels of Government spending are "very high"?Hon GRANT ROBERTSON: I agree with the Reserve Bank Governor when he said that in the overall scheme of things Government spending is "small beer" in the inflation picture.Nicola Willis: Does he stand by his statement that "The short term challenge of inflation is significant." and would he characterise Treasury's forecast that inflation won't fall back below 3 percent until 2025 as a short-term challenge?Hon GRANT ROBERTSON: The challenge of inflation is particularly harsh in the short term because we are seeing a spike that is decades high. The Treasury forecasts that that spike will come off in the second half of 2022 and then as the member states will go back to the 1 to 3 percent band by 2025. None of that takes away from the pressure that that puts on households now and into the future and that's why the Government is supporting them.Nicola Willis: Does he agree with ANZ that the Reserve Bank "might need to 'make room' for Government spending by inflicting higher interest costs on businesses and households"?Hon GRANT ROBERTSON: Well I'd need to see the context of that statement. What I do know is that a range of the bank economists have not only said that the Government's economic and fiscal position is strong but just to pick one of them the ASB said that the Government's recent Budget spending is unlikely to have a huge impact on inflation.Nicola Willis: Does the Minister think Government policy decisions impact business confidence and is he concerned that the ANZ Business Outlook Survey published today shows business confidence is now the lowest it has been since COVID first hit with inflation expectations continuing to rise?Hon GRANT ROBERTSON: The ANZ business confidence survey has been the subject of a number of questions in this House from time to time and there are many different reasons that lie behind it. What I do know is that businesses around New Zealand have been supported with confidence and cash flow by our Government through the wage subsidy scheme the Resurgence Support Payment and now the initiatives in this Budget that will support small businesses to be able to grow as well.Hon Stuart Nash: Are we the only country in the world facing inflationary pressures or are other countries also dealing with this issue; if so what are some of the global issues driving this?Hon GRANT ROBERTSON: Yes this is indeed a global issue. And just around the time of the Budget we saw inflation in the United Kingdom reach 9 percent go over 8 percent in the United States. We know that global supply disruptions both from COVID but also more recently in places like China have been impacting on inflation as well as the war in Ukraine. Every country in the world is dealing with inflation. Our economy is well placed to deal with it along with the support that we're giving to people to get through it.Nicola Willis: Well isn't it the case that in addition to any international factors very high Government spending is putting pressure on interest rates and making life harder for any Kiwi with a mortgage?Hon GRANT ROBERTSON: No it is not. What the Government has done over the course of the last couple of years is make sure that New Zealand got through COVID with one of the lowest unemployment rates in the world—with growth over 5 percent with debt at one of the lowest rates in the world. That's what the Government has invested in over the last few years. We're in a strong position to deal with these challenges and we will continue to support New Zealanders."